Tuesday, May 22, 2012

The higher the expectations, the lower the innovation results

There is a growing interest in creativity and in innovation. More and more leaders see the need to increase the rate of innovation. But many leaders are using old-fashioned methods to incentivize these efforts. For instance they will give a large bonus if the innovation meets or exceeds the targets. Most of the time this will have a negative effect on the performance and not (the intended) positive effects.

Here is a quote from Dan Ariely, The Upside of Irrationality:

“To summarize, using money to motivate people can be a double-edged sword. For tasks that require cognitive ability, low to moderate performance-based incentives can help. But when the incentive level is very high, it can command too much attention and thereby distract the person’s mind with thoughts about the reward. This can create stress and ultimately reduce the level of performance.”

So, instead of huge bonuses it is much more effective to:
-       Recognize innovators for their efforts
-       Give them the resources required
-       Support the innovation from the top (in words and deeds)
-       Lead activities to change the product-out culture into a customer-centric culture
-       Stimulate cross-silo collaboration
-       Connect with customers on a regular basis

Innovation does not only require the design of new products or services, but also the design of a new way of working together.

How are you stimulating innovations?

Enthusiasm drives Excellence!

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