Surprisingly, we've found that fixed pay (salary) and individual performance pay have little affect on innovation, while variable group pay and indirect pay (employee benefits) have a much stronger impact.
In the most recent Human Resource Management Journal, the effects of innovation in the workplace is tested from 7 years of compiled data. The study reveals the declining effects of traditional incentives, such as a raise in salary, and shows the increasing importance of a complex employee motivation strategy to boost corporate innovation. “You can pay employees to innovate if you do it properly. But be aware that individual incentives really are not going to help,” says Bruce Curran, a co-author of the research, and a doctoral student at the University of Toronto.
With the rise of globalization, diversity in the workplace, and the e-business boom, jobs today require a substantial innovation component. Managers are faced with a new set of problems that challenge them to be more flexible and creative when nurturing employee innovation and ideas. A dynamic innovative culture employs freedom, humor, playfulness, trust and time to share ideas in the workplace. (click to tweet)
The Human Resource Management Journal shows that group or team bonuses, profit-sharing plans and indirect pay, such as robust employee benefits, relates directly to higher creativity and better problem-solving at work. Rewarding teams may allow workers to take more short-term risks because their own pay isn’t necessarily on the line. “If you go down a blind alley, you aren’t going to be punished for that,” says Curran.
In other words, the results of this study suggest that encouraging and motivating employee innovation is possible, provided that you select the right compensation incentives.