We all want our companies to be spinning off innovations. To be vibrant with ideas. To be likened to Google, Amazon, and Apple. We want our offices and employees to look just like the picture below. Yet we don’t know how to deliberately create such an entrepreneurial environment. This post discusses how properly chosen metrics and behavioral rewards will help you achieve that.
Your current metrics are the first thing you want to look at. Chances are, they are hindering your organization from achieving this elusive entrepreneurial atmosphere you’re seeking. They are probably operational metrics. This won’t do if you want to promote innovation. A typical operational metric could be to reduce the cost incurred to deliver a project (hello Six Sigma. We meet again.) Naturally, this will focus a team’s attention to reduce the cost incurred due to man-hours spent on the given project. As a result, the team won’t waste time exploring potential alternatives to solving the problem at hand. That wasted time is time that is immensely valued in the path to innovation. Reframing the problem. Unpacking it. Challenging it. Rephrasing it. Those are all key activities in innovation management. But why bother? We are, after all, supposed to reduce the cost incurred to deliver a project as per our metric.
Metrics govern behavior. Chances are, the behaviors prevalent in your company are the result of how you’ve designed your metrics. We have discussed above the importance of what metrics you should choose. Which is very important. I’d argue that how you design them is more important. Typically, rewards are given after a goal has been achieved (ie a metric has been reached). So we tend to reward outcome. With innovation, the outcome is not necessarily what you want to reward. There are two reasons for that. First of all, you don’t want to deflate a person who has tried but failed. You certainly don’t want to eliminate the behavior of experimentation because your metrics only reward the successes. Second, the outcome (hopefully successful) is the reward an innovator is looking for. Instead, you want to design metrics that reward the behavior you are seeking to instill in your organization or amongst your team. For example, let’s say that you wanted to promote experimentation. You could set up your metric to reward the number of iterations a team has undergone in the development of their product during a defined time period. In the graphic below, the time defined was 90 days and the project team had undergone three iterations. If you set your metrics such that three iterations is outstanding, then the team is to be rewarded accordingly. This will boost the desired behavior: experimentation (rapid experimentation, mind you).
Clayton Christensen’s The Innovator’s DNA outlines five key behaviors of innovators. The behaviors are experimenting, networking, questioning, observing and associating. Start out by assessing your current metrics. Do any of them promote any of these behaviors? It’s ok if they don’t. You want to be honest with yourself. This is not a call to throw out your current metrics. After all, a mature organization is one that explores (innovation) and exploits (Six Sigma). Try introducing one or two new metrics based on one of the behaviors mentioned above. Make sure that you are also designing the rewards in a way that pushes the innovator while innovating.