When I was discussing strategies for competing against big business, I mentioned that big companies have trouble innovating. The basic problem is that businesses reward their employees based on success, giving little reason for employees to try anything other than what has worked in the past.
This thing is, truly bright and creative people don’t like doing the same old thing that has worked the past 10 times because they aren’t learning or doing anything new. Motivation tends to be fairly low, and as a consequence you get surveys saying that people waste 2.09 hours a day at work.
So this got me thinking: what if a company organized itself to reward employees for creativity and new ideas more than they are rewarded for success? What would that look like? For small businesses this is easier, because you have to innovate to survive. Even small businesses fail at this though. For large businesses it is even harder to not get stuck using a solution that works instead of a solution that makes them and industry leader. The idea would be to institutionalize innovation as the center of your business culture.
How you ask?
It’s a good question. I don’t know that anyone has solved it yet. I have a general idea that I will present in depth soon, but it’s still pretty rough.
Part of the answer may lie in using good hiring practices. Part may be in seeking employees who are freaks of nature and, like entrepreneurs, have a higher risk tolerance. The environment and situation is probably relevant.
Most importantly and most difficult, the reward structure has to shift to reward quality creativity more than profitability. Unfortunately it’s very hard to tell a quality creative idea. It’s much easier to use profit as a measure of performance because it is an actual number. Most people would probably argue that it is the right measure also, because a business is supposed to make money.
The thing is, focusing on profit leads to a short term strategic focus where companies end up sacrificing long term benefits for short term growth. The same thing happens in the federal government with popularity replacing profitability.
In fact, the proliferation of data is leading to the desire to quantify all performance. If no easy number exists, we prefer to rely on a proxy with a nearly worthless signal to noise ratio than to take the time and effort to evaluate the situation.
The thing is, if what you’re making isn’t easily quantifiable, measuring a proxy shifts efforts to the maximization of the proxy.
Think national testing requirements and the shift of education to teaching the tests. Tests are actually a poor measure of intelligence and education, but we prefer to use them as a bandaid than to consider what is really contributing to the decline of education: lack of money.