How to Reward Employees in Innovation Programs

It might seem like the easiest and most straightforward way to reward employees for innovation is setting a task, getting employees to submit their ideas or projects and giving a financial reward to the best one. However, while cash rewards can work for repetitive tasks, they won’t likely bring results with innovation goals.

Innovators are rarely driven by money rewards – they’re more focussed on resolving a specific problem. For them, the biggest satisfaction is seeing their solution work. It’s especially true in the situations when employees’ basic needs are satisfied, so they are no longer motivated to earn more. As a result, cash rewards don’t work and are not likely to encourage employees.

So how can you bring up innovation in your company and get people to take an active part in your innovation programs?

In this article, I’ll explain how to reward employees the right way, so they come up with more innovative projects that work, change your organization for better and have a positive long-lasting impact.

5 types of rewards

Before we dive deeper into the best practices for rewarding innovative employees, let’s first see what kind of rewards companies usually use to get employees to work on specific tasks and goals.

1. Monetary rewards

Gift cards and prices are one of the best examples for this type of reward. These rewards are usually the most effective for one-off repetitive tasks – creating boring reports or doing market research are two examples. Monetary rewards don’t contribute to achieving long-term company goals, but can boost employee performance in measurable ways, increasing the productivity of employees doing boring tasks that simply need to be done.

2. Perks

Employee perks are another reward system tightly connected with recognition. Instead of giving a paycheck for doing a task, your prize is a benefit that has value to the employee and is given as a reward for good work, such as a preferred parking spot, tuition support or a sabbatical.

3. Attention and respect

A company CEO can reward an employee in front of the whole company and top management. Recognition is a social aspect that matters more than monetary one once all basic needs are satisfied, and it costs the company little or nothing to bestow. Recognition is particularly powerful as a reward for innovation.

4. Task-related rewards

Task-related rewards usually allow for developing employees’ projects besides their daily responsibilities. For example, a company can give a day-off every week or month to work on some innovation project an employee can choose, such as introducing NFT monetization in the most efficient way. It gives innovators a chance to let their creativity out, test their ideas and, at the same time, get paid for it. With task-related awards you incentivize a certain behavior and actions that are beneficial for your organization in the long-run.

5. Rewards aligned with culture

While similar to task-related awards, the main difference of this type of reward system is based on the culture element. Only the ideas that comply with a company culture are rewarded.

The difference between extrinsic and intrinsic rewards

Another aspect of rewards is their nature – extrinsic or intrinsic.

Extrinsic rewards are most monetary rewards – a pay rise, bonuses and paychecks. The main issue with implementing such rewards is the need to increase them over time to keep the same effect. When taken away, they can be perceived as a loss. For long term success, such rewards can’t be the right tool.

Intrinsic are the rewards that are mostly psychological. They often involve an employee’s initiative to proceed with a project and are not influenced by other people (decision-makers).

Intrinsic rewards contribute to setting up new behavior patterns within an organization and contribute to a higher staff engagement that has a positive effect on a company’ profit. Those employees who are truly engaged with their work and have a clear mission contribute to an increase of 21% business profitability.

Best practices to reward employees

Now, once you know about the specifics of different reward systems, it’s time to review best practices that will help bring innovation forward in your company. There are various use cases of rewards that work best for certain situations.

For example, gamification is used among volunteer projects as one of the most effective practices to drive engagement and results. For example, it encourages volunteers to teach themselves new ways to do their jobs better without a supervisor having to figure it out for them. With innovation projects, other factors and practices contribute to success.

1. Encourage effort

Most companies would focus on rewarding results. However, when it comes to innovation, it’s not always the right choice. Innovation is tricky – most projects can fail at one point or another.

When a project fails it doesn’t mean that someone in charge of it is a poor strategist. Perhaps, under different circumstances, that same person will succeed with another project.

Rewarding results only will lead to stifling innovation – people whose projects fail will be demotivated to start again. On the contrary, when their effort is appreciated and rewarded, you give employees a nudge to try again. In the long run, you’ll see this strategy works!

2. Involve top management

Recognition is one of the reasons why employees want to engage in innovation projects – they want to feel important and appreciated. Imagine the two situations.

In the first one, it’s a team leader who gives a reward (one among a hundred other team leaders in a big organization). In the second, it’s a company’s CEO who gives an award and an impressive speech. Which one would matter more?

While the answers seem to be obvious, some companies don’t want to involve senior leadership and that’s wrong. This way, they diminish the impact rewards bring for innovation projects. However, in the remote work era, especially for remote development teams, such events can build on employees’ morale and get developers to come up with more innovative solutions to everyday problems.

3. Reward teamwork

Rewarding individual effort is one of the mistakes companies make when introducing reward systems. By doing so companies encourage more competition among individuals and it doesn’t contribute to more cooperation, teamwork and better employee relations – the factor that is often indispensable for innovation to appear.

Instead of rewarding individual effort, build your reward programs around teamwork. Make teamwork a requirement to win.

4. Make rewards a surprise

The best results come out of the projects people are most passionate about, revolving around a mission and a personal drive to solve a specific problem an organization faces. Often, people work extra (unpaid) hours, spend their weekends expecting nothing in return for the progress they make. It’s best to notice and reward such projects.

You can still announce some reward programs and competitions. However, consider making some of them come as a surprise. Keep an eye on the most innovative and motivated employees in your organization and reward extra effort unexpectedly.

5. Focus on intrinsic rewards

Keep cash rewards for repetitive tasks and remove them from your reward programs dedicated to innovation projects. To make innovation stick in your organization, it’s hard to keep employees motivated using only monetary (extrinsic) rewards. By focusing on intrinsic (psychological) rewards, you will get the most initiative people to work for your company’s future as they see their future in it and can also achieve their personal goals and implement their brave ideas.

Final thoughts

Hiring the right people determines the success of innovation adoption in your organization. If you hire wrong people who seem to be “innovative” only from the first sight, but turn up to lack skills and motivation when hired, rewards won’t help, no matter how well thought-out they are. That’s why you should think of an ideal candidate profile that has an intrinsic motivation to bring up innovation. That’s where most applicant tracking systems will help you filter the right candidates.

Introducing rewards that work to boost innovation is not an easy task. You have to consider motivational factors and come up with your formula for an effective reward system. Hopefully, with the ideas we have shared in this article, you’ll find it much easier.