The value of good ideas

Good ideas are not a commercial soft option. The director who dismisses his company’s suggestions scheme as a sop to the human-resources department has missed a very big trick – and on National Ideas Day this month, managers can expect to be told firmly how to respect the ideas of their staff.

The British workforce does have a suggestion-making frame of mind, says Steve Procter, operations director of IdeasUK, an employers’ association dedicated to the spread of workplace suggestion schemes. The problem, he says, is that corporate management doesn’t know what to do with their ideas.

‘To regard a suggestion scheme as a “soft” HR project, aimed at staff morale, is to miss the fact that good ideas are a business proposition,’ he says firmly.

‘Some director always asks: “what is this costing us?”, and misses the fact that a suggestions scheme is a profit centre, in that its results will produce more in savings than it costs to run.

‘Then it becomes a marketing function. I can show organisations who always show membership of Ideas UK on their tender documents, to promote the fact that they are committed to continuous improvement.’

The question is: do suggestions schemes really make money? According to IdeasUK, its members have received 120,000 suggestions from their employees in the past year, and those put into effect have saved an estimated £90m. But what does that mean in practical day-to-day terms?

‘A lot of ideas come from questioning the old maxim of “we’ve always done it this way”. Take the photocopier-maker, who realised that, although the company was quite rightly doing quality checks on batches of toner, the samples that had been extracted for testing were then thrown away,’ Procter explains.

‘Somebody said: “but if we’ve just approved the sample, then why not put it back in stock?” That saved the company £27,000 a year!’

Finding good ideas is rarely a problem – progressing them from a concept is where expert advice becomes invaluable.

A constant question put to IdeasUK is of whether ideas should be rewarded. The concept of rewards is universally accepted – except, says Steve Procter with a smile, by some management consultants.

‘They say that acknowledgement is enough, and financial reward is divisive – funnily enough, this advice often comes from a consultant who has charged for it, and is often accepted by a chief executive who is quite happy to accept his annual bonus!’

In general, employee surveys almost always show that reward and recognition are equally appreciated. This raises the tax question. In very broad terms, it is possible to give a tax-free award up to £5,000 for a suggestion which produces a financial benefit, and a far smaller ‘encouragement’ award of £25 can be made in appreciation of a suggestion received but not taken up.

PricewaterhouseCoopers has done two major pieces of work on this specific issue – not only does the firm advise clients on tax-efficient ways of managing a scheme, but one of PwC’s own HR consultants, Michelle Radcliffe, has used the subject for her own CIPD course. In doing so, she looked into a useful aspect that has been missed by most other researchers – what do employees really think of these schemes?

‘We continue to be impressed by the vast revenues or savings that can be created by well-run, successful, schemes, but do we know if these schemes are viewed positively by employees? Do they feel exploited?’

Her research was carried out among employees of an organisation, which runs one of Britain’s most-successful schemes. She was intrigued to discover that employers enjoyed the scheme more than some managers had expected.

‘Managers had predicted that employees would perceive the scheme as less of a “good thing” than was found to be the case. The majority of employees perceived it as a “win-win” for themselves and the company, and would be disappointed if the scheme was withdrawn,’ Radcliffe says.

The staff also approved of the reward structure. ‘People tended to value ‘being able to do something that might benefit the business’ more than the size of the award they received. Also, interestingly, from people who were eligible for both company bonus payments and staff suggestion scheme awards, the overriding opinion was that the suggestion scheme rewarded people more fairly.’

PricewaterhouseCoopers’ corporate view is that suggestion schemes are a great thing, and even more so when managed with an eye to tax efficiency.

There are hazards in this – according to the Inland Revenue itself, one crops up when more than one award is made for the same suggestion. This usually happens when an employer gives both a gift and a cash award, or more often, when a suggestion wins an award at submission stage, is later found to be more valuable, and wins another award at implementation stage.

In the BUPA network, a care manager decided to print a helpful booklet about things that bereaved relatives had to take care of, and simply ran off a few copies for her own use.

It was when BUPA realised how valuable the booklet was, and printed it for use across its entire network, that the idea was first put forward for a quarterly prize of £250, and later nominated for the Idea of the Year, worth £2,000.

Sometimes the original idea is simply under-valued – a suggestion made in part of the armed forces in 1999 was accepted, but the suggester complained that the estimated savings were under-estimated.

He had devised a way of saving a lot of physical work by turning to a computerised switching network controlled by a touch-screen panel. The original assessment notes suggested that the idea would probably save £100,000 in man-hours, but four years later a more perceptive assessor re-calculated and added a million pounds to the original figure.

This, says IdeasUK, shows just how thoroughly a suggestion scheme must be managed.

‘We often hear managers saying they “only want quality ideas” – but it doesn’t work that way,’ says Procter.

‘Unless you are prepared to stand in the stream and sift all the sand that passes through your fingers, you can’t expect to find the nuggets.’

As part of National Ideas Day, ideasUK is organising a free conference in London on 15 March for advice on developing and running a staff suggestion scheme programme.

For more information see www.ideasUK.com