The ability to deliver new value
requires systemic evolution in business strategy, culture,
organizational design, and customer awareness. Employees can and will
deliver new customer value, but the way they are paid and directed
must change first and then the results will follow.
People perform the way they are compensated to perform. If an
enterprise is structured and compensates its people to be creative,
it receives creativity from them. If the company preaches that
creativity and innovation are valued but don’t align their
compensation and employee goal setting with these objectives, not
surprisingly, very little innovation happens.
With all of the downsizing, offshoring, and Six Sigma/Lean that
people have been living through for the past 20 years, they have
learned to, “keep their eyes inside the boat” and not to stray
too far from their defined goals and objectives.
People who are engaged in profit-orientated businesses are, for
the most part, employed to perform specific types of tasks. Whether
the task is on a production line or producing invoices, people
develop a set of skills and sell those skills to an employer. So it
should come as no surprise that the employees of a company are
focused on what they are compensated to produce. If people are not
compensated or rewarded in some way to be creative, to produce
changes that delight a customer, and to find new opportunity areas,
why would anyone expect them to do so?
A variety of tools have emerged over the years to assist managers
in directing their employees’ efforts. Key performance indicators,
360 degree performance, management by objectives. Do any of these
ring a bell? Performance management should be focused on setting
goals that are aligned with business strategy, extending a person’s
skill set, and aligning resources to achieve business strategy.
Most people are compensated based on their ability to achieve a
predetermined set of goals and objectives. Managers review employee
performance based on their ability to meet the goals. Many, many
words are being written currently about organizations delivering
innovation . Executives are refocusing their attention on delivering
new value to their customers, but how many executives are looking at
the way they compensate their people? It doesn’t make much sense to
tell people to be creative, to discover opportunities, to increase
customer value when these same people are being paid to deliver
completely different things.
If business strategy requires new products, services, or business
models to extend its competitive advantage, it also requires new ways
to focus and reward the people who work for the enterprise. If people
are compensated based on their ability to complete tasks, it isn’t
logical to also expect them to create new things unless they are
rewarded and recognized for this ability.
The ability to deliver new value to the customer (i.e.,
innovation
Management) requires systemic evolution in business strategy,
culture, organizational design, and customer awareness. Employees can
and will deliver new customer value, but the way they are paid and
directed must change first and then the results will follow.