Rewarding Entrepreneurial Talent
Increasingly we hear that organisations see innovation and creativity as pivotal in achieving competitive advantage. Equally we know that organisations have recognised the importance to their business of attracting and retaining talent and building employee commitment.
Focussed corporate units provide a valuable potential means of encouraging innovation and entrepreneurship. This article, based on a recent research report from Henley-Incubator, explores how such ventures can help to establish a broader innovative environment within an organisation and thus meet some of the changing needs and expectations of employees. Tt argues that rewarding those associated with new ventures in a way which balances risk and reward is central. However, addressing this issue opens up our view of reward to encompass elements beyond the purely financial. A more holistic view of reward is likely to be critical in the future to building an environment which offers scope, challenge, development and recognition to individuals. Tt is these aspects of an environment which will help to build committed employees, and ultimately a successful company.
Risk and reward in new ventures
In today's knowledge-based, competitive environment, companies must mobilise and motivate their employees' latent entrepreneurial talent, encourage them to bring forward innovative ideas and then see them through to launch. At the same time, firms must avoid distracting or demotivatingthe core business. A key element of this is the management of personal risk and reward systems.
How can reward systems encourage entrepreneurial behaviour in organisations? What are the problems that venture managers face in designing reward systems to support their goals? How does personal risk affect innovation? How are the needs of the corporate entrepreneur reconciled with the needs of the existing organisation? What solutions are companies adopting?
In dealing with these issues corporate venture managers are seeking to promote innovation, entrepreneurial spirit and to create new value for their organisations. Specifically there are a number of ways reward management can help, including:
- stimulating the bringing forward of new ideas
- promoting commitment to the new venture
- motivating the new business development team
- attracting talent into the venture from both inside and outside the parent organisation
- communicating a change in organisational values
- rewarding exceptional value creation.
Reward and risk can, however, only be understood in the context of the dynamics of the new business development process itself. As the venture moves through the stages of idea creation, planning, building and launching, management focus will change. Equally important is the complex context within which rewards and risks must be managed. This includes not only the new venture unit but individual, organisational and environmental dimensions.
It is important to maintain a balance between risk and reward, and remember the importance of intrinsic rewards, such as challenge and excitement, throughout the venturing process. Whilst the salience of monetary rewards increases as the new business nears launch, they are never the sole motivator. Importantly, the new business unit provides the ideal opportunity to create the sort of challenging work environment even in a large corporation that many of today's managers and executives are seeking.
The key recommendations for managers are as follows.
- Focus on creating space-organisational, psychological and physical-where intrinsic motivators can flourish.
- Recognise the differing individual needs, attitudes, aspirations and contributions of those taking part.
- Use failure as a learning opportunity for both the organisation and the individual.
- Acknowledge the need to include a broad range of stakeholders in the reward/risk strategy, including venture team members, the incubator team, and external partners.
- Link incentives to key new business development goals rather than the mainstream business metrics.
- Release incentives in co-ordination with the new venture process, not the mainstream organisation's systems.
- Allow for different rewards at different phases of the venturing process.
- Actively manage the expectations of ali of those taking part.
- Ensure reward systems are appropriate to attract the right talent to the venture.
There are a number of companies putting these principles into practise. In the case study illustrated Unilever reveal how the commitment of the founder was instrumental in turning the potential offered by technology into a new venture.