On Cash and Praise: How We Reward Innovation

(This post originally appeared on Forward Metrics)

A good friend of mine works for a high-tech company in Massachusetts. Recently, the company’s new CEO, an avid fitness buff, has introduced an initiative: every employee who’d spend certain number of hours per week in the company’s gym becomes eligible to a cash bonus. My friend, a frequent visitor of the gym himself, complains that the exercising space, largely deserted just a month ago, is now jammed with jogging, yogging and cycling people, sweating and determined. I suspect that many of these folks took advantage of the new initiative to rejuvenate their otherwise moribund New Year’s resolutions.

No, I’m not against commercial entities enforcing good behavior of their employees with cash. My point is different. I wonder why so many companies, while rewarding people for something they should be doing anyway, like exercising, don’t reward them for participating in innovation activities. Does innovation not have at least as strong an impact on the company’s future as the physical and mental health of its employees? Is adding innovation to one’s daily routine, already cramped with multiple responsibilities and looming deadlines, not as difficult as finding time to exercise? And yet, we see it time and again: with a great fanfare, a company launches an innovation contest and then expects employees to submit their ideas for free—or for a vague promise of future recognition if the winning idea is eventually implemented, something that in many high-tech companies may takes years.

Granted, there are companies that do recognize and reward their employees for innovation. Predictably enough, even some “best practices” have already emerged. We’re told, for example, that a balanced mix of monetary (e.g., cash or stock-option awards) and non-monetary (e.g., formal and informal recognition within the organization) rewards is needed to incentivize innovation. We’re further told that monetary awards can encourage incremental, but not radical innovation; the latter is better advanced by a formal recognition of the innovator. While sensing certain logic in these claims, I still wonder if any of them is supported by solid field research data.

It appears to me that such a convoluted approach to rewarding innovation—compare it to the simple “you exercise, we pay you cash” scheme—reflects the fact that in the majority of companies, some notable exceptions notwithstanding, innovation is still not organically embedded in the routine business operations. It is still considered a process that is conceptually different from other major business processes, such as marketing, business development or quality control. Consequently, established performance evaluation metrics aren’t used to assess innovation activities, and as a result, companies either invent ad hocrewarding tools or, worse, choose not to reward innovation at all.

Hopefully, this will change over time. As companies get more mature in their approaches to innovation, as they align innovation with corporate strategic goals, as they define what kind of innovation involvement is expected (or not) from each position within the company and then establish metrics by which this involvement will be assessed at each level, from top to bottom, innovation will eventually be “rewarded” as any other top performance would be: with cash bonuses, stock-option grants, promotions, etc.

And if a company has some money to spare, the opportunities to reward good behavior of its employees are endless. Exercising is great. But what about reading? You read one book per month, we pay you cash.

About Eugene Ivanov

Eugene Ivanov is a PMI-certified Innovation Management Consultant who helps organizations increase the efficiency of their internal and external innovation programs.
This entry was posted in Rewards and Recognition and tagged , , , , . Bookmark the permalink.

One Response to On Cash and Praise: How We Reward Innovation

  1. Pingback: One more time about “culture of innovation” |

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