A number of conversations today about how the ideation process can be so easily skewed bring up perhaps the biggest distortion factor of all: rewards. It’s long been known that the prospect of an extrinsic reward undermines a person’s creativity. I’m thinking along the lines of Alfie Cohn’s Punished by Rewards or Theresa Amabile’s work.
In Ideas Are Free we documented a parallel organizational effect. Organizations that offer potentially large rewards for individual ideas (the most common way is to give a percentage of each idea’s revenue or cost-savings back to the suggester) create an enormous distortion in the kinds of ideas that come in, create all kinds of bureaucracy and dysfunction, and end up getting fewer ideas than if they hadn’t offered rewards for ideas in the first place.
In 1892, John Patterson, CEO of NCR, and the Jack Welch of his era, started the first suggestion system in the United States. In 1905, wanting to get even more ideas from his workers, he doubled the rewards, and the ideas fell off. In the 1990s, Idemitsu Kosan, the Japanese energy services company abolished rewards, and the number of ideas doubled in three months.
Almost all of the companies in the Ideas Are Free study with low-performing systems used rewards, because their managers felt employees wouldn’t give in ideas without them. It was fascinating to us how so many managers had such faith in a tool that was actually working against them.