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The East African : May 17th 2015
The EastAfrican 46 BUSINESS MAY 16-22,2015 MANAG E R Financial ≥ewa≥ds make people suggest fewe≥ but bette≥ ideas COMMENTARY NICOLE TORESS “Instead, offering pay for accepted ideas seemed to focus people on producing better ones.” E mployees have proved to be a valuable source for innovative ideas. Which is why more companies are testing crowdsourcing initiatives and other ways to encourage people to innovate. Offering financial incentives has, for a long time, been one way to do this. But the results of research on whether rewards actually yield more innovation are mixed. On one hand, rewards can motivate employees to speak up; on the other, they bring in a flood of ideas that aren’t really actionable. In Harvard Business Review, we’ve said to focus on culture instead of cash and to avoid offering big rewards for innovation, because luring employees with flashy prizes can kill intrinsic motivation. In 2010, one large Asian informa- tion technology services company decided to run an experiment to see if rewards could actually improve and encourage employee ideas. People could already submit suggestions through an internal system, but the company wanted to test whether rewards would lead to better ideas. The results of the experiment were studied in a recent discussion paper out of the Centre for European Economic Research. The authors, Michael Gibbs, Susanne Neckermann and Christoph Siemroth, found that when finan- cial rewards were on the table, more people contributed — but on average, each person submitted fewer and better ideas. The project arose when Gibbs learned that a former student of his at the University of Chicago was in charge of valuecreation initiatives at the company — and that its internal system (the “Idea Portal”) provided a data set on employee ideas. He asked if he could use it for research. The company randomly assigned 19 teams (roughly 11,400 employees) to either a treatment or control group. The treatment group would receive rewards for ideas that were accepted for implementation. These rewards came in the form of points that could be used at an online store. If the idea was accepted, each member of the contributing team got 2,000 points, which was worth about “2.2 per cent of monthly after-tax salary for lower level employees.” And people could earn more if the client gave a good rating. No change Only higher-level management and those managing the rewards programme knew about the experiment, which lasted 13 months. Aside from the incentives, nothing changed about the process: Employees submitted ideas through the Portal, a supervisor reviewed them and a panel of senior managers decided which to share with clients. Those accepted by clients would be implemented, and their results tracked. The hope was that by offering re- wards for accepted ideas, employees would focus on ones that directly benefited clients instead of ones that improved internal processes — and that people would go through the Portal instead of trying to implement ideas on their own. Analysing the Idea Portal data from before, during and after the experiment, the authors found that when rewards were introduced, more people participated, but there were fewer submissions per person, and these were higher quality ideas — meaning they were more likely to be shared with a client or implemented, or they had a high estimated profitability — than those from people who weren’t offered rewards. Employees at all levels were able to come up with valuable new ideas. The authors said the fewer ideas per employee couldn’t be explained by motivational crowding out, or the idea that extrinsic motivators (money) undermine intrinsic motivation. Instead, offering pay for accepted ideas seemed to focus people on producing better ones. “It is often argued that incentives ‘crowd out’ intrinsic motivation, but we found the opposite,” said Gibbs. “Our view is that this issue is often misunderstood. Incentives can easily undermine intrinsic motivation, including creativity, if they reward the wrong outcomes or behaviours. But if they reward the right ones, they certainly can reinforce creativity.” Ideas galore Younger employees had more ide- as than older ones (after controlling for things like tenure), but tenure was positively correlated with the quality. The authors hypothesised two potential effects: Those with longer tenure went for “low hanging fruit” while new employees took a more experimental and fresh approach; or longer tenure meant a greater understanding of clients’ strategies and business needs, leading to better ideas. Gibbs said the latter was more consistent with their findings. And although higher level employees generally had higher quality ideas, this effect topped off at the highest managerial ranks. Among executives, whose work is less client-focused, there were fewer ideas and they had less financial impact. Interestingly, ideas with more au- thors were more likely to be shared with a client and accepted for implementation, reinforcing the research on the benefits of working in groups (as long as they’re not dumb). And the authors also found that once the experiment was over, people still continued to participate and suggest higher quality ideas, reflecting a “habituation” effect that could be explained by raised awareness of the Portal or perhaps a change in how people thought about innovation. The paper’s main takeaway is that financial rewards can get employees to innovate, and can possibly fuel a more innovative culture. But if you want ideas that bring actual value to your company, and don’t want to be inundated with a bunch of mediocre ones, tailor the rewards so employees know what to reach for. Nicole To≥≥es is an assistant edito≥ at Ha≥va≥d Business Review Inte≥views aside, pe≥sonality tests online may point to best hi≥e By AARON GREGG The Washington Post PICKING EMPLOYEES who are right for a job opening can be a tricky task. An interviewer must have an eye for the intangibles of a candidate’s drive, personality and social skills — and make a call on the candidate’s fitness for a job after just one or two meetings. What if you could automate that process? Infor, a New York-based cloud analyt- ics company, sells employers a 45-minute personality test called “Talent Science” that “exposes a candidate’s behavioural DNA” by testing 39 behavioural, cognitive and cultural traits and comparing the results with those of the high performers already in the door. Here’s how it works: When an employer signs up, a critical mass of workers already at the company take the test. After a brief page of logic games resembling a fifth-grade maths test, applicants are forwarded to 210 personality-based questions asking the applicant to agree or disagree with a presented statement. Some of these statements are more obviously intentioned, tinted to recognise how someone will interact with co-workers, such as, “It is best to withhold unpopular opinions,” or “It is frustrating when companies change existing work procedures.” Other questions are more vague: “I am very skilled in the arts,” or “I spend much of my leisure time imagining.” The test plots the individual’s personality based on the answers, and Infor’s analysts compare the results with some form of performance measure to spot the high performers and the low performers — say, a measure of deals closed, or houses flipped, widgets produced — however success is measured for the job opening. Merging the personality and the performance data allows the company to create a “performance profile” pinpointing the unique personality traits that define a high performer for a specific role at that specific company. Josh Bersin, principal and founder at Bers- in by Deloitte, a talent-management advisory service, says matching employees to those already in the system isn’t necessarily positive. “Let’s suppose you’re an engineering com- pany and you have a lot of introverts, and then you test (an applicant) and determine they’re an extrovert. That may be someone who’s good to have,” he said. 11pc The percentage of the US workforce that Infor claims to have assessed using its ‘talent Science’ test Bersin says personality tests are better used for coaching, not for screening people at the door. “There are much better ways to use big data for selection than this,” he said. “The best way to use these tests is to try to characterise the high performers and say, ‘What is it about them that can be replicated?’” But the company says it’s about more than just finding people who fit in. “It’s not a cookie-cutter process to see how can I fit people in and make sure everybody’s a robot. It’s about figuring out how to put people in roles they’re going to appreciate,” said Jason Taylor, Infor’s chief scientist for human capital management. Taylor said the hiring managers use the software not just to give an applicant a thumbs up or thumbs down for a particular position, but also to pinpoint where someone will be happiest among a range of positions.
May 10th 2015
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