This blog has a recurrent theme: I’m interested in corporate policies that organizations may try to foster the culture of innovation. The only requirement for making the cut is that this policy must be specific and actionable (i.e., not just a call to “celebrate failures”). As of today, the list of such policies is very short; it actually includes only two entries.
- I propose to make stock option grants, as opposed to cash bonuses and other monetary rewards, the principal incentive for engaging employees in innovation projects.
This proposal is based on a 2015 finding that companies offering stock options to non-executive employees were more innovative, and that the positive effect of stock options on innovation was more pronounced with longer-term grants.
- I propose to place employees involved in innovation projects on fixed-term employment contracts, as opposed to employment-at-will. Alternatively, the creation of tenure-like job arrangements for people involved in strategic innovation initiatives can be considered.
This proposal capitalizes on a 2001 study showing that labor laws making difficult to fire employees increase their participation in corporate innovation activities. It was argued that the lower threat of termination produced by stronger anti-dismissal encouraged employees to engage in potentially risky innovation projects.
A recent article in Harvard Business Review prompted me to introduce one more policy to my list. The article author, Simone Ahuja, identifies an important structural barrier preventing corporate intrapreneurs from “owning” their innovative ideas: the decision to proceed with the idea further or terminate it belongs to managers rather than to intrapreneurs. Ahuja then describes a successful corporate policy introduced at Intuit: there, it’s up to individual intrapreneurs to decide “if and when to pull the plug on a project or prototype.” And if they decide to discard the original idea, the intrapreneurs are encouraged to pivot to another solution instead of terminating the project completely.
Sure, I understand that writing off the cost of “failure” when developing software–as opposed to areas where building prototypes requires significant investments–is easier at Intuit that at other companies. And yet, giving individual intrapreneurs the power of decision-making–granting them the status of the Chief Decision Maker, so to speak–provides an enormous boost to fostering the culture of innovation: it eliminates the very word “failure” from the corporate innovation lexicon. For, if it’s your manager who closes your innovation project, it’s failure (no matter what the followers of the “celebrate failure” cult would tell you); but if it’s you who decide when to bury your idea, it is learning.
So, I propose the following addition to my list:
- Whenever possible, provide employees involved in innovation projects with fixed budgets and timeframes to conduct validation studies/prototype building while giving them, within defined borders, the authority to be solely responsible for the key project decisions.
In the future, I’ll try to refine the language of the above proposal.
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