In an uncertain world, innovation plays an increasingly important role in creating value. Elastic innovation flourished, supporting organizational resilience and adaptability. Shortened business cycles are moving incumbents out of the market at a faster pace than ever, manifested in breakthrough innovation which feeds a start-up boom as well as the constant disruption and reinvention of existing business models.
In this environment, business leaders seek to measure and monitor the innovation capacity of their organizations, adding a fundamental sixth “P” (People) to the traditional “Five Ps of innovation measures(Pipeline, Pace, Process, Portfolio and Products). The measures in each category emphasize a direct link between innovation activities, outputs and the creation of value for an organization.
Leaders use several dimensions to measure people, each typically requiring enhanced analytical capabilities:
1. Do we have the right people?
Leaders understand that people are both the source of ideas and inspiration behind innovation as well as the engine to implement new or improved products and services. They also know that innovation is about challenging the status quo. Therefore, a diverse workforce is of fundamental importance in creating new ideas, not only based on its demographics, but also across individual backgrounds and personalities. For example, a good mix of mandates balances familiarity with organizational processes and bringing in outside perspectives to achieve better results. Additionally, despite the pain and costs associated with turnover, healthy levels of attrition energize and energize the workforce with a new way of thinking. A better understanding of the performance and skills profile of incoming and outgoing staff complements hiring and attrition statistics by telling a more complete story. Additionally, a longitudinal dashboard that visualizes workforce diversity and career moves allows leaders to monitor the health of employee movement across functional disciplines or business areas, and introduce thoughtful changes if necessary.
Examples of measures: Demographic diversity; detailed breakdown of the workforce (e.g. seniority, education/work experience) at different levels of the organization; movement of people and careers; hiring and attrition rates; data on incoming and outgoing performance and skills.
2. Do we have the right skills?
Leaders know that innovation is a learned skill and not something innate in certain individuals. With the right training, any employee can innovate in their distinct capacity. For knowledge and judgment-based workers, this could mean learning the craft of A/B testing, stakeholder journey mapping, listening to customers, or rapid prototyping. It could also involve new technical skills or a better understanding of market trends. For administrative and manual workers, this could mean new approaches (within reasonable procedural, safety and quality limits) to performing daily tasks that gradually improve efficiency and effectiveness or learning new tools and applications.
A skills architecture enables organizations to monitor and optimize the skills needed to formulate and implement new ideas that benefit the business. More importantly, it enables leaders to better target learning and skill development to support the different stages of the innovation lifecycle, from business awareness to develop new products and services to technical capability to create prototyping and business development acumen to engage with customers and perform prototype testing.
Examples of measures: Use of employee training tools/courses; number of employees with essential skills by professional discipline/family/level; gaps in (business) demand and (talent) supply of skills over time
3. Do we have the right culture?
A culture that fosters innovation amplifies the impact of people and skills. New ideas and inspirations are best cultivated in an environment where people feel safe to step out of their comfort zone and take risks, and where failure is seen as an integral part of learning. When the purpose of their work resonates and employees feel worthy, improving the status quo means having an impact. This internal driver is often more powerful than any extrinsic (e.g. compensation-based) incentive system.
Employee engagement surveys and other employee listening techniques (e.g., in-person and virtual focus groups) are effective ways to assess how well the work environment exhibits the attributes of an innovative culture. A longitudinal view can help leaders understand progress and adjust management styles, while a cohort analysis can help overcome barriers to innovation within specific segments of the population. Modern techniques such as natural language processing help encapsulate employee sentiments, which can be an important complement to employee listening information.
Examples of measures: Employee engagement scores (over time and by cohort) consensus scores on cultural attributes; employee sentiment summary
5. Do we have the right organizational structure?
In a typical organizational hierarchy, middle managers are often accused of stifling innovation. Clayton Christensen’s “Innovator’s Dilemma” discusses the role middle management plays in resource allocation and how competing priorities mean that resource allocation becomes a natural barrier to innovation. This is only true when the formula determining resource allocation is centralized at the top of an organization. A distributed decision-making model, on the other hand, allows managers and professionals to execute the overall strategy. With the right culture, this gives middle managers more freedom to take risks and drive ideas at a higher speed, possibly at the expense of management discipline and control.
Moderate refinements across the spectrum of top-down and distributed organizational models can spur a spark of innovation anywhere in the organization. And from time to time, rearranging functional alignment (eg, changing the grouping of business areas, grouping different functional disciplines together) can inspire creativity. In addition to monitoring traditional organizational design metrics such as span of control, business leaders can benefit from tracking the changing alignment of functional and business areas to keep the workforce energized. . Meanwhile, continuing to monitor enough non-essential investments made locally can help business leaders optimize business models for better innovation outcomes.
Examples of measures: Span of control; changes in professional discipline and functional coverage over time; frequency and effectiveness of bottom-up or middle management pilot programs
5. Do we have the right support programs?
Most traditional performance management and reward systems fundamentally discourage risk taking. Employees are often penalized for failing, and the path of least resistance is to perform their jobs in a proven way. This mentality is the opposite of what favors an innovative organization. Although it generally does not make sense to reward failure, holistic performance management systems take into account the context of failure, whether the individual makes better decisions after learning from failure and the level of coaching required for the individual to build their path to success.
Managerial effectiveness is often a primary differentiator of human potential. Consider an employee with great potential for innovation. This person will likely thrive under the leadership of an effective manager who encourages the employee to try new approaches, champions them in the benchmarking process, and coaches them to learn from failed attempts. The same individual would likely be less successful under a more rigid manager who defines performance more narrowly. The manager’s impact on the employee can extend far beyond the employee’s tenure in the organization – even a high-potential innovator can turn into an average worker without the right education.
Examples of measures: Distribution statistics of how employees approach problem solving; manager ratings; employee innovation history
6. Do we have the right level of employee wellness?
the link between employee well-being and innovation is established. In organizations where the employee experience is centered around the physical, emotional, social, and financial well-being of employees, stress levels are lower and business purpose is reinforced by their culture and programs of support. In turn, employees can free their minds to create and inspire. To amplify these benefits, organizations must seek to create not only a wellness-centric experience, but also an equitable employee experience. When all cohorts of the workforce feel emotionally connected to their work, the power of innovation multiplies.
Workforce and total rewards analytics allow business leaders and HR managers to assess wellness outcomes across employee cohorts and mitigate drivers cohort-specific stresses. For example, for those struggling disproportionately with higher healthcare costs or personal debt, targeted programs can be used to close the gap to the general population. Analytics techniques to track wellness outcomes globally and within each cohort are a great way to assess whether the organization has the support system in place to cultivate innovation.
Examples of measures: Health and wealth outcomes by cohort, stress ratings, use of support programs
Much of the burden of fostering an innovative organization rests on the talent infrastructure and people analytics capabilities of an organization. Business leaders will benefit from interpreting the results in a broader business context by ensuring the organization has the right people, skills, culture, structure, programs and well-being to prevail in an increasingly disruptive and dynamic economic ecosystem.