It seems counter-intuitive, but offering big rewards for creative endeavors to your employees can have a negative effect on firm innovation. Research by Oliver Baumann and Nils Steiglits of the Harvard Business Review found that sizable rewards might produce a torrent of ideas; however, a company may be unable to implement the majority of those ideas because of limited resources. Additionally, employees can feel disenfranchised by the low likelihood of receiving a reward.
The inability to adopt employee ideas because of a lack of resources primarily affects large firms. Baumann and Steiglits refer to this as “congestion” in the project pipeline. The study offers some suggestions as to how to boost employee innovation.
- Offer many smaller rewards to employees rather than limited large rewards. This will increase the likelihood that an employee will benefit and motivate rather than demotivate their efforts. Alternatively, offer reward levels such as 40 percent of the value of small ideas that can realistically be implemented and 10 percent of ideas that require substantial investment.
- Encourage variety in ideas by promoting experimentation by employees. This requires an understanding that mistakes will occur, and a willingness by the firm to accept the ramifications. However, developing a culture where employees are willing to take risks is crucial to innovation. Employees can be rewarded for failure if they provide productive information.
- Create channels and opportunities for employees to meet and discuss ideas. Laura Hee of Forbes interviewed Google’s Laszlo Bock, Senior Vice President of People Operations. Bock listed the methods employed by Google such as the building of cafes for conversation and brainstorming, software systems that allow employees to interact, vote, and ask questions during meetings, and a ticket system to address technological or procedural problems.
Google also provides employees with the freedom to work on projects of their choosing for a certain percentage of their time. Intense 24-hour sessions where all employees must solve a pressing issue encourage team creativity, and the seeking of constant feedback from employees provides a culture of inclusion.
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