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Strategy, Innovation, Leadership and Security

Employee ideas may save your company

Management, StrategyEdward KiledjianComment

Most organizations are now powered by knowledge (in contrast to the manufacturing era of the 70s). Ideas are the engine of growth in the new global knowledge-based economy and executives are always on the lookout for the next big one. Many of the larger companies are so committed to finding the next big thing that they spend unconscionable amounts of money renting high-priced consultants.  

Most organizations I work with don’t realize the goldmine they are sitting on. There is a huge fountain of fantastic ideas right under your nose and you probably don’t even realize it. Best of all, accessing it is free. What is this untapped resource? Your employees.

Paradigm Shift
The first obstacle you may have to tackle is the long standing and deep rooted belief that ideas come from managers and employees are there to execute. This old command style approach is going the way of the dodo bird.

Understand that every employee in every function sees a part of your business that may be improved. In the airline business, many ignore the front line workers at the airport. Some companies realize that these employees can provide valuable insight into the “customer experience” and often see dozens of process optimization opportunities that you would otherwise never discover.

There are dozens of frameworks that could help you implement an employee idea collection and management system (e.g. Quick and Easy Kaizen, Lean, etc). I will keep this article framework agnostic, providing easy to understand tips.

Decentralized knowledge

F.A. Hayek was a pioneer and proponent of the concept of distributed knowledge. In his article “The use of knowledge is society” (published in 1945), he discusses the benefits of decentralized knowledge.

In short, he breaks down knowledge into 2 categories:

  • Aggregate (centralized)
  • Particular (decentralized)

As you go up the corporate ladder, the data you get is more and more aggregated. Examples are “% of cost increase”, “% efficiency gain”, etc.

Particular data is exemplified by the airline example above. This is “in the weeds” knowledge. This type of data held by your workers can be very powerful. More and more executives are realizing that they need to find ways of funnelling this data to them. This is so popular that there is even a reality show called “Undercover Boss” where CEOs of major companies work in their company’s front line operations (undercover) to get a real pulse from their customers.

Both categories of information are required to optimize your operations. The Aggregate data is useful when defining corporate strategy. The more detailed ‘particular knowledge’ is a way to continuously improve your business and strive for excellence.

Quick and Easy Kaizen concept
This was a framework that asks every worker to come up with small, easily actionable, ideas and empowered them to implement those ideas.

The root of this methodology can be found in 1898 at Kodak when an employee suggested that they “Clean the Windows”. In this model, the employee made the suggestion but someone else implemented it.

In the 70’s, many Japanese companies recognized the power of their employees and modified the Kodak approach to empower the employees to also implement their idea. Research shows that in the Western World, an employee typically submits an idea every seven years. In Easy and Quick Kaizen companies (like Toyota), an average employee submits 2 suggestions a month. Some researchers have even suggested that these companies save about $4000 per employee per year based on the implementation of these small ideas.

I want you to realize that the simple ideas in this entry are powerful and translate to cost saving through reduction of waste, improvement of performance (efficiency) or increased market share (increased customer satisfaction).

The small idea advantage
There are many reasons why small ideas are often more impactful than bigger ones.

  • Small ideas implemented consistently over time will have compounded benefits. Easy ideas will improve on the previous one driving a synergy of efficiency.
  • Small ideas are easier to manage and implement. They usually present less risk so companies are more likely to implement them without red tape.
  • Each idea is too small to be noticed by your competitors “from the outside”. By the time they realize the compounded improvement, it is too late for them to make the leap.
  • Employees who come up with ideas and see them through generally are more engaged in the workplace and happier. This leads to smaller turn-over and increased productivity.

Implementation of your idea system
I will show you how easy it is to implement this in your company regardless of size. This works for the 2 man burger joint or the 100 000 global conglomerate.

  • Create a safe and nurturing environment for ideas. The biggest obstacle to this process is the fear of rejection and nonchalance. Employees must believe that the company is willing and ready for this program. Good ideas welcome.
  • Cut down on paperwork. Nothing kills a process like formality and paperwork. The process of submitting ideas must be simple and straightforward. The process of validating ideas transparent and speedy. Let the people closest to the issue validate the idea and provide a go/no-go.
  • Quick implementation. Make sure that approved ideas have the resourced (personnel and financial) to get implemented quickly. If employees feel the process is taking too long, the idea well will dry up.
  • Accountability and recognition. Make sure every employee is accountable to document and implement their idea. They should also be publicly recognized for their contribution. Some companies have even implemented a wall of recognition listing the idea, their benefit and the owner.

Kick off the process
Make this a mandatory part of every employee’s job. It must get ingrained in your corporate culture. Everyone from the front line employee to the CEO, executives should be expected to participate in this program. Make everyone’s ideas public and visible.

Analyze the flow
For every idea that you implement, ask the following questions:

  • Can this be implemented elsewhere in the business?
  • Are there any follow-up improvements that this idea highlights?
  • Is there a pattern that is coming to light with these improvements? Is there a larger issue that may require your attention

Encourage the right way
Some companies believe that they can get better ideas and better participation by offering a pay for idea model. This is a wrong approach. Understand that humans want to improve their situation and that this is a natural reaction. Recognition and implementation of their idea will be far more rewarding than straight cash.

A reward model that has proven to work is a benefit sharing bonus model where a percentage of the benefits are redistributed to the employees as a bonus (overall not per idea/per employee). This reinforces the concept of “working together to succeed together”. Benefits are distributed fairly and openly to all employees (management is not prioritized because they are management).

Deep rooted change
Over the years, you will notice a deep-rooted change in your corporate culture. Excellence will be demanded not only by managers but also by peers. The rewards will keep coming and the benefits will keep compounding.

The sooner you start, the sooner you will see the benefits !!!