7. Rewarding Innovation: How to Design Incentives to Support Innovation

The Importance of Incentives and Rewards

Incentives and rewards are some of the most powerful management tools available. When Mobil (now part of Exxon Mobil) changed its measurement system to support the introduction of its new business model, it linked 30% of the bonuses of all salaried employees to these metrics. A significant part of Mobil’s improved measures tracked the ability of the organization to learn better ways to execute the business model. At the corporate level, measures such as the growth in nongasoline revenues were used to reflect the value of incremental innovations to the model. At the division level, the company measured new product return on investment ...

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