Ideas Aren’t Always Free

We all know that workers on the front lines are often the ones with the best ideas to help boost productivity and sales. But setting up a reward system for every bit of worker wisdom based on what each idea is worth might spell trouble.

    Alan G. Robinson, co-author of Ideas Are Free, due out this month, teaches at the Isenberg School of Management at the University of Massachusetts. He says his research has found that cash and nonmonetary one-time prizes are not clear indicators of employee motivation and can, in the long run, have negative effects on a company. In fact, he believes that such reward programs can lead to greed and fraud, and could end up costing more than they are worth.

He offers three examples:

• A worker in one of Europe’s largest wireless-communication companies stumbled across an error in the organization’s billing software that was costing some $26 million per year in lost revenues. While he pointed out a simple way to fix it, the company’s CEO worked behind the scenes to block the idea. Why? The sizable reward to which the worker was entitled through the company’s suggestion system would have drawn embarrassing attention to the oversight.

• Two workers at a top U.S. airline came up with an idea that brought in $3 million in additional profits each year. When they were given a paltry $1,000 instead of the 10 percent reward to which they were entitled, they took the airline to court. The case reached the California Supreme Court–twice, no less–and directly involved the airline’s CEO. The company ultimately abolished its suggestion program because of disputes over rewards.

• At a midsize electronics company, a special committee selected the best employee suggestion on a quarterly basis. The worker with the winning idea was rewarded with 10 percent of the total cost-savings from the suggestion. It was later discovered that the committee’s chairperson, a top manager, had actually been gaming the system behind the scenes and, in turn, getting half of the amount awarded to each winner. By the time he was caught, he had ‘stolen’ nearly a quarter of a million dollars.

Workforce Management, April 2004, p. 44 — Subscribe Now!