True or false: There's no such thing as a bad idea.

Of course bad ideas exist. In retrospect, the AOL-Time Warner merger was not the wisest idea. Neither is photocopying your face. But ask any number of innovation experts and they'll all give you a different answer. Of course there is such thing as a bad idea. Or: Every idea has its merit. Or: It depends…

Within the context of innovation, how to handle bad ideas is a controversial topic because statistically speaking, most ideas are bad. Ninety-three percent of successful innovations start in the wrong direction and countless more never succeed. "In entrepreneurship, most ideas fail," explains Roy Rosin, Intuit's vice president of innovation. "You either scale the wrong thing or you scale in the wrong direction. And it's hard to predict."

With no handy algorithm to identify good ideas, innovative companies have to accept that with every great, useful, idea, there will be many more that fall away. Unused ideas are frequently off-topic, underdeveloped, or poorly timed; however, this doesn't make them bad. So should you reject these wayward ideas, or should you reward them?

Taken literally, rewarding bad ideas sounds preposterous. In competitive climates, separating the best from the rest motivates future growth. But most entrepreneurs would agree that to foster creativity and collaboration, every voice should be listened to and every idea should be shared. If every unused idea is treated like a bad idea, don't we run the risk of discouraging future innovation? The following six arguments for and against rewarding so-called bad ideas will help you decide what is best for your company.

Should You Reward Bad Ideas? Yes, Reward Foolish Ideas.

Teachers tell their students that there's no such thing as a stupid question, because even the most elementary query reveals new insights to at least one person in the classroom. In the same way, even the wackiest, most ridiculous, silliest ideas work as a catalyst in a brainstorming session.

"On every campaign our clients do, easily 30 percent of all the contributions are absolutely nonsensical," says Luis Solis, president of innovation software firm Imaginatik. "I don't care how well you frame it or how clear you were, 30 percent of ideas will be random. Another 30 to 40 percent might not be properly timed. But what we don't know is whether the first chunk inspired the best remaining 30 percent."

The evolution of ideas doesn't happen linearly, with one good idea contributing to a better idea contributing to the best idea. Instead, innovators draw inspiration randomly from any thoughts in the brainstorm. "The best way to find good ideas is to allow for the generation of as many varied, unusual ideas as possible," says Scott Isaksen, president of the Creative Problem Solving Group. "You're bound to come up with a lot of oddities, but that's the precursor to getting good ideas."

Rewarding such creative thinking does not require the same cash bonuses and other tangible benefits that better, more useable ideas often do. According to a McKinsey Quarterly survey of C-level executives in June 2009, nonfinancial incentives such as praise or acknowledgement proved more effective than bonuses, raises or stock options in motivating or engaging employees. "The greatest, most powerful reward is recognition," says Solis. "Even a simple ‘thank you for contributing' tells an employee that you heard their ideas. Sometimes all they want is to be heard."

Should You Reward Bad Ideas? Yes, Reward Half-Baked Ideas.

When an employee bounds into a meeting bursting with an idea they came up with twenty minutes earlier, brace yourself. This brainstorm may not be well thought out, fine-tuned, or structured in any way. But, it just might be the best idea you hear all day. That's because these undercooked ideas have yet to transform into their best form, and now you can help them get there.

According to Tom Kelley, general manager of the global design consultancy Ideo, you may need to squint to realize an underdeveloped idea's full potential.  "Ignore all the surface details and look just at the shape of the idea," he says. "Regardless of how rough our ugly this is, if there's potential in there you owe it to yourself and your company to encourage it."

If your employee introduces their idea to you in its nascent stage  they want your insight to help guide its development. So share it. The best way to reward underdeveloped ideas is to provide feedback. "If they never get any feedback, your employees don't know if their ideas are even under consideration," says Isaksen. "When people understand how their idea contributed to others along the way, that encourages them to continue the process and offer more ideas."

Should You Reward Bad Ideas? Yes, Reward Unappealing Ideas.

Chances are, you won't like every idea brought to the table. But hold your judgment. Successful brainstorms incorporate a diverse group of people collaborating with one another and contributing as much as possible without any arguments, debates or snap decisions on their merit.

"The worst thing you can do as a leader is to be the single determining factor of whether an idea is good or bad," says innovation coach Robert Brands. "If they're good, they become the boss's idea and if they're bad, you lose ownership of the operation."

Instead, Brands suggests a method where everyone ("From the maintenance man to the CEO," he says. "Everyone!") develop the parameters new ideas should be measured against. Common parameters include profitability, patent potential, customers service, global impact. And, if an idea doesn't fit your parameters but your employees are passionate about it, consider rewarding their enthusiasm instead.

Many innovative companies, from Google to Intuit, embrace their employees' passion by incorporating unstructured time into their work week during which employees can pursue ideas independent of company objectives. Often, it pays off. In 2001, engineer Krishna Bharat developed Google News in his spare time. And last year, Intuit employees Tad Milbourn and Vlad Magdalin used their 10 percent time to develop Intuit Brainstorm, the company's newest tool for generating and collaborating ideas.

"Sometimes their insights might not be your strategic priority," says Rosin, the general manager of Brainstorm on top of leading Intuit's innovation efforts. "But giving them the freedom push forward promotes their passions and insight and is ultimately very productive."

Build in Rewards for Action.

At the end of a brainstorm, ideas are simply words on a white board, post-it note or piece of paper. If actions speak louder than words, shouldn't the reward go to those employees doing far more than thinking?

For Rensselaer Polytechnic Institute professor and veteran entrepreneur Burt Swersey, the answer is yes. Swersey cautions against the idea of brainstorming, believing instead rewards should be given to the idea generators who do something about their ideas.  "People think that innovation comes from guesswork and throwing out multiple ideas when in fact it comes from understanding," he says. "The key is understanding needs, understanding the customer, understanding trends, and seeing opportunities for what would be significant innovations. You don't come into a meeting with an idea, you go out and do it."

Swersey's archetype for doing not thinking is Ecovative Design, a company whose co-founder Eben Bayer brought in the prototype for the company's now award-winning EcoCradle mushroom packaging when he was a Swersey's student in RPI's Innovator's Studio. "Eben came into the class with a sample of agricultural waste and mushroom cells and asked me what I thought," he recalls. "It was a fantastic structure. But if he just talked about the idea, people would wonder what else he had been doing with mushrooms. Instead, he made it."

In the end, it takes just as much time, money and effort to bring a new product to market whether it's a great product or just another commodity. And no matter how long you flush out an idea, you won't know if it's good or bad until you test it.  "No meeting ever determines whether you have a good idea or a bad idea," says Marasco. "The marketplace determines what is a good idea of a bad idea, and the true entrepreneur is the person who does something about it.

Learning to Reward the Creative Process

When it comes to rewarding the process of innovation it may be time to return to school. Across the country, top universities such as Stanford and Northwestern are embracing entrepreneurship and teaching students how to think like start-ups. "We're trying to teach a way of thinking," says Michael Marasco, director of Northwestern's Farley Center for Entrepreneurship and Innovation and professor for the course NUvention. "An idea could be great one day and not the next day so we grade more on the process and the presentation."

In most entrepreneurship courses, students learn to generate and pitch ideas for new companies – sometimes directly to a panel of venture capitalists. But, students don't earn grades based on how much VC funding their idea gets. "I believe as a leader—as a professor or as an executive—you reward the process," says Perry Klebahn, professor of Standford's course Launch Pad. "There's a connection between the really tough failures and the best learning."

In Launch Pad, students whose ideas fail undergo a process Klebahn calls compositing—reassessing an idea postmortem to draw out its greater lessons. At Northwestern, Marasco enacts intervention before his students' ideas implode. Marasco also lets Chicago venture capitalists kill bad ideas through midterm evaluations. "We exist in a world where we're very sensitive about hard feedback and don't challenging people to make changes," he says. "But, the same VCs who ripped apart my students ideas in March fell in love with the evolution of those ideas at our final pitch in June. That's reward in itself."

Of course, teaching the process of innovation is easier when grades and not profits are up for grabs. But that doesn't mean scaling revenue should be the ultimate goal of your brainstorm. "It's easy to get short-sighted about immediate revenue and immediate success," says Klebahn. "But if you reward just the end product you will not have a good business culture that supports people taking risk and learning from their mistakes."

Rather Than Rewarding Ideas, Reward Participation.

Whether your company culture is competitive or collaborative, the best way for an employee to get noticed is by speaking up. So why not reward their contribution? 

After studying innovation at Ideo for months, Stanford professors Robert Sutton and Andrew Hargadon published a report on Ideo entitled Brainstorming Groups in Context: Effectiveness in a Product Design Firm with a key finding that Ideo's most effective brainstorming sessions resembled a status auction, or a competition for status based on skill. To this day, Ideo's general manager considers social capital the greatest reward creativity both in company brainstorms and with OpenIDEO, their one-year-old global creative community.

"We're not really judging the ideas themselves," says Kelley on Ideo's methods. "But the fluency—the speed of coming up with ideas, and flexibility, diversity of your ideas. I never remember who came up with the specific ideas, but I know every time who made the biggest contribution. The more ideas you give out, the more stature you get in the community."

The question of whether or not to reward bad ideas is complicated. Rather than grapple with whether or not there is such thing as a good idea, ask yourself: What are you measuring and celebrating? Do you show you care about innovation? Is every possible idea heard? "The spirit of that comment is that everyone contributes, everyone gives ideas," says Klebahn. "In a successful brainstorm, you create a lot of energy and have no clue whose idea is whose anymore. And if you come up with terrible ideas but everyone is working together, that's a great outcome."

Maybe there is such a thing as bad ideas. But in innovation, there's no such things as a bad contribution.