The New York Times recently interviewed Mark Nathan, CEO of Zipari, a health insurance software company. In it, he talked about how he doesn't like firing people. Nobody likes firing people, but in Nathan's case, he's thought through why he doesn't like it.

When you fire someone, not only does it hurt the person, but it hurts their family, it hurts the co-workers who liked that person, and it creates fear.

His big reason for not firing people isn't just that he finds the conversation awkward, and it isn't just that he doesn't want to make someone's family sad. It's because "it creates fear." Firing people creates an atmosphere that doesn't lend itself to innovation. In his words, "nobody ever comes up with a brilliant idea while they're being chased by a lion."

The machine-cog, balanced scorecard style of management is fantastic on paper, and its strength is its weakness: it drives behaviour.

Imagine a factory that tells its people that they will get paid a certain amount for following a certain process, and may lose their job if they don't. That approach generates three predictable results:

1 The process will generally be followed.

This is perfectly fine. Why have a process if you don't want people to follow it?

2 If another factory offers more money to follow a similar process, those people will leave.

Now this is a frustration for many employers. There's a constant tension between getting good value for money, retaining staff, attracting staff...

The factory will attract people who are comfortable conforming.

This is the exact opposite of what is expected from many employees in today's challenging marketplace! When a job focussed around ideas creation is rewarded in this transactional way, the ideas generated will follow the path of least resistance, rather than being truly innovative.

Please don't hear what I'm not saying.

Taking away an employer's choice to fire staff is a bit dangerous, so let's not leap there quite yet. Instead, let's think about how to foster innovation.

People are motivated differently to how we think they are. Daniel H Pink's fascinating book Drive demonstrates how rewarding people with money reduces people's enjoyment of a task and makes them less likely to perform it well. That's definitely worth a read.

But thinking about the bigger picture, many businesses attempt to innovate because they feel they must. They see competitors both old and new strapping on their weapons of digital transformation, and react by desperately recruiting people and releasing mobile apps. An organisation trying to innovate out of fear is going to produce the same quality results as an individual will.

What's the answer?

Innovation happens best where passion meets risk-taking. Passionate people are internally driven to make things better, and risk-taking means that those passionate people will feel free to experiment, making mistakes along the way, failing fast, and ultimately producing something better.

I wonder if there's an organisation out there that rewards its people for how passionate they are?

I'd love to have a conversation about what's working for you in this space and what challenges you're facing; please do get in touch.