Q&A

Q&A: Do You Charge Other Departments for Your Innovation Services?

Every few weeks, we send out a newsletter with a member-submitted question and ask you for your advice/experience/input.  (If you’re not getting our newsletter, you can sign up here.)

Last time, we asked this two-part question:

  • Does your team charge other groups in the company for your services? If you don’t charge, why not? 
  • If you run innovation training or ideation workshops, how much do you typically charge for those?

Below, we’ve summarized some of the top answers from the community.

• • •

No Charge for Inside Groups—But Occasionally for Others

Free to Train – “We do charge other groups. We do not charge for innovation training,” a respondent from the telecom industry says.

An Innovation Team’s Responsibility – A member from the food and beverage industry explains, “We don’t charge any other department with cost, whatever the topic or service. To me, this is the role and responsibility of the innovation team to provide expertise, support, tools (whatever) to the rest of the organization following clearly-set business priorities and alignment with strategies. In case of service provided by a third party, the cost will be borne by the requester.”

Encouraging Businesses to Engage – “The corporate functions (corporate development, innovation, marketing, HR, finance) don’t charge separately for services,” says an executive from the insurance and risk management industry. “There is an overall charge allocated to business segments for corporate functions. It makes it easier to implement, and encourages businesses to engage with the corporate functions.”

Similarities in Energy and Sustainability – An energy industry respondent says, “No, my team doesn’t charge. Our company doesn’t do internal chargebacks for internally-provided services. It’s a cultural aversion to overhead. Managing internal chargebacks is seen as non-essential overhead. Neither our IT nor our world-wide engineering groups charge for one-off services either.”

One respondent from the sustainability industry similarly says, “My department does open innovation for the company and we find it better to fund the projects without charging back the costs to the divisions that need our help.”

Internal Innovation Groups Foot the Bill – “As far as ideation sessions, we do those often, and the materials are provided by our Internal Innovation group. With training, we pay for the cost of training coaches across the organization who then lead the ideation sessions. Training the rest of the company is typically also paid for by our Internal Innovation group, unless someone RSVP’s to the training, then doesn’t show up. [In those instances,] sometimes we charge back the business unit to keep people accountable for their actions, but not always,” says an energy industry respondent.

Why Teams Charge Internally

A Case-by-Case Basis – “We do a mix of charging,” a respondent from the energy industry explains. “When an idea is going to get funded for the initial testing/pilot, it’s either covered by our Internal Innovation group or it’s split between business units. That determination comes by way of an evaluation submitted and discussed by one of our committees. Our internal innovation team budgets $300,000/year for ideas – we typically use it on an annual basis. When the funds get low, we simply state, ‘We have $50,000 to fund this, so we can do a cost-share or ask for more…’ or something to that effect.”

“On average, we spend about $300 to train an employee that does not have direct reports. Currently, we ask for volunteers, we don’t plan to train the whole company on innovation fundamentals. If we reach 700 employees per Innovation Ideation Sessions – that cost is lower, it’s merely materials (easels, chart paper, markers, post-its etc.) that’s about $10/employee reflecting the reach of about 700 employees – not all of our employees attend ideation sessions. That’s probably a higher estimate, just because not all materials are used each time, markers don’t get replaced every time etc.”

“Where we spend a lot of money on training is for our Innovation Coaches, which we have around 50 at any given time now. Each coach goes through a 2-year training plan, which I continue to develop, refine, and change to meet their needs. The cost per coach is $1500 in year one, and about $600 in year two. I’m beefing up year two, now that I’m almost through my own certification as a Professional Coach. For supervisors, the cost for training is about $1,000/supervisor. For 2018, we budgeting to send about 48 supervisors through the training we’ve used in the past. Once we have their evaluations, we will decide if we will continue to use this offering, or switch to something else.”

Charging Enables Adoption – “Our team is entirely funded by charging other groups in the company for our services.  Although this practice limits some of the ‘big thinking’ projects, those are usually deferred to the R&D organization. By charging for our services, we drive behaviors such as very close links with the end users of innovations, and a need to ensure customer satisfaction and involvement throughout the innovation process.  We have discovered that this enables much better adoption of technologies,” says one energy industry respondent.

Often, But Not Always – A respondent from the professional services industry says, “We do charge internally for innovation resources and services (builds), but not in every instance.”

Activity Based Costing – “We seek to allocate costs to understand where resource spend pays the most dividends and to understand true profitability,” says a respondent from the lawn care industry. “Activity based costing is what some would call it. The where could be sales activity, marketing, R&D time, shop & engineering time, technology application. Really anything. The ‘how much’ is based on the spend. For technology application it will spread across the divisions where revenue is generated over the course of a number of years depending on depreciation schedules.”

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