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Rewarding the individual or the collective?
Researching the Relation Between Monetary
Reward and Employee Innovativeness
Author Details
Author 1: De Spiegelaere, Stan
KU Leuven - HIVA
Leuven, Belgium
Author 2: Van Gyes, Guy
KU Leuven - HIVA
Leuven, Belgium
Author 3: Van Hootegem, Geert
KU Leuven - CESO
Leuven, Belgium
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Introduction
Both policy makers, managers and academia are increasingly aware of the importance of
employee creativity and innovativeness (European Commission, 2010; EUWIN, 2012). As
organizations are under pressure to continuously reinvent their products and production
processes, the employee contribution in this process of continuous innovation is
progressively acknowledged. Academic research frequently stressed that in order to boost
the creative performance of employees, one should focus on boosting their intrinsic
motivation (motivation coming from the task itself, because the employee enjoys doing it).
As such, Hammond et al. (2011) recently identified job characteristics as the main trigger of
employee innovativeness in their meta-analysis. Notwithstanding the relative consensus in
academia about the primary importance of intrinsic motivation for employee creativity and
innovativeness, HR managers on the field still quickly turn to extrinsic, monetary reward
policies in order to promote certain employee behaviour. The role of these monetary
rewards is nevertheless heavily disputed. Monetary rewards would increase the extrinsic
motivation of employees (motivation rooted in the desire to obtain some outcomes of the
work, such as reward or status (Amabile, 1993)), which could actually result in lower levels of
intrinsic motivation (Amabile, Conti, Coon, Lazenby, & Herron, 1996; Amabile, Hennessey, &
Grossman, 1986; Deci & Ryan, 2000; Kruglanski, Friedman, & Zeevi, 1971). Others
nevertheless found opposing evidence which suggest that giving extrinsic rewards could
actually increase the creative performance of employees (Eisenberger & Rhoades, 2001;
Eisenberger & Shanock, 2003; Eisenberger et al., 1990).
Some years ago, Baer, Oldham and Cummings (2003) studied these contradicting findings
and discovered that the relation of extrinsic rewards on creativity is not linear, it depends on
other characteristics which are related to the intrinsic motivation of employees. As such they
found that for employees in complex, challenging jobs extrinsic rewards have a negative
relation with their creative performance. Yet, for employees in non-challenging simple jobs,
extrinsic rewards stand in an opposite, positive relation to employee creativity.
Since then, the research literature on employee creativity and innovativeness progressed
rapidly. As such, the concept of ‘innovative work behaviour’ (IWB) and its dimensions related
to idea generation and implementation has become more popular. Also the term employee
creativity has been further investigated and researchers now frequently distinguish between
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incremental creativity at the one hand, and radical creativity at the other (Gilson & Madjar,
2011; Madjar, Greenberg, & Chen, 2011). According to many researchers, future research
should distinguish between these various dimensions and look for differential antecedents.
In this article, we study the relation between extrinsic monetary rewards, employee
creativity and innovativeness taking into account these new insights. In doing so, we
distinguish between two large categories of extrinsic reward policies frequently used by
organizations: individual performance related pay (PRP) and collective performance related
pay. As will be shown in this article, these two kinds of extrinsic reward policies have very
different relations with employee innovative outcomes. As such, this article makes a bridge
between the literature streams of industrial psychology and organizational sociology by
combining concepts and research traditions of both fields.
In what follows, we first define and describe the concepts of innovative work behaviour
(IWB), employee creativity and their dimensions. We continue with a discussion of the
difference between individual and collective forms of PRP and their relation with employee
outcomes. Afterwards, we discuss the methodology and results of the analyses.
Literature
Employee Innovative Behaviour & creativity
In this study, the main dependent variables are Innovative Work Behaviour (IWB) on the one
hand and incremental & radical creativity on the other. Innovative work behavior is here
defined as: “all employee behavior directed at the generation, introduction and/or application
(within a role, group or organization) of ideas, processes, products or procedures, new to the
relevant unit of adoption that supposedly significant benefit the relevant unit of adoption”.
IWB thus includes behavior of employees that directly and indirectly stimulates the
development and introduction of innovations on the workplace. Employee creativity can be
defined as the production of novel and useful ideas or solution in the workplace (Amabile,
1988; Oldham & Cummings, 1996; Zhou & George, 2001). The definition of IWB and
creativity are very similar, yet cover distinct realities for two main reasons. First, creativity
focuses exclusively on the generation of ideas, while IWB encompasses all employee
behaviour related to different phases of the innovation process (Kanter, 1988). Second,
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creativity traditionally refers to the creation of something absolutely new. IWB on the
contrary focuses on something new, for the relevant unit of adoption. Employees who take
the initiative to copy successful work habits from other departments, for example, are
clearly staging important ‘innovative behavior’, while not at all engaging in workplace
creativity.
As already stated, IWB makes an explicit reference to the distinct parts of the innovation
process. A problem is recognized, a idea for a solution is generated and developed, the idea
is proposed, defended and eventually implemented in the organization (Kanter, 1988).
Knowing that a normal innovation process is iterative, time consuming and complex (Kanter,
1988; Scott & Bruce, 1994; Tuominen & Toivonen, 2011), researchers distinguish between
particular employee behaviour related to the different phases of the innovation process. As
such, some authors refer to two dimensions: idea generation and idea implementation (De
Jong & Den Hartog, 2007; Yuan & Woodman, 2010), while other suggest three dimensions:
idea generation, idea championing and idea implementation (Carmeli, Meitar, & Weisberg,
2006; Janssen, 2000; Messmann & Mulder, 2011; Reuvers, van Engen, Vinkenburg, & WilsonEvered, 2008; Scott & Bruce, 1994). Some others refer to four (e.g. de Jong & Den Hartog,
2010) or even five dimensions (e.g. Kleysen & Street, 2001). Nevertheless, only rarely these
dimensions can actually be distinguished in the empirical data and separate analyses are
performed for the separate dimensions.
Where IWB can be subdivided between different dimensions, also the concept of creativity
can be broken up in two creativity concepts which distinguish between very different types
of creativity: incremental and radical creativity. As Zhou & George (2003) state: “Implicit in
the definition of creativity is the fact that there are different degrees of creativity. Creativity
can range from a minor change in a work procedure to a major breakthrough in science and
technology”. They here differentiate between what can be called ‘incremental’ versus
‘radical’ creativity. Other researchers (e.g. Gilson & Madjar, 2011; Madjar, Greenberg, &
Chen, 2011) built on this idea when they searched for different triggers of incremental and
radical creativity. The distinction between radical and incremental creativity is informative
when it comes to the content of the creative ideas generated by the employees. At the same
time, the concept of IWB reveals crucial information on what parts of the innovation process
the employee invests in. Both when it comes to creativity, and when it comes to IWB,
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research showed that predictors differently affect the identified subdimensions of the two
concepts.
Monetary rewards & employee creativity/innovativeness
The relation between giving employees financial incentives and employee outcomes in terms
of motivation, productivity or creativity has been the subject of fierce debates, both in
industrial psychology and organizational sociology literature. In industrial psychology, the
discussions are focused on the roles of intrinsic motivation at the one hand, and extrinsic
motivation at the other hand. Intrinsic motivation refers to a motivation to work, rooted in
the work itself. Employees can be motivated because they find the work interesting and
challenging. Intrinsically motivated employees would be more creative as they are generally
more be more curious, flexible, persistent and have an internal drive for optimizing the work
process (Baer e.a., 2003; Shalley & Gilson, 2004). Extrinsic motivation refers to a motivation
rooted in the desire to obtain some outcomes of the work, such as reward or status
(Amabile, 1993). Installing performance related incentive systems would increase the
attention of the employees to the rewards and thus increase their extrinsic motivation.
Whether this increase in extrinsic motivation occurs at the detriment of the intrinsic
motivation or is added up is one of the focal points of debates between the friends and foes
of providing incentive rewards. Empirical findings tend to find evidence for both the
argument that extrinsic rewards stimulate (Eisenberger & Rhoades, 2001; Jenkins, Gupta,
Mitra, & Shaw, 1998; Ramamoorthy, Flood, Slattery, & Sardessai, 2005) or deter
creativity/innovativeness (e.g. Kruglanski et al., 1971). Building on these contradictory
findings Baer et al. (2003) studied the effect of extrinsic reward on employee creativity,
taking into account the role of first job complexity and second the cognitive style of the
employees. His data suggested that reward has very different (and opposing) relations with
creativity, depending whether the employee has a simple or complex task. They related their
findings to the previously mentioned idea that when intrinsic motivation is high (complex
job), extrinsic rewards will ‘outcrowd’ the intrinsic motivation and reduce the creative
performance of employees. Yet, when intrinsic motivation is low (simple jobs), extrinsic
rewards will give a certain degree of control to the employees which will lead to higher
levels of creative performance.
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The same inconclusiveness is reflected in the organizational sociology field. Here, reward
systems are discussed in the context of what is called ‘High-Performance Work Systems
(HPWS)’, which are HR practices that would lead to supreme company performance through
the stimulation of the employee motivation, productivity and innovativeness. Nevertheless,
when it comes to performance related reward systems, the overall evaluation is mixed.
Empirical studies focusing on the direct effect of incentive schemes on organizational
innovativeness mostly find insignificant effects (Michie & Sheehan, 1999; Shipton, Fay, West,
Patterson, & Birdi, 2005; Shipton et al., 2004; Zoghi, Mohr, & Meyer, 2010), while some find
positive (Nielsen & Lundvall, 2003) or mixed effects (Walsworth & Verma, 2007). Just as in
the industrial psychology literature, important interaction effects are nevertheless
mentioned. As such, the effect of a performance related reward system generally increases
when combined into ‘bundles’ or ‘systems’ with other HR practices (Laursen & Foss, 2003).
Individual and collective PRP
Under the general term of ‘Performance-related pay’ (PRP), organizations introduced a wide
variety of systems in which employees receive a monetary reward contingent on the
performance of an individual, group or company as a whole (Aumayr, Welz, & Demetriades,
2011). Building on organizational research, we know that the selection of the indicators, the
process of evaluation, the frequency and the height of the reward all have their influence of
the effectiveness and success of the reward system (Thierry, 2011). A major distinction can
be made between individual and collective PRP. The first refers to PRP systems where the
reward is contingent on the individual performance of the employee, whereas collective PRP
is linked to meeting collective performance indicators on the level of the department or
company. When it comes to employee outcomes, both have very different rationales and
consequences as the focus is or on the individual, or on the group. Individual PRP (implicitly
or explicitly) introduces a form of competition between workers while collective PRP
(implicitly or explicitly) introduces an incentive for cooperation while at the same time risks
to stimulate ‘free rider behaviour’.
Individual PRP & Employee creativity/innovativeness
Building on the previously discussed theoretical and empirical literature, we suspect to find
no significant linear relations between individual PRP and employee
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innovativeness/creativity. As was demonstrated by Baer et al. (2003) the effect of reward on
creativity is dependent on the job context of the employee. As such, we suspect to find a
significant interaction effects between job resources, individual PRP and employee
creativity/innovativeness. Job resources is defined here as “those physical, social, or
organizational aspects of the job that may do any of the following: (a) be functional in
achieving work goals; (b) reduce job demands and the associated physiological and
psychological costs; (c) stimulate personal growth and development” (Bakker & Demerouti,
2007) and is closely related to how Baer et al. (2003) see their ‘job complexity’. As they
stated, providing extrinsic rewards in complex jobs tend to negatively affect individual
creativity (through depressed levels of intrinsic motivation). At the same time, providing
extrinsic rewards in simple jobs is related to higher levels of individual creativity (as
employees are given a basic sense of control in jobs with which are not intrinsically
motivating).
Hypothesis 1: There is no direct linear relation between individual PRP and employee
creativity/innovativeness.
Hypothesis 2: The relation between individual PRP and employee
creativity/innovativeness will be interacted by the degree of job resources enjoyed by
the employee in such that individual PRP will be positively related to employee
creativity/innovativeness when job resources are low and negatively when job
resources are high.
We nevertheless suspect that this relation will be weaker for idea implementation as idea
implementation is likely to suffer more from the competition element related to individual
PRP. We also suspect that the relation will be stronger for incremental rather than radical
creativity. Here we build on the work of Gilson and Madjar (2011) who stated that radical
creativity is predominantly related to intrinsic motivation, while incremental creativity is
more likely to be affected by extrinsic rewards.
Hypothesis 3: This interaction effect between individual PRP and job resources will be
particularly strong for idea implementation and radical creativity.
Collective PRP & Employee creativity/innovativeness
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Very little is known about the impact of collective PRP on the motivation or creativeness of
employees. Advocates of collective reward systems refer to the increased cooperation and
feelings of ownership or commitment of employees to state that collective reward systems
can positively contribute to the motivation and performance of employees (Bartol &
Srivastava, 2002). Adversaries on the other hand point to the problem of ‘free rider
behaviour’ of employees (Gerhart, Minkoff, & Olsen, 1995). Empirical studies are rare, yet
one study performed by Hanlon, Meyer and Taylor (1994) studied the effect of the
elimination of a gainsharing plan. After the elimination of this collective reward policy, the
researchers observed higher levels of job satisfaction, commitment, but also of idea
generation. Other studies on the other hand note that through forms of collective PRP,
employees have an incentive to share ideas and knowledge that they would otherwise keep
for themselves (Bartol & Srivastava, 2002). Also the empirical studies on the organizational
level find weak positive relations between collective forms of PRP and innovation (Aerts &
Kraft, 2008; Zoghi, Mohr, & Meyer, 2010), while others find insignificant results (e.g. Michie
& Sheehan, 1999). Further, Lorenz & Valeyre (2005) observed that the innovation prone
‘learning organization’ uses less individual pay-for-performance schemes and relatively more
collective incentive systems as compared to the ‘lean organisation’. At last, studies on the
year-old ‘Scanlon Plan’ are revealing (Welbourne & Mejia, 1995). According to these casestudies, the introduction of a form of collective reward, combined with a organizational
structure in which employees can effectively influence the companies’ performance will
result in an overall increase of employee motivation and firm profitability, through the
optimal mobilization of the innovative and creative ideas of employees (Massoud, Daily, &
Bishop, 2008; Thierry, 2011; Wren, 2009). Building on these last insights, we suspect that the
relation between collective PRP and the individual innovative behaviour of employees will
depend on their evaluation of the influence they have on the group outcomes. If employees
feel they can effectively communicate their ideas and complaints to the group, the collective
PRP will strongly affect the employees’ innovative performance. We further suspect that the
influence of the collective PRP will predominantly affect the idea implementation behaviour
as this type of IWB is more strongly linked to group dynamics than the idea generation.
Hypothesis 4: There will be a positive relation between collective PRP and IWB or
employee creativity. This relation will be stronger for idea implementation.
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Hypothesis 5: Effective group communication will interact in the relation between
collective PRP and IWB or creativity where the combination of both collective PRP and
company resources will result in the highest levels of IWB or creativity.
Method
Choice of sample & variables: combing the best of two worlds
Both the industrial psychology approach and the organizational sociology approach have
their conceptual and methodological qualities and flaws. When it comes to industrial
psychology, we can refer to the mostly high-quality development and measurement of the
outcome variable (creativity or innovativeness). Yet, the dependent variable, reward, is
frequently measured as a subjective appraisal not of reward in general, but of ‘reward for
creativity’ (Baer e.a., 2003; George & Zhou, 2002) or ‘reward for performance’ (Deckop,
Mangel, & Cirka, 1999). While this approach has its advantages in terms of clarity, the
disadvantage is that it’s difficult to make an overall assessment of the success of a PRP
scheme as the perception of getting a reward for the employees’ creativity might differ from
employee to employee. Further, these studies are frequently based on relatively small
samples (n < 200) from very few organizations. The insights of organizational sociology also
face some limitations. First, the outcome variable in these studies is frequently a dummy
variable distinguishing between companies that are ‘innovators’ and those that are not. The
samples tend to vary in size (from 111 companies to over 3000), yet the organizational level
design of the studies make it hard to make conclusions on the impact of PRP on individual
P a g e | 10
behavior employees. Whether introducing PRP schemes is related to a higher innovative
activity of employees in companies, or whether innovative companies tend to introduce PRP
systems is unresolved by these studies.
This study tries to overcome some of these research limitations, first by building on the
conceptual work of the industrial psychologist and taking over their concepts. Therefore, a
employee level study was designed which used a far larger sample than most studies in
industrial psychology. For the independent variable, the study chose not to rely on
subjective measures like ‘reward for creativity’, but to focus on the presence or absence of
various types PRP systems. Therefore, the survey was designed in such a way that it covered
employees from a wide range of companies.
Data collection and sample
The data used in this article is based on an employee-level face-to-face data collection based
on standardized surveys. The sample consisted of Flemish unionized workers from five
different industries: banking, retail, hotels & restaurants, chemical industry and the social
sector. It concerns an a-select sample taken from the membership databases of the two
primary unions organized in these sectors. As such, the sample consisted of employees from
a multitude of organizations and HR policies. In total 927 surveys were collected with an
overall response rate of 49%.
Measures
The presence of individual and collective forms of performance-related pay was measured
using dummy variables. Employees were asked whether a part of their wage was dependent
on their individual performance first. Second, employees were asked whether their wage (on
a monthly, yearly or other basis) was dependent on the group level performance or
company performance (profit sharing, gain sharing and occasional collective bonuses).
Innovative work behaviour, was measured using the IWB scale developed by De Jong & Den
Hartog (2010). Respondents indicated how much a certain characteristic occurred in their
job, ranging from “very rarely” to “very frequent”. Examples are: finding original solutions
for work related problems and developing innovative ideas into practical application. An
exploratory factor analysis showed that a two-factor solution was to be preferred. This
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factor solution separated the IWB scale in a idea generation and idea implementation
dimensions with high reliability (Cronbach α: 0.88 & 0.94).
Radical and incremental creativity were measured using 10 items developed by Madjar et al.
(2011). Respondents could indicate whether they agreed with a certain statement using a 7
point likert scale. Sample statements are ‘I use previously existing ideas or work in an
appropriate new way’ and ‘I suggest radically new ways of working or products’. The five
item radical creativity scale had a high reliability (α: 0.81) while the incremental creativity
scale had a lower, yet acceptable reliability (α: 0.68).
Job resources was measured using a series of 7 questions which referred to job autonomy
(e.g. I can arrange my own work pace’ and ‘I can decide for myself how I perform my work’)
and 7 questions related to learning opportunities at work (e.g. I have the opportunity to
develop my professional skill and through my work, I learn new stuff). Following Schaufeli &
Bakker (2004), we calculated a single variable of all these items with a high reliability
(Cronbach α: 0.87).
The measure for group communication was based on a 3 item scale including questions like
‘in my company people can express clearly when they disagree on a topic’, and ‘in my
company, one can react on decisions coming from above’ (α: 0.84). Further, control variables
were included such as educational level, sector of employment, age, size of company and
type of employee.
Common method variance
The data used in this research was all gathered from one single source, the employee. This
could lead to serious problems related to ‘Common Method Variance’ (CMV): variance
stemming from the use of a single source of information, not from the actual empirical
differences or correlations. CMV could inflate correlations and thus lead to incorrect or
overblown results. Although several statistical method were developed in order to assess
the impact of CMV (e.g. Harman’s single factor test), proactive strategies for avoiding CMV
are still preferred (Conway & Lance, 2010). As the design of the study (employee level,
multiple organizations) made a multi-source data gathered practically infeasible, the survey
tried to reduce the impact of CMV by providing a break of methods when it comes to one of
P a g e | 12
the central dependent variables (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003):
incremental and radical creativity. Where all other questions were read by the interviewer
and the answers were noted, the respondents were asked to complete the answers
regarding employee creativity on their own, as they would do with a paper-and-pencil
survey. After this intermezzo, the interviewer continued with the normal procedure of a
face-to-face interview. Next, building on the proposal of Podsakoff et al. (2003) the answer
scales used in the research differed in size (6-7 point scales) and in labels (agree-disagree vs.
always-never). Further, a Harman’s single factor test was performed on scale variables
included in this research. This confirmatory factor analysis resulted in the identification of 7
different factors which makes the likelihood of disruptive CMV improbable. At last, there are
other good arguments to suspect that CMV is not a central problem in this research. First,
more ‘factual’ questions on the presence or absence of certain HR methods is significantly
less affected by CMV (Chang, Van Witteloostuijn, & Eden, 2010). Second, finding significant
interaction effects indicates that problematic CMV is improbably as they are generally
deflated by a large method effect (Siemsen, Roth, & Oliveira, 2010).
Results
Descriptive results
Table 1 and 2 give some descriptive statistics of the data. We first see that the overall
reliability of the scales used in this research was satisfactory. The scales were calculated
based on the factor scores of the items. Consequently, all variables were centered around a
mean of zero. As we expected, the correlations of the job resources and group
communication variable with the employee creativity and innovativeness variables are all
positive and significant.
Table 1: Descriptive Statistics - Correlations
Cr a
1 Job Resources
0,87
St Dev
0,94
2 Group Communication
0,84
0,93
0,327*
3 Idea Generation
0,88
0,95
0,507*
0,190*
4 Idea Implementation
0,94
0,97
0,445*
0,221*
0,767*
5 Incremental Creativity
0,68
0,86
0,241*
0,161*
0,364*
0,270*
0,81
0,93
0,239*
0,077*
0,467*
0,522*
6 Radical Creativity
1
2
3
4
5
0,491*
P a g e | 13
* p: <,01
Table 2 gives an overview of the relation between the various variables and the PRP policies.
As can be seen, a sufficient fraction of the sample was subjected to individual or collective
PRP policies. The regarding some dependent and independent variables are mostly relatively
small and statistically not significant. Regarding individual PRP we see a significant difference
when it comes to group communication (which has a higher value when there is an
individual PRP system) and the two dimensions of IWB. Regarding collective PRP the only
observed bivariate difference is found regarding the job resources. Employees who fall
under a collective PRP system tend to have more resources in their jobs.
Table 2: Descriptive statistics - Individual & Collective PRP
n
Resources
M
SD
Individual PRP
Yes 340 0,04 0,84
No 587 -0,03 0,99
not sign.
Sign diff.
Collective PRP
Yes 177 0,16 0,77
No 736 -0,04 0,98
**
Sign diff.
Group
Communication
M
SD
0,10
-0,06
0,82
0,99
Idea
Generation
M
SD
Idea
Implementation
M
SD
Incremental
Creativity
M
SD
Radical
Creativity
M
SD
0,11
-0,07
0,91
1,00
**
0,17 0,85
-0,10 0,99
**
**
0,01 0,78
0,00 0,91
not sign.
0,03 0,89
-0,02 0,95
not sign.
-0,08
0,92
0,02
0,94
not sign.
0,11 0,83
-0,03 0,98
not sign.
0,02
0,87
-0,01
0,99
not sign.
-0,06 0,80
0,01 0,88
not sign.
-0,06 0,97
0,01 0,92
not sign.
* α:0,05; ** α:0,01
Regression Results
The results of the regression analysis are given in Table 3. We first of all notice that our
model has a relative strong explanatory value for the two IWB dimensions (R2 between 0.28
and 0.35), yet this is not so for our creativity dimensions (R2 between 0.11 and 0.13). Next,
we see that job resources stand in a strong positive linear relation with all dependent
variables in this research. This finding is in line with the literature on the importance of job
resources of employee innovativeness (Hammond e.a., 2011). The linear relation between
group communication and our dependent variables is nevertheless more ambiguous. Where
group communication is positively related to idea implementation and (weakly) to
incremental creativity, it is not related to idea generation and even negatively related to
P a g e | 14
radical creativity. This findings confirms that idea implementation is, more than idea
generation, an form of employee behaviour that is affected by group dynamics. The same
can be said for radical creativity, where effective group communication can withhold
employees from developing really radical ideas on how to change the work organization.
Table 3: Regression Results
Idea Generation
Model 1
R square
0,34
Model 2
0,35
Idea Implementation
Incremental Creativity
Model 1
Model 1
0,28
Model 2
0,28
0,11
Model 2
0,12
Radical Creativity
Model 1
Model 2
0,12
0,13
Beta
p val.
Beta
p val.
Beta
p val.
Beta
p val.
Beta
p val.
Beta
p val.
Beta
p val.
Beta
Job Resources
0,40
<,01
0,44
<,01
0,34
<,01
0,36
<,01
0,22
<,01
0,04
<,01
0,24
0,04
0,27
<,01
Group Communication
0,03
0,31 -0,01
0,67
0,09
0,01
0,05
0,15
0,06
0,04
0,04
0,39 -0,03
0,03 -0,05
0,20
Collective PRP (0: no PRP)
0,30
<,01
0,29
<,01
0,27
<,01
0,26
<,01
0,05
0,45
0,07
0,53
0,22
0,07
0,22
<,01
Individual PRP (0: no PRP)
Coll PRP* Group Resources
0,03
0,68
0,08
0,31 -0,02
0,77
0,01
0,93
0,00
0,99
0,09
0,70
0,04
0,09
0,09
0,36
0,15
0,02
0,11
0,09
0,07
0,10
0,08
0,25
-0,23
0,01
-0,13
0,14
0,09
0,11
-0,23
0,02
Ind PRP*Job Resources
Model controlled for age, education, sector, company size & hierarchical status
Turning to our hypotheses, we see that our first hypothesis is fully confirmed. There’s no
linear relation between the presence of an individual PRP system and the individual
employee behaviour. Nevertheless, the interaction (hypothesis two) of individual PRP with
job resources on the dependent variables was significant for both idea generation and
radical creativity. For ease of interpretation, we plotted these interaction effects in figure 1
and 2.
Figure 1: Interaction of Individual PRP and job resources on idea generation
0.5
Idea Generation
0.25
0
-0.25
Low Resources
High Resources
-0.5
No ind. PRP
Ind PRP
p val.
P a g e | 15
Figure 2: Interaction of Individual PRP and job resources on radical creativity
0.5
Radical Creativity
0.25
0
-0.25
Low Resources
High Resources
-0.5
No ind. PRP
Ind PRP
As we hypothesized (hypothesis two), the relation of individual PRP shifts, depending on the
level of job resources. When employees have ‘high resource jobs’, the individual PRP is not,
or even negatively related with the generation of ideas and radical creativity. For employees
in low resources jobs, on the other hand, the relation between individual PRP and radical
creativity or idea generation is positive. Regarding the relation of individual PRP on idea
implementation or incremental creativity, none of the studied relations (direct and
interaction) were significant. As not all the interaction effects were significant, we conclude
that our second hypothesis is only partially confirmed. The third hypothesis on the other
hand is fully confirmed. Individual PRP and the interaction with job resources is particularly
important for idea generation and radical creativity.
Regarding collective forms of PRP, we suggested that there would be a positive relation
between collective PRP and the employee outcomes, and that this relation will be
particularly strong for idea implementation. As can be seen in Table 3, collective PRP indeed
stands in a direct positive relation with idea generation, idea implementation and radical
creativity. Incremental creativity on the other hand, is not significantly related to collective
PRP. The strength of the relation with idea implementation is not significantly different from
the relation with idea generation which refutes the second part of our fourth hypothesis.
Our fifth hypothesis suggested that the relation between collective PRP and our dependent
P a g e | 16
variables will be particularly outspoken when the subjective appraisal of group
communication in the company is high. This hypothesis could only be confirmed for idea
generation (figure 3) and shows the pattern we hypothesized. For all other dependent
variables, this interaction effect was insignificant.
Figure 3: Interaction of collective PRP and group level resources on idea generation
0.5
Idea Generation
0.25
0
Low Group
communication
High Group
communication
-0.25
-0.5
No Coll PRP
Coll PRP
Discussion
As managers try to influence the behaviour of their employees, they frequently turn to
monetary incentive schemes to do so. Yet, monetary rewards schemes are mostly known for
their complexity, not their effectiveness. Moreover, giving people financial rewards can well
undermine their intrinsic motivation and negatively affect their innovative and creative
performance. Earlier studies showed that the relation between rewards and creativity is
complex (Baer e.a., 2003) and this study builds on these insights to further untangle this
relevant research question. In doing so, we use recent insights on the diverse nature of both
employee innovative behaviour and employee creativity. Further, we chose not to use
subjective evaluations of reward, but objective indicators regarding the absence or presence
of both individual and collective PRP systems.
Our analysis first showed what is generally known fact in the innovation research: more than
rewards, the work content is a crucial factor for explaining employee innovativeness. Job
P a g e | 17
resources such as autonomy and learning opportunities are strongly related to all
dimensions of IWB and employee creativity.
Next, the effect of group communication less straightforward. Effective group
communication is positively related to idea implementation and incremental creativity, yet
negatively to radical creativity. Although the relation is relatively weak, this result
nevertheless came as a surprise. Yet, knowing that innovative behavior sometimes leads to
negative reactions of colleagues and supervisors (Janssen, Van de Vliert, & West, 2004;
Janssen, 2003), we can suspect that this will be increasingly so for very radical ideas.
Regarding our main object of study, individual and collective PRP, the findings mostly
confirmed our hypothesis. Individual PRP is mostly unrelated to employee innovative or
creative behaviour. Both for idea implementation and incremental creativity, no relation was
between the two variables. For idea generation and radical creativity on the other hand, the
interaction between job resources and individual PRP was significant. Analysis of the pattern
showed that, in line with previous findings (e.g. Baer et al., 2003), individual PRP is positively
related with the dependent variables when the job resources are low, yet negatively when
job resources are high. Although our data cannot establish causal relation, it appears that
giving individual rewards to employees is no managerial ‘quick win’ for employee
innovativeness. On the contrary, blind individual reward policies can potentially undermine
the innovative performance of employees and therefore the performance of the company at
large.
Contrary to the complexity of individual PRP, collective PRP was found to be directly and
strongly related to both dimensions of IWB and radical creativity. For idea generation, we
also found a significant interaction with effective group communication on ideas and
complaints which amplified the positive relation of collective PRP. This last finding confirms
the year old case-study findings on the implementation of so-called Scanlon Plans: effective
employee innovation comes from the combination of collective reward with effective
participation of employees. The fact that incremental creativity is unrelated to collective
PRP is furthermore surprising. Just as when it comes to effective group communication,
incremental creativity seems to remain largely unaffected by the explanatory variables in the
model. Reasons for this could be the nature of incremental creativity which, just as job
P a g e | 18
crafting (Berg, Dutton, & Wrzesniewski, 2008), happens in any given situation. Alternatively,
the lack of significant relations could be explained by the fact that the measurement of
incremental creativity in this research was imperfect (cronbach alpha <0.70).
The findings on first individual PRP and collective PRP could hardly be more contrasting.
Where individual PRP asserts itself as a complex, potentially negative policy option for
stimulation employee innovativeness, the relation between collective PRP and employee
innovativeness is straightforward and simple. This observation stands in contrast with the
very scant attention that went collective reward in both the industrial psychology and
organizational sociology literature.
This article therefore contributes to the overall literature on rewards which hardly takes into
account the differential effect of different types of employee reward systems. Further, by
taking into account the dimensions of both IWB and employee creativity, we contributed to
the literature that searches for the antecedents of radical and incremental creativity and
where they diverge (e.g. Gilson & Madjar, 2011).
Conclusion
As Jeffrey Pfeffer (1998) noted in his article in the Harvard Business Review, performance
related pay policies are very popular with managers cause, “It's simpler for managers to
tinker with compensation than to change the company's culture”. Yet, while implementing
reward systems might be relatively easy, assessing their outcomes is not, definitely not when
it comes to employee innovativeness or creativity. As we have shown in this article, when it
comes to individual PRP, both negative, positive and insignificant relations are found. All
depends on first the outcome variable and second, the degree of resources enjoyed by the
employee. When the job is challenging and resourceful, individual PRP undermines
employee idea generation and their radical creativity. Yet, when resources are low,
individual PRP can actually enhance their innovative behaviour.
Where the individual PRP is marked by ambiguousness and complexity, collective PRP has a
strikingly straightforward and strong relation with employee innovative outcomes (except
when it comes to incremental creativity). As has been shown by this article, reward matters
P a g e | 19
for creativity. Yet, the size and direction of the relation all depends on the job of the
employee and on the organization.
P a g e | 20
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