Providing a compelling cost-benefit analysis is hard if you’re dealing with lots of abstracts and unknowns. Organisational innovation projects fall in this category and they have the stigma of causing real costs for seemingly no measurable payoff. Fighting management or shareholders on this is tough and has slim chances of success. But there is a way around the trenches – by presenting innovation projects as the cost-cutting measures they are.
Instead of juggling estimates for an innovation project geared towards higher job satisfaction tomorrow, let’s analyse and expose a rival project you might be a part of today – the “do nothing” option which is obviously an alternative to any project. Conveniently, others have already compiled hard data for us about that: It’s available in the form of studies and market analyses you’re probably familiar with – every particular field seems to have at least one metaphorical gold standard against which organisations measure themselves. I used to work in B2B services for a German company so I’ll use this market as an example.
The most anticipated study of our field was the yearly Lünendonk list that gives indications about the B2B service sector’s performance. Our segment was personnel services and recent Lünendonk publications tell us – among other things – the following:
- The 25 top performing companies named in 2016 expect a future growth rate of less than 3 %.
- 5 of these top 25 had to stomach loss of revenue in 2015.
Now we’re dealing with actual and alarming numbers that are sure to resonate with management/shareholders – let’s add some more for contrast. Gallup is a well-recognised source for data on employee engagement. From their 2016 publications on the German labour market we can learn the following:
- 84 % of employees report a weak or no emotional connection to their organisation.
- The economic cost of resignation among employees is between 75.6 and 99.2 billion Euros per year.
Germany has a gross domestic product of about 3.1 trillion Euros – if your organisation’s revenue is, say, 400 million Euros that accounts for 0.0129 % of the GDP. Assuming the costs listed by Gallup are distributed corresponding to GDP contribution, the “do nothing” project running at your organisation right now is spending 11.3 million Euros per year (part of which may be paid for by parties outside the organisation such as health insurance funds) while its only outcome is the obstruction or destruction of added value. No executive board ever signed off on that – and suddenly, approval for a six-figure innovation project doesn’t sound so far-fetched!
[Obvious disclaimer: This calculation is oversimplified and doesn’t meet professional economic requirements. It’s not meant to. It’s only meant to establish a connection between abstract economics on a national level and an individual organisation to initiate discussion with people who are used to decision-making based on extrapolated numbers. To quote statistician George Box: “All models are wrong but some are useful.” I hope it can be the latter.]
To end on a more positive note, let’s return to Gallup for a metric that doesn’t seem to fit in at all but is very impressive:
- 74 % of employees would want to keep working if they suddenly became financially independent.
Remembering that only 16 % report a strong emotional connection to their current employers, the question is: Where would these people work? Beeing free to choose, surely they would gravitate towards an organisation that allows and enables them to tailor their work environment to their individual human nature. The organisation to pull this off would have a workforce so passionate and commited the competitive advantage and resulting payoff would be through the roof – and it could scrap the “do nothing” project.