This article first appeared in The Edge Financial Daily on November 20, 2017

If large corporates want to embrace innovation rather than just pay lip service to it, they will have to look at current procedures and methods of remuneration and make some hard decisions to ensure employees are sufficiently motivated to innovate.

Jordan Schlipf, partner of Rainmaking Innovation, says this is because corporate employees are usually hired to do a specific task and paid a fixed salary, unlike start-up entrepreneurs who can roll with the punches and do what needs to be done without fear of reprisal. Also, the latter have a huge stake in the success of the business and are willing to fight for success.

“This is a cultural issue and it is a tricky one. I don’t have a silver bullet for this. There are a bunch of things that are interconnected and it’s a complex system that drives human behaviour. It also involves intangible things like trust.”

He says it is important for corporates to have a framework to decide which projects are meant to be driving innovation within the company and come up with a different set of key performance indicators (KPIs) and reward system for them.

If not, he adds, people will continue with the status quo, afraid to rock the boat in case they would be penalised for failure.

“They will be consciously thinking of what will happen if they fail. ‘What will happen to the people who report to me and whom I report to? How will my bonus,

remuneration and prospects of the company be affected?’ If an employee has any doubt, he won’t do what he is being told to do by his boss. It is a question of how you align the path of the top management and those in the team,” he says.

Schlipf says it is important for corporate leaders to have a different mindset if they are to drive real innovation from within their companies. They have to conduct culture experiments and see what the results are.

“For instance, [those with] a traditional mindset would think that rewarding a team that fails is crazy.”

However, he points out that a team that knows when to pull the plug on a project that is not working, without waiting until it goes up to the board and wasting a lot of money, is the one that should be rewarded.

The key focus should not be on the failure but on what they have learnt from it and how this knowledge will bring them closer to the bull’s eye the next time.

However, if the failure is due to sheer idiocy, then, yes, he agrees that the team should be punished for wasting the company’s resources without learning anything.

“Corporate leaders can run culture experiments, such as celebrating failure, to change something within an organisation and see what the results are. Most of the time, they want to change the culture without changing the KPIs and reward structure. That’s not going to work.

“This is why you see a lot of these corporate executives shouting that their people should operate in a lean manner and fail fast, if necessary. They ask them to do it and yet nothing really happens. It shows that the culture is not right,” he says.

Schlipf says  culture experiments, however, should only be for teams that are tasked to drive innovation within the company. Thus, it is important to have a framework to identify the projects that are meant to drive real innovation.

“Again, this should be implemented for the people who fall within the innovation framework. Others outside the framework do not need to be changed. These are people who are focusing on the day-to-day operation of the core business and they should continue doing what they are doing,” he says, adding that if everyone within the company were to focus on innovation, day-to-day operations would grind to a halt.