Innovation is the topic du jour, an imperative in today's fast moving business environment, a top concern of executive teams around the world and - increasingly - a key agenda item for HR. If today's watchwords are truly innovate or perish, how does an organization hardwire innovation into its culture and what role can rewards play in creating a climate conducive to innovation?
From Minnesota's 3M and i4cp comes new research and some data pertinent to the question of rewards. Their recently released report Innovate or Perish: Building a Culture of Innovation brings us some interesting findings, including some on whether and how high performing companies (those that excel in revenue, profitability, market share and customer satisfaction over the course of the previous 5 years) recognize and reward innovation.
A few outtakes from the research:
High performing companies reward innovation. High performers are more than twice as likely as low performers to report that their organization rewards innovation.
Nonfinancial recognition is the most commonly used innovation reward approach by high performing companies. More than half of high performing companies (57%) recognize innovation through the use of nonfinancial rewards. Only 36% of low performers use nonfinancial recognition to reinforce innovation.
High performing companies are significantly more likely to tie individual bonuses and salary increases (45% versus 26%) as well as team bonuses (29% versus 10%) to innovation than low performers, although these reward practices are reported by under half of high performing study participants.
High performing companies are also more likely to reward innovation with more challenging work or autonomy (44% versus 34%) or promotional consideration (42% versus 31%) than low performers, although the differences here are less noteworthy.
These findings, of course, don't reflect an assessment of the effectiveness of these practices at driving innovation - only their prevalence. Clearly, though, high performing companies are much more likely to be using their recognition and reward budgets and practices to help create a culture of innovation.
My personal philosophy around rewarding innovation has been that it is best done broadly and indirectly. Programs that are very direct and narrowly focused presume that we know and can predict exactly the kind of behavior and efforts that will generate the next breakthrough in process, product or service - and that we're likely to get there by focusing and constraining people's actions accordingly. A faulty assumption at best. Better, I think, to:
-Set the stage with the right mix of resources, opportunities and freedom.
-Use recognition (financial and/or nonfinancial) to celebrate victories and right steps along the way, when they occur.
-Focus on group, rather than individual, efforts and results in order to discourage silos and encourage collaboration and communication across groups and organizational boundaries.
-Reserve more significant financial rewards for the purpose of sharing the economic success created across the responsible group(s) - economic success that depends on innovation as well as performance in other areas.
Some parts of the 3M/i4cp results support my worldview, others do not. I admit to surprise at the degree of emphasis on individual innovation rewards that high performing companies claim. But I also know little about the particular approaches or mechanics they use to accomplish this.
What's your reaction to this research? What surprised you - what didn't? Consistent with your worldview - or not?
Ann Bares is the Founder and Editor of the Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time. Follow her on Twitter at @annbares.
Image courtesy of ideachampions.com
I have a story to share about recognizing innovation with non-monetary rewards. A technical architect at a certain IT company sent a programming challenge out to the busy development group, asking for creative solutions. A mystery prize was involved. Somewhat to his surprise, response was overwhelming and interesting ideas poured in. Finally came the big unveiling: everyone presented their ideas and a winner was announced.
The prize turned out to be that the Irish development lead - who has a particularly melodic way of speaking - would record an answering machine message for the winner.
Is that creative rewards in action or what?
Posted by: Laura Schroeder | 07/18/2011 at 02:16 AM
What a great story, Laura - thanks for sharing ... and for reminding us of the particular power of non-monetary (and non-conventional) rewards!
Posted by: Ann Bares | 07/18/2011 at 07:36 AM
If I'd been the guy that won the answering machine message I would be pretty peeved. I don't think there's much people want other than money in today's business world.
Posted by: air conditioning | 07/20/2011 at 02:20 AM