A most simple equation
Profit, of course, is the most simple metric for business outcomes, indeed the very reason the business exists.
There is also a simple metric for managing growth and increased staff numbers – Profit divided by headcount (P/H).
A new hire initially costs money so expect a short term dip in the P/H result, but in the longer term, this number should, in fact, be bigger than the pre-hire number. If that’s not the case, then the new person is, in fact, costing you money.
This, of course, disregards any lifestyle choice you may make in sacrificing a higher P/H to enable yourself more leisure time. A laudable choice, of course.
In larger organisations we often see headcount grow for no good reason. In good times new people are hired with scant regard for the return on the investment they deliver. This is even more prevalent in Government where a simple profit metric is not a relevant metric and outcomes can be hard to quantify.
Even in smaller organisations, people are sometimes added with no real metric to determine the value they deliver.
What about Innovation
Many companies have dedicated innovation departments and spend large amounts of money trying to embrace innovation. Lots of training is undertaken, special tee shirts handed out, coloured banners, slogans and special thinking spaces created, some even with coloured bean bags to sit on. The now fashionable co-working spaces with their multi-coloured and funky outfits have taken this to an entirely new level. This is all considered part of the innovation message.
But does it work?
When was the last time your innovation people delivered on your investment? Perhaps more to the point, do you have a metric? Perhaps the P/H metric alone may be sufficient. What would be the effect of dispensing with your innovation department if it’s not delivering real innovations?
Do we need a crisis to make it happen?
At the commencement of any workshop, we conduct the first question we ask is “Can you force people to be innovative?” The answer we get is always the same – NO!
We then ask, putting aside the innovations enabled by the IT and internet revolution, what period in history was the greatest for innovation? The answer we get again, is always the same, during the Second World War. In these time it truly was, “Innovate or Perish”. In light of this we may ask why it should be any different from the innovation people in your business.
The present Coronavirus is a classic example of necessity inspiring invention. New initiative for survival and growth are popping up at every turn.
Look at the growth in food deliveries, a service that is sure to stay. Look at the IT-enabled home offices now sure to be a thing of the future. Bosses have realised they can gain more effective outcomes with people avoiding the drudgery of peak hour travel. Look too at the reduced office space and attendant overheads enabled by remote working.
As for travel, we have seen air travel disappear with people managing with remote video meetings and travel costs for companies almost completely gone. Doubtless, there are times when personal visits are important, but what we are seeing is that there are alternatives to what we considered normal; and many of these are here to stay.
What’s the message?
If your innovation initiative is awaiting a crisis to spring to life, it may be time to review your approach. Yes indeed, we should demand a return on our innovation investment.
Contributing writer: Roger La Salle Founder of Innovation Traning - Matrix Thinking https://www.innovationtraining.com.au/
