Kelly Services Exec on Impact Payments and Disruptive Ideas

December 5, 2014

Kleiner’s Mandate from the CEO

The CEO gave me three things to focus on. One, foster disruptive innovation in the organization. The second was to improve the efficiency by which we deliver innovations into the marketplace. So, this company has a very long history of innovating, but a very poor history of monetizing those innovations. The third thing was to really begin to create and drive a culture of innovation in the company to shift it from what it is — which is a very transaction-oriented organization — to much more of a solutions/consultative organization that had innovation embedded in its culture.

The drive to innovation inside of Kelly actually started in 2007, but we didn’t call out a dedicated function focused on disruption until 2012.

A White Sheet of Paper

Basically when we started, we had a white sheet of paper. There was no known practice, function, process, etcetera, within our four walls or even within the four walls of our major competitors and collaborators that we could reference, so we didn’t really know what it meant to have an innovation practice and to have an innovation culture.

I started looking for best practices outside of the organization, and fortunately a person that I knew in the staffing industry who lives down in Raleigh referred me to a group down at North Carolina State University called The Center for Innovation Management Studies. It’s probably the oldest established organization in the country that’s been focused on the management of innovation.

I went down there and I showed them my processes and that turned out to be a very, very productive meeting. We later became members of CIMS and actually are now embedding some of those practices, tools, and processes they have in our organization systemically worldwide.

Launching the Road Show

One of the things we needed to do was we need to go out and explain to our staff and our leaders around the world, “What exactly does this mean and how does it impact you? What are the expectations?”

We built this thing called a “road show,” and inside the road show, we spent a fair amount of time on explaining the why, the what, and the how of our thinking. Why do we need to do this? What are the market drivers? What are we going to do and how are we going to do it? What is their role in it? Because in terms of beginning to build this cultural shift, everybody needs to participate.

Innovation is not something you add to your workload. It has to be the way you approach your job. I started with the premise that innovation is an outcome, and it’ll come when you have a proactively engaged workforce that you can tap into.

By definition, those folks [in the field] are going to be thinking about how to do things better, how to do them faster, how to improve the customer relationship, etc. We put this road show together, and I spent the better part of a year going allover the world. We put it on 40 times.

Embedded in the road show, after we described the why, what, and how, is we had an interactive idea jam. We took an actual topic that the business units that we were talking to had submitted as a challenge they were facing.

We took it through a process where you break that challenge down, in terms of all of the obstacles you have to overcome. If those obstacles didn’t exist, how would you approach it?It was a two-hour interactive session that left people with a sense of, “This is what it means for me to be participating in this initiative.”

About 60 percent of our revenue comes from North America. We spent a fair amount of time in our operations in the United States. We did these jams in Australia. We did them in China. We did them in Malaysia, Singapore. Did them all over Europe, UK, etc. They were fairly well dispersed.

How “Impact Payments” Work

One of the things you want to do – and there’s all different kinds of approaches to this – is you want to create an incentive for people to participate. But you don’t want to make it about the money. You want to make it about participation. It’s about being part of something bigger than yourself. Part of it is putting an incentive plan in place.

We have an extended group of people that we invited to be members of an online community. We’re on here, so it’s called Chatter, which is a social media, online community thing. We built an innovation community there. Everybody who went through a road show was entered into that. We have about 1,000 people in that community now.

We extended to them an opportunity to participate in the outcomes of ideas that were selected for being carried forward. The first step was you submit an idea, and if it was actually approved for further investigation and development, that would trigger a nominal $250 payment if it was an incremental idea. If it was potentially disruptive, it would be a $1,000 initial payment.

Then, if that idea actually made it through the stage-gate process and would be put into production, then we would allow, on a second payment, the idea submitter to participate in the gain that that idea represented for the company, to a maximum of one percent of the impact on the business and/or $10,000, whichever came first.

It really puts skin in the game for the idea submitter. They could actually participate in the impact that that idea could potentially have on the business.

What’s Disruptive?

As you would expect, most of the ideas that are submitted tend to fall in the realm of continuous improvement or incremental innovations.

For us, disruption was defined as an idea that was either precedent-setting or that would obsolete something that came before it, that would have the potential of impacting the company’s overall bottom line by at least 10 percent. If it fell into that category, we’d view it as potentially disruptive.

Of those disruptive ideas, the one that is about ready to be accelerated into the business is one that, basically, shifts the entire concept of what we do, as a business. We have something like, I don’t know, 1,200 to 1,500 locations around the world. We have become a very large administrative organization in terms of processing staffing transactions. We’ve become very, very good at that, very good at managing workers’ comp, State Unemployment Tax, and everything related to a staffing transaction.

All of that represents expense in our business. This is done to support our existing operations. Staffing as a marketplace is an extremely fragmented market. There are approximately 160,000 staffing companies in world. There are approximately 20,000 in the United States.

The vast majority of these companies are small. They don’t have the advantages of scale that a company like us does. Some of the things that we can do to manage our risk, to manage these ancillary costs, they can’t afford.

The idea was why don’t we serve these capabilities up to what is currently a competitive base, view [our competitors] as customers, and sell them managed services on a technology platform that basically allows them to lift and shift all of their administrative functions out of their organizations, either wing-to-wing or piecemeal. They can leverage our scale and our 67 years of knowledge in the space, drive their operating costs down, and become more competitive. As you know, staffing is very commoditized.

That, basically, is a very, very radical idea because it requires that you now look at a competitor as a customer. It also requires that potential customer then to trust you with basically all of the critical knowledge that goes on in your business.

If you can overcome that, you end up creating an opportunity for this small business to drop their operating costs. Right now, our experience with the pilot [is that costs drop] about 40 percent. That is very meaningful because that translates into four to five markup points of advantage in the competitive space.

We couldn’t launch that idea when it came forward because there was no technology to provide it on, even though we had the managed services capability, the BPO capability to deliver it, until about 2012.

Then I ran into one of our staffing partners that had a software business, who was building this technology. Together, we finished it. We put it into pilot with a $30 million staffing company in the United States. We are now producing results that are almost shocking.

That particular instance is still in pilot, but it’s about ready to move into production. We’ll probably release it next year. The whole reason it was created, the whole reason the idea was created, is because of the shift in strategy that we put in place in 2007, which said we need to be a solutions business.

If you’re delivering services to enterprise accounts worldwide and if you want to get ahead of the curve, then you need to understand that customer’s strategy and their workforce needs and to build a supply chain of talent behind those needs so that when the customer is ready to avail themselves of the talent, that it’s there.

Then you can execute quickly. You can fill the jobs faster than the competition. In order to do that, you have to have robust supplier relationships. In order to have robust supplier relationships with people who are good at what they do, you have to have a compelling value proposition for them.

This was a way to create a compelling value proposition. It aligns perfectly with our overall long-term strategy. It monetizes things inside of our business that were previously just pure expense.

That idea will see the light of day and will have an impact on the marketplace. That’s probably the most significant one that’s moved through the system so far.

What about Rewarding the Team?

Question: “Is only the individual idea submitter rewarded? What about the team that helped execute the solution?” — Ann Zakrowski at Crowe Horwath LLP.

We focused on the idea submitter because the whole idea was to stimulate interest in participating at the very beginning. This is our third year in doing this.I would expect that as time goes on, that we would begin to expand this thinking, push it further down into this process, and begin to reward teams, not necessarily for the outcome, but for the fact that they collaborate across operational boundaries, internal silos, which is a challenge, but critical to being able to successfully drive something forward like this.

Great idea, and something we will probably migrate to as the system matures.

Making the Go/No Go Decision

Question: “How are ideas ranked or evaluated for approval to proceed? Who will ultimately make that go/no go decision? How many ideas get submitted annually, and how many move forward in some way?” — Judy Mondello at the J.M. Smucker Company

There are two thresholds for this. The first one is the idea comes in through an ideation funnel, into the process. Both new product development and marketing and my office share this same portal. We take a look at the ideas, and then we decide is it potentially disruptive or not.

If it is potentially disruptive, it drops into my organization. If it is not, it continues on through the new product development cycle, where they share that idea with the business where the ultimate business owner for the idea would be. They make a decision on prioritization, if it’s a good idea or not.

If it comes to me as a potentially disruptive idea, then we run it through a screen of seven or eight different questions to make sure it’s strategically aligned with the business, that it can meet the financial expectations of a potentially disruptive idea, etc.

If it does, then we go through the first stage of the idea management process, which we call the “discovery phase.” We do some initial research on it. We do some additional write-up work. We present a case.

Then we bring that case to the CEO, the COO, the CFO, and the Chief Legal Counsel of the company. We make a presentation on it. That’s where the decision to decide to go to the next stage or not is made.

If it makes it past that stage, then we take it into the first step of the incubation process, where we begin to really do some deeper analysis on it and begin to construct an experiment or a pilot, and figure out what it would cost us to stand that pilot up. Then we come back to that same group of people and make the case for doing the experiment.

If it’s approved, then we actually fund that experiment through my office. It’s not funded on the back of the operation. There’s a separate budget that funds this. Stand the experiment up, run it, and either adjust the idea, kill it, or allow it to live based on the performance of that pilot.

Take that business case, make it a business plan, and bring it forward again to the same group, where the decision to accelerate or not is made.

On the incremental side, the decisions are made by a group of people in the business or in the function of the business where that idea would ultimately reside.

We’ve had about 450 ideas that have been submitted since we turned the portal on, which was two-and-a-half years ago. I think there were like 30 to 35 incremental ideas that actually made it through approval and have been implemented.

Again, a lot of those are things like user interface issues with our system that make life easier, things of that nature, which are actually very hard to quantify at the end.

In terms of the potentially disruptive ideas, we had seeded the process with five. We had two more come in over that period of time. One of those two is still alive and is moving into pilot in Italy. We have five active projects underway. Two of those are moving to the end of the pilot phase, and will likely go on into acceleration.

We don’t have data on yield yet. But once we have an idea actually go into production in the business, we’ll be able to start pulling the data that we need to determine the effectiveness of the process. We’re not far enough along to have a full set of cycle data, but we’re getting close now.

To answer your question, probably about 10 to 15 percent of the ideas make it through an approval process and go through some kind of a vetting. Of those, I’d say maybe a third of those actually make it into the business. On the potentially disruptive side, it’s one in hundred, right? A hundred ideas come in and one is potentially disruptive. Of those, you see a fairly significant drop off across the process. The art here is in understanding how to fail fast if you’re going to pursue an idea that isn’t viable.

Time Robbers

Question: “What’s one thing that you chief innovation officers waste their time on, or focus on and shouldn’t?” — Anonymous

I would tell you what one of the biggest time robbers, in a big organization, is that there’s a fair amount of politics that you have to engage in. Because it’s incredibly important that you have buy-in and [collaboration] to move these things through, or they get scuttled along the way.

You have to have a process that allows you to circumvent those kinds of roadblocks to really test an idea. We have that. Probably the biggest time waster is trying to get buy-in from folks that are not going to buy-in.

The way we’ve set this up is this operation reports directly to the CEO, it has its own funding, and our initial desire is always to stand up our experiments and pilots inside our own organization, but sometimes you can’t do that.

Sometimes you either don’t have the capacity to do it, the IP to do it, the intellectual capital to do it, or in some cases the will to do it. Where that comes in, you have to have a way to continue on. You can’t let that stop you.