Do Rewards Kill Innovation and Creativity?

by Matthew E May

I am constantly asked how to best structure a financial reward system in an effort to motivate people to contribute ideas and improvements. My answer: Just say no.

Combined research from the Employee Involvement Association and Japan Human Relations Association reveals that the average number of ideas submitted per employee annually is 100 times greater in Japanese companies than in U.S. companies. Why? For one thing, we reward the wrong thing in the wrong way. The average reward in Japanese companies is 100 times less than the average U.S. reward of nearly $500. We have it backwards!

In a nutshell: payment for ideas can defeat the purpose.

The situation brings to mind one of my favorite parables:

An old woman lived alone on a street where boys played noisily every afternoon. One day, the din became too much, and she called the boys into her house. She told them she liked to listen to them play, but her hearing was failing and she could no longer hear their games. She asked them to come around each day and play noisily in front of her house. If they did, she would give them each a quarter. The youngsters raced back the following day, and they made a tremendous racket playing happily in front of the house. The old woman paid and asked them to return the next day. Again they played and made noise, and again she paid them for it. But this time she gave each boy only 20 cents, explaining that she was running out of money. On the following day, they got only 15 cents each. Furthermore, the old woman told them she would have to reduce the fee to a nickel on the fourth day. The boys then became angry and said they would not be back. It was not worth the effort, they said, to play for only a nickel a day.


Sound familiar? The old woman’s scheme effectively stole from the boys the very thing they loved most to do, what they were in fact doing for free. The moral of the story is pretty clear. If we’re not careful, we can replace a natural motivation with a synthetic one. We can rob creative power from people by attaching a financial reward to ideas.

The story repeats itself all the time. Companies treat employees like a rat in a maze after cheese, by paying for approved ideas and accepted suggestions. They then wonder why they get such low participation. They give no thought to the notion that in order to get a good idea, you need a lot of ideas.

Teachers at my daughter’s school are notorious for the practice, and I take them to task regularly. They want students to read more books, so they reward the completion of books. Maybe with a homework exemption. Or extra credit. Or even vouchers to the local Taco Bell. So the quick and easy books get read. The superficial books get read. Even the good readers, the ones who love to read, get swept up in the program. They stop reading the classics, turning to the quick reads to score points. Then the program is discontinued, and everyone stops reading. Even the best readers lose their love of words. And that’s a true shame.

Is there a solution? I think so: mandatory kaizen, aka continuous improvement. Yep, good old Yankee born and bred incremental innovation, circa World War II, courtesy of Training Within Industry under the auspices of Roosevelt’s Emergency Services. Make it part of the daily work. Make it the daily work. Kaizen aims to draw out the natural curiosity and creativity within people and guide it toward adding value for customers.

Kaizen does not attempt to light a fire under people. It lights the fire within them.

Related Article: Importance of Recognition to Innovation Success


Matthew E. May is the author of “IN PURSUIT OF ELEGANCE: Why the Best Ideas Have Something Missing.” He is constantly searching for creative ideas and innovative solutions that are ‘elegant’ – a unique and elusive combination of unusual simplicity and surprising power.

Leave a Reply