Posted on Harvard Business Review: July 22, 2010 11:17 AM
Season four of AMC's hit series Mad Men starts Sunday night. But I was reminded of an episode from season two after reviewing fresh research results. In the episode, fast-rising copywriter Peggy Olson confronts senior partner Roger Sterling in the hallway, reminding him that she "landed the Popsicle account on her own." Earlier scenes depict Olson imagining the ad campaign, testing it on colleagues, and successfully pitching it to Popsicle executives. As compensation, Olson asks Sterling for her own office.
"It's yours," replies her boss decisively.
The takeaway? While the Sterling Cooper ad agency has hordes of creative types—employing "more failed artists and intellectuals than the Third Reich," according to mordant creative director Don Draper—Olson is the one that is conspicuously rewarded for combining creativity and aggressive execution (and a dose of moxie in choosing to approach her boss.)
It's usually not a great idea to look for innovation tips in the storyline of television series, even award-winning ones. But in this case, the scene depicted what our results showed: Bosses shouldn't hesitate to openly reward the execution of a solid idea.
In our Babson Executive Education survey of 194 front-line employees on trends and practices in corporate innovation, we found a striking correlation between higher performance and overt leadership rewards for execution of new ideas in three innovation practices: personal idea creation, experimentation, and scaling ideas. For convenience, below we call organizations in which respondents agree that their leadership overtly rewards execution of new ideas "rewarders," and those that disagree "non-rewarders."
Rewarder companies report higher rates of personal idea creation. Respondents working at rewarders are two and a half times more likely to personally develop new ideas on a regular basis than those working at non-rewarders (55% versus 21%). This finding challenges the widespread notion that hiring imaginative, intrinsically-motivated people and letting them "do their thing" insures innovation.
Dangling the proverbial carrot on a stick may work after all. With no promise of some sort of extrinsic recognition from the top (even if it's something more modest than a new office), potential idea generators are far less likely to actually generate ideas.
Rewarders' employees demonstrate more productive action by using tests that yield fast, tangible results. Rewarders' are 3.5 times more likely than non-rewarders to devote significant organizational resources and attention to innovation experiments and projects that "will yield quick measureable outcomes" (73% v. 21%). They don't rely on a long, structured planning and resource allocation processes to make big bets. Instead, they try to democratize a process of action and analysis to quickly place a series of smaller bets.
At the same time, many rewarder respondents emphasize the importance of having an organizational group for testing and assessment, like an innovation center or open-door innovation lab. "The fact that we have an Innovation and Advanced Technology Department speaks volumes about our organization's commitment to innovate," says a worker at a large health services company we surveyed. The upshot of forming these groups is they can quickly kill ideas that early analysis shows won't fly.
The rewarders' approach of low-scale, quick moving innovation seems to create fewer cognitive barriers to innovation. Only 18% of respondents at rewarder firms strongly agree that their main concern is "avoiding negative outcomes when pursuing innovation opportunities," compared to 57% at non-rewarder firms.
Rewarders scale IP and knowledge cleverly when they think they have a winner. In cases where analysis shows a small bet to be promising, rewarders build and scale the idea to ensure that organizational learning and IP doesn't go to waste. Nearly three-quarters (72%) of rewarders devote significant organizational resources and attention to "developing processes that make new ideas monitorable, repeatable, and transferable" to other business domains, markets, or customer segments. By comparison, only 21% of non-rewarder companies focus on maintaining such processes. Respondents at non-rewarders thus report more inefficiency ("We have multiple groups working on the same thing") and less impact ("Innovation is promoted but with a limited scope...it is extremely difficult to find and implement significant opportunities").
As a follow-up to our research, we hope to understand in more detail the specific rewards leaders use to ensure that great ideas are found and used. What rewards or recognition does (or should) your boss use to drive innovation?