How can compensation models support innovation and creativity in your organization?

1 Align compensation with organizational goals

One of the key factors that influence innovation and creativity is the alignment of compensation with the organizational goals and values. If you want your employees to be innovative and creative, you need to reward them for behaviors and outcomes that reflect those qualities. For example, you can use performance-based pay, profit-sharing, stock options, or bonuses to incentivize employees to pursue new ideas, solve problems, improve processes, or create value for customers. You can also use recognition, feedback, career development, or learning opportunities to acknowledge and support employees who demonstrate innovation and creativity.

3 Balance extrinsic and intrinsic rewards

A third factor that influences innovation and creativity is the balance of extrinsic and intrinsic rewards that you offer to your employees. Extrinsic rewards are the tangible and external benefits that employees receive from their work, such as salary, benefits, or bonuses. Intrinsic rewards are the intangible and internal benefits that employees derive from their work, such as satisfaction, enjoyment, or meaning. If you want your employees to be innovative and creative, you need to provide them with both extrinsic and intrinsic rewards that match their needs, preferences, and motivations. For example, you can use variable pay, merit pay, or equity pay to provide employees with extrinsic rewards that reflect their performance, contribution, or ownership. You can also use purpose-driven pay, mission-based pay, or social impact pay to provide employees with intrinsic rewards that align with their values, purpose, or impact.

4 Customize compensation for diversity and inclusion

A fourth factor that affects innovation and creativity is the diversity and inclusion that you foster in your organization. If you want your employees to be innovative and creative, you need to respect and leverage their differences and similarities. You can do this by using compensation models that customize and personalize rewards for each employee, based on their background, identity, skills, interests, or goals. For example, you can use individualized pay, competency-based pay, or career-based pay to tailor rewards to each employee's skills, competencies, or career stage. You can also use inclusive pay, fair pay, or equitable pay to ensure that rewards are consistent, transparent, and fair for all employees, regardless of their gender, race, age, or other characteristics.

5 Experiment and iterate with compensation models

A fifth factor that impacts innovation and creativity is the experimentation and iteration that you apply to your compensation models. If you want your employees to be innovative and creative, you need to be innovative and creative yourself in designing and implementing compensation models that suit your organization, industry, and environment. You can do this by using compensation models that are flexible, adaptable, and responsive to changes and feedback. For example, you can use agile pay, dynamic pay, or adaptive pay to adjust rewards based on market conditions, customer demands, or employee feedback. You can also use pilot pay, test pay, or prototype pay to try out new ideas, measure results, and learn from failures.

6 Evaluate and communicate compensation models

A sixth factor that influences innovation and creativity is the evaluation and communication that you conduct with your compensation models. If you want your employees to be innovative and creative, you need to inform and educate them about the rationale, benefits, and expectations of your compensation models. You can do this by using compensation models that are clear, transparent, and consistent. For example, you can use scorecard pay, dashboard pay, or analytics pay to track and display the performance, progress, and impact of your compensation models. You can also use feedback pay, dialogue pay, or storytelling pay to solicit and share feedback, opinions, and stories about your compensation models.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?