Mix of long-term incentives and golden parachutes 'great for innovation'

Date: 18/05/2009

Businesses aiming to bring about innovation and creativity in the workplace should still stick with incentive schemes despite bad press following misuse of such programmes, it has been stated.

Recent research by the Massachusetts Institute of Technology Sloan School of Management explained that in a controlled experiment, it was understood that the combination of tolerance for failure and reward for long-term success is "effective in motivating innovation".

Gustavo Manso, an assistant professor at the institution, said: "Subjects under such an incentive scheme explore more and are more likely to discover a novel business strategy than subjects under fixed-wage and pay-for-performance incentive schemes."

He added that while the concept of golden parachutes is not currently well-regarded, such as severance pay to avoid the possibility of perverse incentives, it still improves morale and provides a safety net, particularly in the current climate.

Signs of low motivation must be spotted by employees wanting to implement a successful incentive scheme, according to psychologist Eve Ash of Smart Company, who said that performance will slip without a keen eye on the welfare and stress levels of workers.

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