Winners promote and reward innovation

Companies that recognise hard work and ideas among their staff reap benefits in the loyalty stakes, writes Olive Keogh.

SWEATING assets is the corporate equivalent of a good work out. It drives executives to think slim and get the best possible return from every facet of their business. Those who trim and tone successfully are well rewarded.

Performance-related pay has become a familiar concept. Many executives have grown used to having everything they do linked to results. How well they make the connection is there for all to see. Its champions believe it is an effective motivator because it brings good financial rewards and recognises achievement. It can also help companies to recruit and retain high-performing managers.

However, its critics question its short-term focus and the extent to which money is truly a prime motivator. For many people job satisfaction is still the most important factor. They also say it is not conducive to team spirit and that assessments of what constitutes "performance" can be quite subjective.

Paying people for achieving performance-related targets certainly works where the objectives are narrow. For example, where a business is working flat out to maximise the return on an established product or service. But it doesn't leave much room for anybody to think about what comes next.

Now, more than ever, companies need to innovate to stay ahead. But performance and innovation have different lead times and goals that do not necessarily sit easily together. Given today's competitive pressures, many organisations feel uncomfortable about investing resources in uncertain outcomes.

Having a workforce that delivers sterling day-to-day performance and comes up with new ideas is obviously the ideal. But achieving this balance may require a rethink in how a company's financial incentives are structured. A performance pay driven environment may not be the best option for a company that needs to promote innovation. Fostering a culture that promotes and rewards innovation is a start.

But companies may still find it difficult to motivate people at two such different levels.

The international management consultancy group, McKinsey, produced a study last year on this issue.

Their study looked at the determinants of corporate adaptiveness in companies such as GE, Hewlett-Packard, Nokia and 3M. All of these organisations have a track record in sustaining one business while developing others.

One of the report's key findings was that a business culture which places the primary emphasis on performance-related pay may inhibit innovation.

"Pay for performance may still have an important job to do in such a culture, but as a supplemental boost rather than a primary driving force," the report says.

Organisations that are most successful at getting people to handle their "day" jobs while still finding time to develop new ideas tend to place less emphasis on pay for performance. "Crucially, they combine it with an unusually inclusive culture," say the authors. In such companies, employees are made to feel that their interests and those of the business are much the same. As a result, they give of their best to ensure both its current and long-term success.

Companies tend to put managing current objectives and developing new ideas into separate boxes. They are rarely run side-by-side. Most motivational awards and incentive schemes for employees tend to be biased towards performance, and it's not difficult to understand why.

Measuring current performance is a lot easier than measuring something that may have a positive impact on the business at some time in the future.

It's typically the technology sector where getting the edge matters most. It is hardly surprising then that the leaders in innovation reward tend to be large IT multinationals.

For the purposes of this article, we asked more than 12 Irish companies for details of how they fostered and rewarded smart ideas. Most had no answer to the question.

One organisation that has a carefully structured rewards and recognition system is Intel. Bright ideas, good service, and innovations that make a significant contribution to the business are all rewarded.

The first rung on the recognition ladder is a "thank you" gift voucher which an employee gets for putting an exceptional amount of effort into something. At the next level are Intel Ireland site awards. These are presented quarterly to an individual or group from any department who made an innovative contribution.

The third tier is divisional awards, where a team in an international division is recognised for making an outstanding contribution.

The Intel "Oscar" is an achievement award. It recognises a contribution that has significantly improved corporate operations or competitiveness. Winners get an all expenses paid trip to America (with their partner) to attend an Intel banquet and a gift of Intel shares.

Waterford Wedgwood rewards people who come up with ideas for cost and energy savings. The top award is Euro 3,000, and awards are given in varying amounts and in varying numbers from year to year.

The Kerry Group, which has been successful at maintaining current performance while expanding into new business areas, operates reward schemes in different divisions within its international operation.

"We don't currently have one in Ireland, but there are such schemes in other business units," said Frank Hayes, the director of corporate affairs.

"The rewards are typically related to business and, while they have a value, it may not necessarily be a financial one."

Feargal Quinn, Superquinn chairman, is a man brimming with bright ideas. He rewards innovation within his own organisation at an annual awards ceremony.

Employees who come up with good ideas also receive a financial reward ranging from Euro 300 to Euro 3,000.

Hewlett-Packard (HP) is the second largest IT company in Ireland employing over 4,000 people in Dublin, Leixlip, Galway and Belfast.

"Our biggest and most valuable asset is our staff, and we ask them to communicate their ideas for product innovation, process improvement or new business development," said Martin Murphy, country manager for Ireland.

HP employs 1,700 at its inkjet manufacturing facility in Leixlip. Roughly 100 people are recognised there every month for making an ideas contribution. Rewards are tracked and reviewed quarterly by the senior management team. Lower level rewards across the company include lunch vouchers valued at up to Euro 200.

HP also has a more substantial recognition programme for employees who create intellectual property. In addition to its formal rewards and recognition policy, the company recognises site and departmental achievements from time to time with social events and gifts.