Motivating Innovation and Creativity: The Role of Management Controls

This chapter discusses the challenges of using performance metrics to stimulate creativity and innovations in organizations. Formal incentive systems have proven to be effective in motivating executional behavior. Using such systems to motivate creativity is more challenging because useful creativity and innovation are notoriously difficult to measure, and use of flawed systems can produce negative outcomes. Further an innovation’s success is usually determined by the efforts of teams, not individual employees. But well-designed incentive systems, which use good measures and also allow for some slack and toleration of short-term failures, can be effective. Metrics can also serve an information role, by providing opportunities to exchange ideas, providing performance-related feedback, and enhancing individual and group accountability. The chapter concludes by discussing how the use of incentive systems in combination with other management controls can help make organizations ambidextrous; i.e., good at both execution and innovation.