Driving Innovation with Total Rewards

I've always been fascinated by innovation and the thrill of thinking about something in a way that nobody else ever has. Innovation can drive positive changes in quality, efficiency, and competitiveness. It's no secret that quite a bit of corporate time is spent thinking about how to innovate.

But how do you foster innovation? Spend millions of dollars on state-of-the-art research labs? Encourage riding a unicycle up and down the hallways while juggling, a la Claude Shannon at Bell Labs? Change the company uniform to black turtlenecks and jeans?

You don't have to resort to providing wacky toys or jeopardizing the bottom line with monster R&D labs. Believe it or not, your compensation mix, recognition and rewards programs, and development opportunities can go a long way in creating that next great idea. Here are three ways you can drive innovation with your total rewards strategy:

1. Create a safe space for innovation. Employees have to feel comfortable taking calculated risks. The structure of a total rewards program can help create this safe space. The proper balance between salary and incentive compensation creates a safety net. Relying too heavily on incentives can create pressure for achieving short-term returns. Employees may sacrifice work on "the" idea to come up with "an" idea to earn this month's bonus so they can pay their bills. Getting the right mix between salary and incentives removes this concern and frees employees' minds to pursue bigger and better ideas.  
2. Provide fresh perspectives through development and career opportunities. Addressing the same challenges with the same set of tools day after day can drive even the strongest innovators into a rut. Use professional development and career opportunities to encourage employees to explore their full potential and accumulate diverse experiences. Seeing things from a different vantage point (either because of new skills or a career advancement) can provide that spark of inspiration.
3. Recognize and reward innovation throughout the company. Innovation isn't constrained to the mad R&D scientists. Ideas are everywhere, and not all great ideas are for the next iThing or an alternative energy source that will save the planet. Innovation comes in a variety of forms. Each employee - from administrative assistants to zone managers - should be encouraged to innovate from within his or her own function. Everyone should be looking for better ways to do things, and creating an inclusive rewards program extending beyond the R&D labs can encourage this. 

Innovation isn't some mystical mojo that some companies have and others don't. It isn't about cultivating a "creative" culture. It's about providing employees with security to explore ideas, tools to realize their potential, and recognition of their achievements. 

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

Comments

[Jacque Vilet]

Great topic Stephanie. I would like to hear from you and other readers:

In your company how do you tell employees it's OK to take risks and if they fail, how do you design incentives that don't penalize him/her because of it?

Look forward to hearing answers.

[John A Bushfield]

Stephanie - Creating a culture and rewards program to encourage new ideas from the workforce is a tremendous concept. Similar to the old Suggestion Programs, however, it can be difficult to administer and sustain. Many of those 'old' programs died through strangulation by the bureaucracy created to manage them.

A culture of innovation requires easy and frequent communication throughout the organization. The better informed the workforce, the more likely ideas will be triggered to improve or change.

Designing a rewards program to support that culture can be a tricky exercise, especially when metrics are superimposed over the process. Moreover, the law of unintended consequences needs to be thoughtfully considered.

Just like most other highly impactful concepts, if it were easy to do everyone would be doing it. Success can be transformative, so its worth the effort.

[Patty Tanji]

Hi Stephanie -- I can't help but think back to Daniel Pink's book "Drive" where he describes innovations that happen as a result of letting go of control/incentives and letting people 'be'. Our minds can't be free in a lab as your article alludes. Ultimately employers have to give up a great deal of control in order to establish a culture of innovation. Its fun, its creative, and its, dare I say, heart centered freedom. Also thinking of Otto Scharmer's thoughts on 'Presencing' and Theory U.

[Jeffrey Haynes]

Totally agree with Patty - my first thought as I read this was "autonomy, mastery and purpose". Talk pay off the table (make it not matter) give them the intrinsic rewards they crave, and a heuristic (innovative) workforce will blossom. Of course, its a 180 degree difference for an algorithmic (scripted) workforce. Great book, DRIVE - I highly recommend it.

[Dan Walter]

We had this for years. It was called recess.

When we got older we stopped having recess because it just "seems' unproductive.

But recess is probably where most people made life-long friends. It is probably the time where we learned how fast we could run, how high we could jump and, if we squinted just right, how easy it was to fly.

Most great creative companies have recess. But, like most great schools they also have great places to do more structured work, great leaders and goals that can and must be attained.

These things are measured in minutes, hours, day, months, years and life-times.

But, most of all the measurement of recess how big you could make the world in your mind. The measure of class was how to turn that vision into reality.