Duncan Brown: How creative reward can drive innovation

How creative reward can drive innovation

CIPD (Chartered Institute of Personnel and Development)
Duncan Brown


«Innovation certainly does lurk beyond the c-suite, as Grace Lewis pointed out in her recent PM opinion piece.

»And in a recovering, but still spluttering, economy innovation and how to promote it are near the top of the agenda for almost every government minister, CEO and HR director.

»Last summer, Vince Cable and Adair Turner spoke at a University of Sussex Finance for Innovation conference calling for companies to “think big” and invest. I have also spoken on the subject of HR in the role of innovator at the Institute for Employment Studies (IES) HR directors’ retreat.

»However, the core question remains how can HR help foster an innovation-friendly corporate culture? Aon Hewitt’s engagement database shows overall engagement levels were flat-lining in Europe last year. Perceptions of innovation actually fell back four points as cost pressures and management controls tightened.

»But the most difficult area is that of pay and reward and its role in helping, or perhaps often hindering innovation. Here’s a little test, ask yourself what would happen in your organisation in each of these scenarios:

»Someone invested a huge amount of time and money in a project, which failed to bring a product or service to market? Would they be applauded or financially penalised?

»One of your junior staff came up with an idea to improve the organisation’s efficiency by 30 per cent? Would they be believed or ridiculed?

»You proposed giving everyone one day a week to do what they liked at work, like Google’s famous 20 per cent time policy?

»You proposed paying everyone to go to the pub on a Friday lunchtime on the condition that they came back with at least one idea for improving the business?

»Your ideas will give you some idea of your organisation’s cultural approach to encouraging innovation.

»On the basic issue of whether money motivates innovators, economist Diana Coyle argues this is “a winner takes all (knowledge-based) economy…we need ‘star’ systems” in pay.

»And as US writer Po Bronson asserts Silicon Valley programmers are “no longer nerds in the backroom: they want ownership, they want money”.

»Yet psychologists Nina Gupta and Jason Shaw found “non-financial motivators and a trusting environment, not money, were the prime motivations” for scientists. Peter Reilly, IES principal associate, agrees: “Do not rely on pay, a total set of rewards needs to be available.”

»Rewarding innovation challenges many predominant HR approaches, such as assuming everyone’s work can be encapsulated in five SMART objectives, or that tiny differences in base pay awards are going to make any difference to people’s behaviour.

»From my own research and experience I’ve found that reward and HR professionals need to consider a number of things if they hope to incentivise innovation through reward.

»For example, the optimum reward depends on the context and how innovation comes about in your setting – it is ‘best fit’ rather than ‘best practice’. But you do need to question whether your existing pay systems reward perspiration over inspiration, individual over team and short-term financials at the expense of long-term growth.

»You need to look at the whole rewards package and how it best supports your employees’ needs and a culture of innovation. One interesting example is the Google Founders Awards, which paid out $12 million of stock to the search firm’s 24 most innovative employees. This confers ownership, recognition, status and security, not just the monetary value. So don’t forget the importance of status and security to employees as they are often under-estimated and under-utilised staff motivators. And that can be particularly important in the UK’s current zero-hours, low pay work environment.

»I think that HR needs to be more creative in its reward approaches if the function wants to encourage innovative performance. Don’t just copy what everyone else in your sector does. So how about introducing a lottery or unexpected gift element to liven up your boring, long-running pay plan for example?

»Or let employees decide how a bonus pot is allocated and spent?

»As management guru Peter Drucker put it: “If you want something new, you have to stop doing something old.” In reward, it’s time for HR, as well as their employers and employees, to innovate.»

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