Giving Employees Incentives for Innovation

Calls for more government efficiency come not just from the public, but also from the public servants who make government’s day-to-day operations possible. Some of the best ideas come from the people who intimately know the processes that could be improved. However, implementing those ideas often requires jumping several, tall hurdles.

In an unfortunate case of irony, government budget cuts have precluded some efficiency improvement efforts because those efforts require a financial investment. Saving money three or four years down the line seems less attractive when employees are facing salary cuts, furloughs, and layoffs. And, in the case of some Web 2.0 tools whose ROI isn’t measured in dollars, investing in the technology is almost out of the question.

Now, more than ever, more people are in need of government services and agencies need to find ways to provide more service with fewer resources. To make this happen, agencies can’t just work harder. Agencies need to find innovative ways to deliver services at less cost.

The Colorado legislature is supporting this effort with a bill, HB10-1264, that provides financial incentives to state agency employees who recommend cost-saving improvements.

The bill requires the state department of personnel to develop a form, called an “idea application”, for employees to suggest improvements. The personnel department is also responsible for developing criteria for evaluating the applications. However, the director of the agency where an employee who makes a suggestion works is responsible for evaluating an application.

Then, for each idea that is implemented, the employee who made the suggestion will receive 5% of the cost savings, up to $5,000, as an honorary award. The agency will receive 25% of the savings and the rest will be used by the state.

Up to a $5,000 bonus is definitely a strong incentive to put forth new ideas. But, why is this type of bill necessary? Why do we need laws to encourage innovation? Isn’t giving an incentive to suggest improvements like paying a child for getting good grades? (Disclaimer: I wasn’t paid for grades when I was a kid, and I don’t have any kids, so I’m not really sure if that works.)

Shouldn’t directors, managers, supervisors, and other agency leaders already be encouraging employees to share ideas for innovation? Shouldn’t the leaders already be listening? Well, it’s not the first time common sense has needed to be legislated. I don’t mean to suggest this is a bad bill. I just find the need for such a bill to be disappointing. But, if Colorado government employees need an incentive to innovate and managers need to be pushed to listen to ideas, and I’m not saying they do, this is a step in the right direction.

What are your thoughts about this type of incentive? What barriers have you encountered with recommending improvements? How have you overcome those obstacles?

As of the date of this post, the bill is waiting to be heard in an appropriations committee. The fiscal note associated with the bill doesn’t specify an amount for projected savings, and, while the fiscal note mentions the possibility of costs for implementing the idea applications, the note assumes those costs will be nominal.

This commentary was also posted on my blog.