Rewarding Intrapreneurs or rather How Not to Punish Them
We all have read the stories about those startup founders who struck it rich with selling their company or bringing it public through an IPO. All the hard work and risk paid off with millions or even billions of dollars that they could pocket. Still, most of the startups fail but we love those success stories.
While the payoff for a startup, for an entrepreneur is clear, what’s the payoff for an intrapreneur, a corporate entrepreneur, an internal innovator? Why are they going beyond their assigned tasks and try to change the world from within a company, and take on the struggle against internal and external obstacles? And how can we reward them?
To answer that question, we must understand the underlying motivations of intrapreneurs, how we can help them, and what’s in for them without choking their motivations.
What Motivates Intrapreneurs?
As someone who has worked in and consulted with big corporations I have met intrapreneurs and gotten a good insight into what motivates them. I picked up programs that helped intrapreneurs, and I considered myself an intrapreneur who’s taken up topics and ran with it. One of them ended up to become my own company Enterprise Gamification Consultancy. that’s now transformed into Enterprise Garage Consultancy.
First and foremost intrapreneurs have the ability to question the status quo, are mindful, and curious. Based on that they notice things that are broken and need to be fixed. Instead of an attitude of “If it ain’t broken don’t touch it” they see opportunities to improve stuff everywhere.
This makes them search for ways to improve processes, products, services, or come up with completely new ideas that can make life better and humanity better off. Such an attitude comes with a high level of energy. After all, if everything is working, then you don’t have to spend extra energy on that thing. But intrapreneurs are worried about those “working” things because there must be a better way. The authors of The Innovator’s Dilemma call that a discovery attitude. Managers of innovative companies spend one day per week more on discovery activities than managers from a not-innovative company. Latter ones focus more on execution activities.
The motivation for intrapreneurs is foremost an intrinsic drive, a reward that comes from inside an individual and is based on learning, understanding, from showing mastery, or from socializing among many others. This type of motivation is the strongest you can get and this one makes you go the extra-mile and take on difficult tasks that you could easily excuse yourself of not being part of your job description.
Now before we speak about rewards, we need to talk of how not to punish intrapreneurs.
How not to Punish Intrapreneurs
Rewards are intended to encourage a certain behavior. While companies want innovation and new ideas, in fact they do the opposite. The corporate immune system reacts violently to new ideas. After all, new and potentially disruptive ideas challenge the way things are done. This can be interpreted as disrespect by superiors or product owners. In fact it’s not and I gave a talk about it at TEDxSanFrancisco a while ago.
Having to change your own process or service means more work for everyone else, and the creates resistance. In addition, it’s easier to just add features and improvements that customers told the company, because this makes additional revenue more predictable. With new innovations it’s unclear whether they will work, or will make money. There is a risk that the money invested to develop them will be recovered through new sales of cost savings.
With disruptive innovation especially intrapreneurs are often pushing the limits of what is allowed and possible. Corporate policies and processes created to execute and scale are ill fits for discovery and innovation. Following all steps of a quality assurance process for large software projects that take years and hundreds of developers are not applicable for mobile app development with teams of two and four weeks development time. Plugging new technology into the corporate infrastructure may violate several policies and processes on data security. When a company starts out in new fields it often does not any any IP yet. Analyzing screenshots from other companies can bring the innovators into hot waters with the legal department. Did you know that you cannot use screenshots of other corporate websites in internal meetings, as they may infringe on copyright and are not considered “fair-use?” I didn’t, and this is why the legal department of my former employer once went after me.
And then managers in the direct line of an intrapreneur may be more interested in getting stuff done that they told everyone to do than having people come up with their own ideas. “Is this even your task?” or “Did I tell you to do this?” are some of those killer-questions that indicate looming punishment for own initiatives. In the worst case you are even getting publicly ridiculed by your own CEO, as this quote from former Porsche, now VW-CEO Matthias Müller demonstrates.
Finally, the biggest punishment could come when an intrapreneur fails with an idea. Having the Damokles-sword above you of being fired for failing is not helping intrapreneurship. Failure must be considered as natural part of innovation. In fact, not failing should be punished as it means you didn’t risk enough. Behavioral Economist Richard Thaler mentioned a great example of how companies are failing with that.
For all those reasons the main focus in setting up an intrapreneurship program should be on how a company can prevent punishing intrapreneurs. Coming up with an incentive systems for rewarding intrapreneurs has much lower priority.
The Problem with Rewards
When we set up an intrapreneurship program, we have to be careful not to interfere with the intrinsic drive. Scientific research has studied that thoroughly how extrinsic motivators such as money, cookies, gold stars, big bonuses and so on can destroy intrinsic motivation. Read more in my article titled 8 Examples Of Monetary Rewards Leading To Worse Outcomes.
Not only adults and children are affected by extrinsic rewards, also animals, as this video clearly shows.
The negative effect of rewards leads to lower engagement, to unethical behaviors, to cheating, to competition instead of collaboration. If an incentive system for intrapreneurs is badly designed, you will attract employees to participate that just do the bare minimum to qualify for the reward and stop as soon as they received it.
Here is an example that will make it clear. Imagine you have an eight-year-old boy whom you want to get interested in reading. For every book that the boy reads, you promise him a baseball card. Now what kind of books with the boy select? The shortest ones with the largest fonts. If you ask him what the story was about, he very likely will do a poor job of telling you. And if you stop handing out baseball cards as a reward, what will happen? He will stop reading at all. In other words: you achieve the exact opposite of what you intended.
Extrinsic and intrinsic rewards need to work together. An extrinsic rewards task is to help the intrapreneur keep track and feel appreciated, but the main reason must always be an intrinsic motivation.
How Did Other Companies Reward Intrapreneurs?
Several companies have publicly talked about how they did or do reward intrapreneurs and innovators for their work. And one of premises is that you actually know what you base your incentives on. What are the metrics that you base your evaluations on?
In Google‘s former 20%-program such risk-takers could earn a million dollar check, as it was rumored. But as you already may suspect based on what you learned in the paragraphs above, this can lead to unwanted consequences. Envy and wanna-be intrapreneurs started gaming the system and since then there is no million dollar check anymore.
Intel on the other hand gave people hefty bonuses for patents filed, which lead to people filing patents, but not so much on doing innovation.
Other companies use hackathons to garner ideas and hand out prize money. But often there is no follow-up and funding on those project and this well-meant but poorly executed initiatives dies right there.
If the innovation is revenue or cost-relevant, a certain percentage of saved costs or royalties may benefit everyone. But beware: an intrapreneur does not necessarily have all the say or information in what is coming on the price-list and being sold, or how much money is being saved and conflicting interests or motivations of the business line manager and the intrapreneur may have the opposite effect.
IBM rewarded innovative minds with their own lab and team. The idea is basically to empower them, giving them the time and resources to followup on their own interests and ideas with the expectation that over time this will be very beneficial for the company and the intrapreneur.
After a hackathon give the winners six months off to followup on that project and give them resources. Nothing is more frustrating that you spend nights and weekends at the hackathon, get all these exposure to executives, even the corporate blog talks about how great the ideas are, but as soon as everyone walks out of the door the project is forgotten.
SAP had the Global Business Incubator program that was led by a former VC. Teams could submit ideas and selected into an internal incubator program for a period between 6 to 18 months. If the program was successful the team could earn a bonus that was equivalent to their annual salary.
SRI offers kind of the biggest payoff for an intrapreneur. It encourages intrapreneurs to actually spin off a unit into their own company. From intrapreneur you turn entrepreneur with your own company. With the advantage that you still have a friendly mother corporation that provides you with resources. Several SRI spin-offs actually reside in the same building or never even changed the desk areas.
Another approach may be to not promise any rewards, but do a surprise reward. Surprise rewards are not expected and do not focus people on the rewards and have less negative influence on their intrinsic motivation.
Before you plunge into creating a reward and incentive model for intrapreneurs, invest in studying what motivates your intrapreneurs. Remove obstacle that they face including potential punishment encounters from individuals and groups. Install mechanics that remove punishing activities directed towards intrapreneurs. Do not interfere with their intrinsic motivation by installing artificial extrinsic rewards that lead to negative unintended consequences. Introduce rewards that emphasize intrinsic motivation rather than extrinsic ones. Reward risk-taking and failure instead of success only or punishing them. And when you reward extrinsically, don’t promise it in advance. Don’t forget to include rewarding the right kind of failures to demonstrate that taking risks, trying stuff out and learning from it without bringing the house down is an encouraged behavior.
After all, we have enough people who do the minimum to follow the rules and “earn” the promised bonus. Intrapreneurs are motivated with focusing on the topic at hand first and foremost. A promised huge bonus would just take the focus away.
To start a reward program my recommendation is to hire an expert on the topics of behavior, motivation, and incentives. Gamification designers are experts in that matter.
And this is where you can give me a call or shoot me an email.