Rewards May Drive Innovation

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An intriguing study finds smaller rewards motivate employees to generate better ideas.

What rewards do you offer employees for their disruptive ideas? If it’s half the value of the idea, you may be spending too much, and end up with too many ideas.

Yes, there is such a thing as having too many ideas. And because innovative projects must be implemented efficiently, they can become too unwieldy to manage.

That’s according to Oliver Baumann, an associate professor of management at the University of Southern Denmark, and Nils Stieglitz, a professor of management at the Frankfurt School of Finance and Management, who researched how reward systems can impact idea-generation. Together they created a virtual workplace not unlike Sim City, in which employees were asked to come up with ideas in exchange for rewards.

The results were intriguing: The bigger the reward, the bigger the ideas that flowed into the company’s pipeline, sometimes to the point of excess. When virtual employees received smaller rewards, however, they came up with smaller but more useful ideas. “Our research shows that high-powered rewards are no better than low-powered incentives at producing radical innovations,” the researchers wrote in the Harvard Business Review. “They may generate excitement and high hopes, but they result in few breakthrough concepts.”

 

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