Small Rewards Favor Innovation

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A recent study found out that small rewards will motivate employees to come up with innovative ideas.

So that begs the question, what rewards do you offer your employees for their creative or innovative ideas. The common thing to do in this case is to invest at least half the value of the idea. Invest more and you might end up spending too much of your revenue and being “drowned” in ideas.

Maybe it seems weird but having too many ideas could prove hard to manage. Innovative projects need time to be developed and implemented correctly so that it may bring revenue tenfold. If you have too many innovative projects at once you might get the short end of the stick. You might not have enough time, effort and resources to invest in all of them so that the final product resembles or is quite similar to the product you were presented with.

Oliver Baumman, a management professor at the University of Southern Denmark and Nils Stieglitz, a management professor at the Frankfurt School of Finance and Management conducted a research on how reward systems are correlated with the innovation process. They were able to create a virtual workplace in which employees that came up with innovative ideas were offered rewards in exchange.

To say the results were intriguing is an understatement. The bigger the reward, the more ideas employees came up with, often times to the point of excess. However, during the study when employees received small rewards, those employees offered more useful ideas but not as many. According to the researchers, the study shows that high rewards prove not to be better than the smaller rewards when it comes to the innovation process.

The study was later published in the Harvard Business Review and the professors are anxious to see how their study will be met by entrepreneurs. They hope that it will generate not only excitement, but also high hopes that will lead to some breakthrough concepts.

It should come as no surprise that more complex ideas are not as easy to implement as the smaller and more useful ones. For example, in today’s business world, 3M allows employees to use about 15 – 30 percent of their work time to work on their own projects, whereas Google takes this a step further by offering employees millions of dollars in stock for the innovative idea that will win a Founders Award.

However, rewards as not always the answer to your problems. Yes, they may help you get started and put you on the right path but, they can only take you so far. This is where the culture and the organizational structure comes into play given that this will encourage your employees even more to come up with new and fresh concepts that will bring you revenue.

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