Factor 14: Rewards for Innovators

This factor deals with the availability of reward mechanisms for innovation.

Factor extremes as measured in survey:

There are specific reward mechanisms for innovation

vs.

There are no reward mechanisms for innovation

Overview to restructuring initiatives

Innovators require recognition and rewards that match the significance of the effort and the results achieved. Innovative companies have special rewards for innovators which are designed to provide the incentives for innovators to remain with the organization. Rewards can take many forms, the important thing is to be seen to have, and have, special rewards to innovators.

Good examples of having an explicit policy to reward innovation.

Factor #14 is one of the 8 most important blocs to support corporate innovation

Deere & Company; Chairman and Chief Executive Officer, Robert W. Lane, from an address he gave on May 7, 2007, addresses how Deere is ‘Driving Growth through Innovation’. Emphasis is placed on rewarding ‘great performance with outstanding rewards’. The rewards practice is set in the context of a ‘commitment to innovation’ by a ‘commitment to aligned talent’ an effort to encourage high-performance talent working together. Salaried employees create annual performance plans with objectives that support ..goals. There is an understanding of “best-in-class” compensation that .., rewards good performance with good bonuses. The idea is to encourage more of a team effort than it is related to the individual. Each senior officer is required to have a ‘breakthrough innovation-related performance management objective …. and compensation at year end is based on whether the goal is met.
At Whirlpool Corporation rewards for innovation are in place for senior leaders of an innovation initiative while others in the corporation receive peer recognition.

The innovation initiative, which is referenced in an article in Business Week – March 6, 2006 – began as a deliberate attempt to inculcate innovation into the organization and broaden the responsibility for innovativeness. The objective was to stimulate and better managing the flow of ideas. Prior to this initiative the responsibility for innovation had been the responsibility of a ‘couple of groups, engineering and marketing’. According to Nancy Snider, who was Vice President of leadership and strategic competency in 2001, the result which the corporation has achieved required ‘a lot of trial and error’.

While employees are encouraged to submit innovative ideas, Whirlpool ‘now relies on 240 full-time employees, dubbed I-consultants, to assess which are the best ideas and then to get them to the market’. An intranet site is used as a focus for the placement of new ideas from employees. People, called I-mentors, about 600 around the world, while having real jobs, have also ‘been trained in how to facilitate innovation projects and help others with their idea’.

The ‘tipping point for us on innovation’ was tying pay to success but in this case to one group; the managers of the innovation process. A ‘senior leader’, one of the I-consultants, is rewarded in the amount of one-third of compensation, tied directly to what comes out of the innovation pipeline. While a team approach to innovation was the desired norm, it was believed necessary to also provide specific rewards for individuals. The reward for others in the corporation is by peer recognition. The system had, in 2006, been in place for 3 years.

Possible Initiatives to Modify and Improve the Culture for Innovation

Provide incentives for innovators

Over and above stock options and bonuses; which are the most favored methods of providing incentives to employees, there is a need to provide additional incentives and rewards to innovators, i.e.; cash rewards, recognition of special achievements by honoring individuals or groups, and in general a broadcasting of the reward to all concerned.

The creation of special forums represents an opportunity to recognize innovators. Drawing in customers by way of user-conferences and featuring the innovation team can be an effective way of ensuring innovators receive recognition while at the same time securing feed back from the customer group. Internal trade shows can draw together the innovators and those in the company that are involved in the selling or distribution of the product or idea.

Compensation is a tool for building an organization which encourages innovation

Four areas make for an effective compensation program for innovators: base pay, incentive pay, recognition devices, and career development. The key characteristics of compensation arrangements in innovative companies includes;

  • meeting or exceeding externally competitive salary levels,
  • having a simple salary structure,
  • emphasizing incentive pay,
  • cafeteria approach to benefits,
  • bonus eligibility to all employees,
  • widespread availability of rewards (not just to senior management),
  • active ‘suggestion box’ programs,
  • well publicized rewards and not hidden arrangements,
  • patent and royalty payments available to individual innovators, and
  • availability of dual career paths of significance for innovators as well as management types.

Putting innovators in charge of their creations

Many innovators have the skills necessary to follow the development of their idea, their product, through the many phases it must pass through before becoming commercially successful. Some do not! Providing the opportunity for an individual or small group to accompany and foster the idea through all phases, and to be rewarded for this effort, is a strong incentive to be successful and a just reward. Success breeds success as other staff become aware of what they too can do for themselves and for the corporation—a win-win situation.

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