Leading at Light Speed is a powerful leadership book by Eric Douglas revealing the 10 specific ways an organization must act and behave to build trust, spark innovation, and create a high-performing organization. In Chapter Six, Stimulate the Creative Flow, Eric discourses upon Aligning Compensation and Rewards.

Many companies link compensation to performance, believing that it will motivate people to make the organization more successful. This is sometimes true. However, to promote the most creative productivity, the emphasis must be the overall success of the organization, not simply that of one person or team. Here’s a way to think about aligning compensation to help spark creative flow and innovation:

First calculate the Total Maximum Compensation (TMC) that a person should receive. Certain forward-thinking organizations, including Google, restrict the compensation level of the highest paid executives to a particular multiple of the lowest paid, e.g., 10 times. Thus if $50,000 is the lowest, then the maximum that an executive could be paid would be $500,000.

A guaranteed base compensation of up to one-half of their TMC seems a fair payment for corporate executives and senior leaders. So if the TMC for a particular leader is $1 million, then the base could be as high as $500,000. Bonuses should constitute the remainder, reflecting the company.

Here are some forms of forward-thinking compensation you can use to reward people for performance and spark creative flow:

Gain sharing: This is an awards fund that is based on how well an organization does in meeting its strategic or business goals. Every employee, regardless of position, receives a bonus in the form of a cash payment. Everyone’s bonus should be based on clearly understood standards of success – by creating transparency in this way, trust in the process is built.

Team innovation awards: By announcing you’ll reward teams that do a superb job achieving specific innovations, you can motivate everyone without eroding trust. In order to foster the most productive team spirit, it is highly suggested that no one team shines above the others on a regular basis; the wealth and glory should be equally available and realized to all, over time.

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