New ideas, new products, new processes. Every business needs them to succeed and leaders know that only with talented and motivated human capital they can unlock creativity and innovation in their organisations. In fact, in a recent survey conducted by The Conference Board, CEOs rated innovation and human capital their top two priorities–they understand that innovation and human capital go hand in hand. The challenge is how to connect the two and create culture of forward thinking and creativity.

Traditionally many organisations set up R&D departments, centres for excellence or incubators with the primary purpose of producing innovation. The problem with this approach is that it isolates innovation from the rest of the business, limiting the breadth of perspective it would otherwise gain from other departments and more diverse groups of employees. To create a culture of innovation organisations need to make innovation a human capital issue embedded in everyone’s jobs.

To address this we see many businesses prioritising innovation by linking it to the company’s reward system. This can have a positive impact on encouraging innovation from a diverse, multidisciplinary or targeted groups. A research of HR and reward professionals we conducted in partnership with Loyola University, Chicago, showed that they overwhelmingly use bonus, incentives and spot awards to drive innovation and consider these effective ways to achieve their results. Incentives and bonuses in particular ranked the most effective.

However, the research also revealed that financial compensation is not the only incentive in place to tap the innovative powers of individuals. Opportunity for promotions was slightly more utilised than bonus and incentives and other non-financial rewards also ranked high.  Interestingly though, promotion opportunities were viewed as significantly less effective than bonus and incentives.

Although there is a longstanding belief that financial incentives are the most powerful motivator of performance, organisations large and small should look at what scientific research says about effectively motivating today’s workforce.

Findings of various studies by behaviour psychologists suggests that intrinsic motivation–or the joy of the task–is a much stronger driver of motivation than the typical extrinsic rewards otherwise known as money. In the 1950s, researcher Harry Harlow was the first to argue this theory. His principle was based on studies of monkeys performing relatively complex tasks. He observed that the primates enjoyed completing the tasks without the presence of expectations or rewards. Subsequent research over the last decades continued to replicate these findings.

In the book Drive: The Surprising Truth About What Motivates Us (Riverhead Books, 2009), Daniel H Pink summarises the thrust of these findings. Pink demonstrated that the traditional practice of increasing productivity by rewarding behaviour, the carrot and stick approach, worked well in the 20th century when work consisted predominantly of routine based tasks.  But when the tasks became more complex, interesting and more self-directed, the traditional approach no longer delivered the expected results.

Pink outlines that using monetary incentives can have unintended consequences. They can result in extinguishing intrinsic motivation, crushing creativity, encouraging unethical behaviour and short term thinking. He argues that money is a motivator at work only to a certain extent–people expect to be paid enough so that they can focus on the work instead of worrying about money: “If you don’t pay people enough they won’t be motivated” he says. Assuming that you have a competitive compensation strategy in place, Pink recommends that you adopt an approach to motivation more in line with today’s jobs and aligned with our innate intrinsic motivators of:

  • Autonomy: the desire and need to direct our own lives
  • Mastery: the need to get better at things that matter
  • Autonomy: the core human need to be connected to something bigger than ourselves

All that said, we know that people do work for money and have bills to pay and in some circumstances they may lack the intrinsic motivation to do their jobs. The key is to provide the right balance of intrinsic and extrinsic motivators that springs the true creative and innovative power of your workforce.

An effective way of incorporating intrinsic and extrinsic motivators in the job is to combine both reward and job design strategies. Here are some suggestions to help you integrate and use them as a lever to engage and motivate your people to innovate:

  • Rewards

Provide financial / tangible incentives through bonus, cash, shares, additional holiday, and the like.  Importantly though remember that not all are of equal value in the eyes of your employees. Some will appreciate the time off, for example, more than pay whilst others may prefer pay and even like to work extra hours.

Also provide non-financial rewards and recognition for innovative ideas. Provide support for trials of new ideas.  Reward creativity with promotion opportunities, job rotation, international assignments but be aware of different needs as noted previously.

  • Job design

Provide the environment that gives ownership of their work. Give employees flexibility over how, when, where they do their projects and allow employees to get involved in projects with other teams and departments.

Help employees develop themselves and learn new skills so that can become masters of their work.  Also, set clear and realistic goals, reward learning and promote risk taking and entrepreneurship in order for them to develop expertise and innovative approaches.

Purpose is needed to get your employees to buy in to the why of the work.   Have a meaningful company mission and purpose.  Share the vision and how the employee is contributing to the company goals (make sure that they see the link between their job and their innovation to the overall purpose). Support social initiatives and involve employees in a greater cause as a way of creating the why.

The connection between innovation and success is clear and by understanding what motivates your people you can structure your compensation programs to drive the innovation needed in your organisation.

How is your company incentivising innovation? I would love to hear your views. Leave a reply below.


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About the contributor

Trevor Warden is the Co-Lead APAC Rewards & Benefits and Work Measurement at Korn Ferry. Trevor helps organisations and people become more effective through finding job clarity, enabling them to be the best they can be and building a motivating environment for high performance. During his consulting career, which spans two continents and two decades, Trevor has worked with a wide variety of organisations. He brings with him enormous experience to help organisations review their structures, create doable jobs and develop wide ranging Employee Value Propositions.

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