14 January 2009

Inventor Says Most U.S. Corporations Stifle Employee Creativity

David Pensak says pizza, not cash, unleashes innovation

David Pensak was able to increase employee morale by offering pizza, not cash, to recognize outstanding performance.

This is the second article in a three-part series on the teachings of David Pensak, a prominent scientist and lecturer on innovation.

By Phillip Kurata
Staff Writer

Washington — The creator of the first Internet firewall, who holds dozens of other patents and patent applications, says most U.S. corporations have lost their competitive edge because they stifle innovative thinking by their employees.

“Most people in corporations don't know when they're doing well,” said David Pensak, the founder of Raptor Systems Inc., which marketed his firewall. “The only feedback [employees] get is cash bonuses,” he said.

Pensak, a scientist who worked 30 years at the chemical giant E.I. du Pont de Nemours and Company, now devotes his energies to teaching innovation through the Creative and Innovative Economy Center in Washington and through his own Pensak Innovation Institute.

Pensak said cash bonuses help employees pay for things they have already bought. The money is immediately forgotten by the recipients, but not by their colleagues.

“Word spreads. One would ask, ‘I got only $500. Shouldn't I have gotten $1,500?’ When you need teams, this makes employees into competitors and undermines teamwork," Pensak said.

He was able to boost morale in one company he owned by offering pizza instead of money when an employee deserved recognition.

Bestowing pizzas instead of money is a more effective way of raising morale for three reasons, in Pensak's view. “Everyone likes food. The aroma lets everyone know that someone has been rewarded, and the honored employee shares his good fortune with others, instead of concealing it,” he said.

“This cut the special compensation budget by a factor of five and morale skyrocketed. Companies need to find out what motivates employees,” he said. “The human resources office was astounded. It never dawned on them to offer something like pizzas.”

Another effective way to spark innovation from employees is to reward their families for the sacrifices they make to help the employees succeed.

When Pensak owned and operated Raptor Systems, he arranged for outstanding employees and their spouses to be taken in limousines to fancy restaurants, with their children cared for by baby sitters, all at the company's expense. To provide an additional touch, he gathered background information about the kids' interests to enable the baby sitters to bring computer games and toys sure to entertain the children.

“This is ... saying ‘thank you’ in a way they will remember. It also created a thriving baby sitter business. Young girls would sign up for the company. Once they established a relationship with the family, they got all the family's continuing baby-sitting business. Some girls would do it free just to get a foot in the door,” Pensak said.

Companies innovate and produce sellable products when management and employees operate in synchrony, Pensak said. In the case of the struggling U.S. auto industry, Pensak said, it is vital that management devote considerable resources to employee education.

He said autoworkers have accumulated invaluable, intricate knowledge of the production process, which needs to be retained as companies design vehicles that are more attractive to consumers. Autoworkers are more closely attuned to the needs of consumers than are senior company executives, Pensak said.

“I asked a senior executive at GM [General Motors] if he had ever been grocery shopping with his kids. ‘Heavens, no!’ was his answer. Then I asked, ‘How do you know what moms taking care of kids need in a car?’” Pensak said.

Pensak said many employees are discouraged from speaking up with innovative ideas. A class exercise he conducted while teaching a course at the University of Delaware illustrates his point. He recounted the story of an employee at an electronics components firm. The employee had worked on a money-making project that had not been assigned to him and, in doing so, had spent company money without getting prior approval. In the end, the employee devised a system to get customers to pay for services that the company had previously provided for free.

The question Pensak put before his students was, “Should he be compensated for working in the company's best interest or fired for squandering the company's resources?” Students were assigned roles of prosecuting attorney, defense attorney and human resources officer in a mock trial. Others were members of the jury. The debate lasted three hours. In real life, the employee in the situation was fired.

The point of Pensak's teaching is that successful companies listen to their employees and customers. Most managers tend to steal ideas from their subordinates and take credit for them, but the great ones create environments where people are more creative than they have ever been in their lives, he said.

See also “Prominent Scientist Says Power to Innovate Lies in Everyone.”