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The world is changing at an increasing pace. To stay competitive, many organizations are focusing their efforts on enhancing innovation. It’s a worthwhile pursuit. Innovative organizations stand the best chance of developing a sustained competitive advantage in their industry. To achieve that competitive advantage, firms are asking how they can be more innovative.

At its core, innovation needs creativity. Innovative organizations are those with individuals who generate novel and useful ideas (the consensus definition of creativity). To put it another way: creativity yields innovation. If you want your organization to be more innovative, you need your people to be more creative.

In a recent survey of business executives, ECSI found that 68% believed innovation and creativity to be something individuals are born with. These business leaders felt strongly that innovators cannot be made, that creativity cannot be trained. However, their beliefs aren’t exactly supported by research. As early as 1973, studies on identical twins sought to distinguish whether creative ability was attributable to nature or nurture. The evidence supports that being creative isn’t a trait that some people possess and others lack; it’s a skill that some have learned early and some need to develop. All people have the capacity to be creative; they just need the right environment.

But being creative in a competitive world is risky. Proposing ideas you hope are novel and useful inevitably leads to judgment. Organizations have to judge ideas because resources are scarce; some ideas will soar and others will flop. It would be helpful if we could know which ones will soar before we invest too much money in them. Many managers feel that evaluating these ideas and comparing them to the norm is part of the job. Creative ideas get judged and most often killed long before they reach the top. Perhaps this is why those senior leaders surveyed by ECSI believe innovators were born.

However, the most innovative organizations — the ones that seem to attract the most creative people and launch the most creative products and services — are the ones who delay this judgment and who encourage their people to take the creative risk. And the evidence supports it. Research on teams of R&D personnel showed that willingness to take risks is a potent influence of creative expression. Innovative organizations give their people the resources to play and experiment with new ideas. They give them time to pursue projects whose tangible value is still unknown. They even celebrate when those projects result in spectacular and enlightening failure.

There are risks to these methods. These companies risk the time that might be wasted or money invested without realizing a return. The belief these organizations share, perhaps the belief that makes them innovative, is that these risks are worth the potential reward.

If you want to increase innovation, you must first consider what your organization is doing to encourage creative risks.

David Burkus is a professor of management at Oral Roberts University and editor of LeaderLab, an online think tank that offers insights from research on leadership, innovation and strategy.

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David Burkus is a professor of management at Oral Roberts University and editor of LeaderLab, an online think tank that shares research and best practices through articles, videos and podcasts. His debut book, “The Portable Guide to Leading Organizations,” empowers readers by providing a brief and entertaining primer on the history of empirical research on leadership, management, motivation, strategy and change.

Motivation is a big industry. From incentive and recognition trade shows to compensation consultants, there are a host of industry experts ready to carefully craft the perfect program that keeps employees working happily and productively. Most of these experts adhere to the economic principle of agency theory, which says that individuals work for their own self-interest.

To best leverage this principle, these experts offer just the right trinket, or they design an elegant incentive compensation solution tailored to your needs. All of these offers assume that simply having financial incentives triggers people to work harder, which makes performance-based compensation almost a given.

Almost.

According to research from Ian Larkin, assistant professor at Harvard Business School, social comparison — our natural tendency to measure ourselves against our peers — may be the most powerful workplace motivator. So performance-based compensation might not matter as much as how that pay compares with peers in the organization.

Larkin’s research examined sales representatives at an enterprise software firm whose compensation was largely commission-based. Their commission structure also contained a “commission accelerator,” which offered salespeople higher bonuses as they made more sales in a given quarter. However, the company also maintained an annual “President’s Club” recognition program, which rewarded salespeople for being in the top 20% of all representatives.

The commission structure favored salespeople who could close many deals in one quarter, but the recognition program favored salespeople who spread their large sales out over an entire year. Representatives on the borderline of induction into President’s Club often faced a choice: Close the deal in the same quarter as other deals and be paid more, or wait until next quarter and boost their ranking compared to their peers.

Larkin discovered that salespeople who were on the borderline of club induction were willing to buy their way in by sacrificing their commissions. He was even able to calculate their “willingness-to-pay” — the amount a salesperson was willing to forgo in commission to be inducted into the club. The average salesperson was willing to pay $30,000 or 5% of their total compensation, just for the non-monetary recognition of President’s Club.

Organizational leaders need to consider the lessons of social comparison when designing motivational programs and compensation plans. When employees decide how much effort to exude, they don’t merely respond to their own pay but also to how their pay compares to that over their peers.

Strict pay for performance, then, might hold unintended consequences; employees on the borderline of top-level status may cheat or sabotage others to get there — likewise employees who are outside the cutoff may grow to resent their colleagues if they feel their own efforts are underpaid.

The implications of such research are that standardized salary scales and ancillary incentives may serve to better motivate the entire workforce and better encourage team collaboration. Whatever compensation plan is chosen, leaders need to realize the social comparison is a real factor and develop a plan that best leverages what really motivates.

I don't think there is anything wrong with acknowledging that as I do enjoy a decent quality of life I would take the monetary motivations any day! Being Alpha doesn't neccessarily matter to me, as long as at the end of the day I am delivering on my goals and what is expected of me.

Show me the money...