Corporate Entrepreneurship and the Power of the Employee – Part 3

By Eric van Niekerk, Innocentrix Research Lead

Previously we discussed what employee innovation is, and gave some tips on how to successfully implement an employee innovation drive within an organisation.

This article will look at how to reward employees for innovative behaviour.

Rewarding innovative employees

Any organisation aiming to build a culture of innovation will ultimately need to consider a reward system for participating employees. But this is easier said than done – implementing a reward scheme without due consideration and planning can lead to unintended, and often damaging, consequences.

The wrong reward

The default reward structure for large organisations usually involves offering high impact prizes like large sums of money, or something of monetary value like a new car. Though, research has shown that offering high-impact rewards, like large sums of money, can actually decrease the quality and long term participation rate of employees in an innovation drive. Offering a large, monetary reward could easily lead to an influx of ideas, as everyone wants to have a chance to win some money, but without alignment to a specific corporate challenge most ideas will be of low value. Prize winners might be chuffed about the prize but they are the elite few, the rest of the workforce will experience the opposite (demotivation) and achievement will become viewed as close to impossible.

It is important to carefully consider what type of reward would best suit your organisation and its needs.

Types of rewards

South African organisations employ a variety of different innovation rewards, both monetary and non-monetary, or even a combination of the two. According to survey research, both of these reward styles offer drawbacks and benefits.

Monetary Reward

There is a strong case for the use of a monetary reward system in corporate organisations:  monetary reward tends to be the greatest motivator, and is an easy tool to use to generate interest and to gain participation. A successfully implemented innovative idea usually results in revenue growth, mitigating the cost of monetary reward. Monetary rewards also tend to be the employee rewards of choice, as they have more control over the reward, and recognise money as legitimate recognition of success.

The downside is, though, that an implemented innovation idea needs to go through a lengthy pipeline process, just like any new product or service. Many people are involved in turning a good idea into reality – who of them actually deserves the reward? Monetary rewards can also lead to jealousy amongst employees, promoting individualism, to the detriment of collaboration and team work (an aspect which lies at the heart of innovation). Monetary rewards further tend to set an expectation among employees – once monetary rewards are implemented, it is difficult to change to a non-monetary system. Also, employees may begin to expect monetary rewards for other organisational contributions.

Non-Monetary Reward

The alternative to the above is the non-monetary reward. Non-monetary rewards are usually seen as less desirable than the monetary alternative, but is often the reward system of choice in large multi-nationals. Non-monetary rewards tend to be easier to manage and administrate, as budget and red tape have less impact. Another advantage is that with a very diverse portfolio of non-monetary reward possibilities, more reward options are available for the organisation. Even though employees might think of non-monetary rewards as less desirable, it is important to not underestimate the impact of peer and organisational recognition – this recognition is often more likely to motivate modern knowledge workers. Non-monetary types of reward systems are also less likely to create jealousy (as is often observed with monetary rewards).

Selecting a reward system

Based on Ignite’s Guidance Note on Recognising and Rewarding Innovation, following are some important factors to consider when selecting an innovation reward system:

  • Consistent and clear – equal contributions should stand an equal chance of winning a reward
  • Earning reward – rewards cannot be given out on a whim, all awards must be earned through impactful innovative contributions
  • Timely – rewards should be awarded as close in time to the contribution as possible to establish a link between innovative behaviour and reward.
  • Creative and relevant – as innovation rewards are designed to recognise creativity, do not shy away from creative rewards, but ensure that rewards are relevant and valuable to employees.

Try to avoid:

  • Monetary focus – do not attribute more value to financial reward than it really has
  • Individual focus – having an individually focused reward can create unhealthy competition to the detriment of team-work and collaboration
  • Non-innovative rewards – allowing rewards to become repetitive and stale will decrease effectiveness over time
  • 1st place only – a system where the winner takes all serves as less of an incentive than one that has a 2nd and 3rd place reward.

Ultimately, designing an innovation reward structure requires thought and planning. No reward structure is without fault or merit, and choosing between them can be challenging. Even though it may not be possible to select the perfect reward system to please everyone, selecting one that best fits your organisation’s culture and structure can be done.