Competitive pay encourages innovation, researchers find

Competitive pay encourages innovation, researchers find
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  • Competitive “winner-takes-all” pay is the most effective means to spur the creativity that helps fuel economic growth, according to research from the University of California San Diego (UCSD) and Thermo Fisher Scientific.
  • UCSD professors partnered with the biotech company in developing a contest asking participants to design digital solutions to help share medical equipment among the region’s small healthcare clinics. Contestants were selected to compete in either the “winner-takes-all” category, in which there was one prize of $15,000 awarded to first place, or the “top 10” category, in which the same amount of prize money was spread out among the top 10 entries.
  • “Participants under the winner-takes-all compensation scheme submitted proposals that were significantly more novel,” according to paper’s authors. Both pay models produced the same number of submissions, researchers said, indicating that having less of a chance of winning a monetary award did not have an impact on the amount of work produced.

The findings are “significant because the 21st-century economy is one that prizes novelty. Firms view it as an important source of comparative advantage,” the UCSD researchers said. “It is also an essential ingredient in the development of technological breakthroughs that transform markets with major impacts to consumers and producers.”

Creativity was the most in-demand soft skill for applicants last year, and it is continuing to make a strong showing into 2020, according to a Jan. 9 LinkedIn Learning report. “Organizations need people who can creatively approach problems and tasks across all business roles, from software engineering to HR,” the company said.

Employers are examining ways to encourage innovation. Assuming that creativity can be taught, PepsiCo, and its philanthropic arm, the International Youth Foundation, last month launched an online, “gender-smart” course aimed at teaching students “work readiness skills” which include creative thinking.

Other employers allow employees to spend a day working on anything they want. Google has experimented with this idea, giving employees a set amount of work time to devote to passion projects, training and more. 3M has had a program in place for decades — the 15% Culture — which encourages employees to set aside a portion of their work time to proactively cultivate and pursue innovative ideas that excite them, the company’s people and culture marketing and communications manager previously told HR Dive via email.

Source: HR Dive

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