Material incentives for innovative activity of enterprise personnel based on key productivity indicators of innovation

Abstract

Development and implementation of innovation is one of the means of providing competitive advantages for a business in a market economy. Innovative activity of a company ought to be expedient from the economic viewpoint and result in reduction of costs and maximizing the profitability of the company’s activity in the long-term perspective. One of essential factors of economic effectiveness of innovation is innovation-active personnel able to generate ideas and quickly adapt to changes, willing and motivated to participate in implementing innovation strategy of the company’s development. Not all employees a priori possess such features, and therefore the company ought to develop and take measures to facilitate their innovative activity. The article introduces the method of material incentives for innovative activity of the personnel suggested by the authors. The method is based on adapting a well-known system of key productivity indicators to innovative activity of a company. Personnel of the company is divided into three categories of employees according to their roles in realization of the organization’s innovative policy, and the authors defined a set of four or five key productivity indicators of their activity for each category. The authors defined a range of quantitative interpretation of the achievable result for each indicator. They suggested a mechanism for calculating the total amount of the incentive bonus which takes into account key performance indicators coefficients of innovative productivity and their value, the size of the bonus wage fund for the employee, the employee’s affiliation to one of the personnel categories established, the number of rewarded employees and the frequency of premium payments. Implementation of the suggested mechanism will ensure objective assessment and reward for the contributions made by all the interested employees into innovative development of the company increasing effectiveness of the production.