- Tension: Incentives are designed to boost innovation, but in practice, they can just as easily stifle the very creativity they aim to spark.
- Noise: Conflicting expert opinions about rewards—some claim they unlock genius, others say they kill intrinsic motivation—leave organizations unsure how to proceed.
- Direct Message: Incentives can either fuel innovation or stall it—but the outcome depends on whether the reward creates space to explore or pressure to perform.
To learn more about our editorial approach, explore The Direct Message methodology.
Imagine trying to plant a garden in fast-forward. You add fertilizer, crank up the sun, and water like your reputation depends on it. And maybe you do get some results—quick growth, visible signs of progress. But what you miss are the subtler processes: roots finding their way, soil adjusting, ecosystems forming. You pushed for speed, but lost resilience.
This, in many ways, mirrors how organizations approach innovation. They want it now. They incentivize it. They set metrics, deadlines, and stretch goals. They expect creativity to emerge on command. And sometimes it does. But just as often, it collapses under the pressure.
As someone who studies the psychology of performance and motivation, I’ve seen this dynamic play out in corporate brainstorming sessions, startup accelerators, and academic think tanks. Leaders try to motivate people to innovate—but what they offer as fuel often turns into friction.
So the question becomes: when do incentives truly encourage innovation — and when do they short-circuit it?
When values pull in opposite directions
At a cultural level, we value both innovation and accountability. We believe in rewarding results but also celebrate out-of-the-box thinking. And that’s where the collision starts.
Incentives are inherently goal-oriented: “We want this type of outcome, so we’ll reward it.” Innovation, on the other hand, is often messy, nonlinear, and rooted in failure. It doesn’t always look productive in the moment. So when the promise of reward collides with the unpredictable process of creativity, tension builds.
You can hear it in the language of teams:
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“We’re being told to innovate, but we also have a weekly deadline.”
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“There’s a bonus for the best idea, but no time to explore bad ones.”
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“If I experiment and fail, I lose credibility—even if I was encouraged to take risks.”
These are not isolated complaints. They point to a fundamental tension between what incentives are meant to drive and what innovation requires to thrive.
As Dan Ariely, a behavioral economist and author of Predictably Irrational, famously explained, when we try to use money to motivate people, we sometimes succeed. But more often than not, we fail—because the very act of rewarding turns play into work.
In other words, a reward reframes the task. What once might have felt like curiosity becomes a transaction. And in that moment, the intrinsic spark dims.
Why experts still don’t agree
This wouldn’t be a problem if research were clear. But the literature on motivation and innovation is famously contradictory.
On one side, you have researchers like Teresa Amabile, whose foundational studies show that extrinsic rewards — especially when closely tied to output—can undermine creativity by narrowing focus and increasing anxiety. Her work emphasizes the importance of “perceived freedom” and “psychological safety” for idea generation.
On the other side, economists like Steven Levitt argue that well-designed incentives can absolutely catalyze innovation, especially when they’re tied to long-term performance, not just short-term output. Levitt’s take: without incentive, many people don’t bother to try anything new at all.
Then there’s the growing field of neuroeconomics, which adds complexity by showing how reward systems affect dopamine and decision-making differently across individuals. What inspires one person might shut another down.
So which is it?
Are incentives tools for focus or shackles for curiosity? Can they fuel the next big idea—or just mimic innovation while breeding conformity?
The answer, frustratingly, is yes.
The paradox in plain sight
Incentives can either fuel innovation or stall it—but the outcome depends on whether the reward creates space to explore or pressure to perform.
It’s not about whether you incentivize. It’s about how and when.
The same reward can function like sunlight or like fire—nourishing or destructive—depending on how it lands. Offer a bonus with clear space for trial and error, and you get a motivated, curious team.
Offer that same bonus with high urgency, limited resources, or a looming evaluation, and you may end up with safe ideas packaged as innovation.
What the garden actually needs
Let’s return to the metaphor of the garden.
If incentives are like fertilizer, they need the right conditions to work. Too much, too soon, and the roots burn. Too little, and growth stalls. But it’s not just about the amount. It’s about the timing, the soil, the climate—everything around the reward.
Here’s how organizations can design incentive systems that grow real creativity:
1. Incentivize inputs, not just outcomes
Rewarding end results puts pressure on people to skip steps. Instead, reward behaviors associated with innovation: time spent prototyping, cross-functional collaboration, risk-taking, or the sharing of failed ideas.
2. Build in protected creative time
If every hour is tied to output, there’s no room to meander—and meandering is where new connections happen. Give teams autonomy over blocks of time to pursue unconventional projects with no immediate deliverables.
3. Normalize failure as part of the incentive structure
Incentives that punish risk-aversion also punish creativity. Consider recognizing failed experiments with “best attempt” bonuses or internal storytelling platforms that celebrate what didn’t work and what was learned.
4. Match reward timing to creative cycles
Avoid trying to spark creativity under urgent deadlines. Space out incentives so they align with longer-term goals and give teams time to iterate.
5. Co-design incentives with the people using them
Top-down rewards often miss the mark. Engage your team in shaping what “rewarding innovation” should look like for them—and what support they need to pursue it.
Growing more than output
Incentives aren’t the enemy of innovation. They’re just misunderstood.
We’ve framed them as motivation systems, when in reality, they’re expectation systems. And expectation, when too narrow, stifles exploration.
To lead innovation, we need to stop asking, “How do we reward people into being more creative?” and start asking, “What would make this team feel safe, energized, and free enough to try something truly new?”
Because real innovation grows in healthy ecosystems. It takes time. It takes failure. It takes space. And yes, sometimes it takes fertilizer. But only when the roots are ready.
