GMJ: Does every business have a creative component? And how can you evaluate creativity?

@Dr. Florida: Every single human activity requires creativity, and anyone who tells you differently doesn't get it. Whether it's farming, the production of automobiles, or hair cutting -- every job role has a creative component, and every person is creative. But it can be hard to evaluate creativity. What tends to happen is that companies give the toughest problems to the best people, but then they can't evaluate who's best because the best people -- the most productive people, the brightest people -- have the toughest problems to solve. That makes it hard to compare because people are working on different kinds of problems. But people also have different abilities, people have different skill sets, and people have different capabilities. Everyone needs the opportunity to contribute their creativity. The organizations that will win over time in this Darwinian competition will be those that consistently and continuously harness talent, creativity, knowledge, and ability everywhere.

GMJ: So how should managers cultivate creativity in their employees?

Florida: Make sure that each employee has the opportunity to contribute. Make sure that every worker feels challenged and motivated. Make sure that your creative people have time to apply themselves creatively and are not putting out silly and counterproductive fires all day. Remember that people really want the respect of their peers; peer recognition and the power of the team really work. So make sure that workers can gain peer respect, and don't be afraid to use peer pressure to hold employees accountable for what they're doing. I mean, it's just common sense. But don't think that you can evaluate creativity by a time clock. Any manager who believes that productivity can be measured by the number of hours employees work should immediately be moved to another job. Creative people want the freedom to work on their own terms and on their own time. They want to be responsible. That doesn't mean there's no accountability, but the accountability doesn't come from sitting at a desk counting time. Instead, the accountability is: "Do you deliver? Do you meet your performance measurements? Do you produce quality work in a timely way? Do you contribute?"

GMJ: What value does creativity add to an organization?

Florida: The real source of value in a company is increasingly the creative energy of its workforce. The great lesson of the 1980s, which Toyota taught the world, was that we could increase efficiency and quality by getting more and more workers involved. Toyota's management system harnesses shop floor workers' intelligence to gain efficiencies through continuous improvement. But I think that those lessons have now been learned. Being a high-quality and efficient producer of goods and services isn't enough -- organizations really need to harness the creative energy of their workforce. I think we've gone down the wrong road of trying to manage creative workers. We've tried to apply a lot of industrial management techniques, which don't work, and we have to break nearly entirely with that.

GMJ: How do creative workers interact? Is there a team mentality for creativity?

Florida: There's another component to creative capital. The value of the organization isn't just embedded in individuals' heads; it also exists in the relationships between people. It exists in the relationships between software developers and engineers, for example, but it also exists between the user and the representative of the company. Companies should limit turnover not just because replacing workers costs a ridiculously high amount of money, but also because it breaks up those long-term relationships. The SAS Institute and other incredibly creative companies constantly monitor and learn from their environment. They see users and customers not only as the source of money, but as the source of key relationships, and SAS has a 98% customer retention rate. So if a customer works with the same salesperson, and the salesperson works with the same sales engineer, and the sales engineer can call someone on the development team that he's known for years, they build up an accumulated stock of knowledge and interaction. This is real creative capital, but it's stored in the relationships that exist among the employees and customers of organizations -- and it's invaluable to both inventing new products and solving problems.

GMJ: What do creative workers really want? If the creative class earns half the salaries, is it money?

Florida: Virtually all the literature on the psychology of creativity and of creative people suggests that creative people simply do not respond to financial incentives. The grave lesson that we learned from the Internet bubble and dot-com bust is that attempts to use stock options and financial incentives to motivate creative people is just fraught with problems. At the height of the Internet bubble, Peter Drucker said that you cannot bribe the knowledge workers on whom these industries depend -- you need to treat them as if they are volunteers whose commitment to your organization is contingent. Creative people respond to intrinsic rewards; they are trying to enact their personalities in their creative work, and it's a mistake to think they're motivated by financial incentives. When I wrote The Rise of the Creative Class, we looked in detail at the Information Week surveys of 20,000 workers over two years. When people were asked what motivates them in their work, salary ranked fourth. Things like tough challenges and having flexibility and stability ranked higher. Bonuses and stock options weren't even in the top 25. That was true before and after the dot-com crash.

GMJ: Then what's the single greatest motivator for creative workers?

Florida: Creative people respond to challenge, but that challenge is different for different people. A software developer wants to work with other great developers and with really cool technology on cutting-edge projects. A salesperson wants to make quota, but creative salespeople are not necessarily motivated just by the money -- doing better than other salespeople motivates them. Landscapers want to make really elegant and beautiful gardens. Each of these creative people has an intrinsic reward structure, but each is different. Organizations must keep them challenged, then keep hassles away from them. This is just so important. Most companies say it's the worker's responsibility to deal with all this stuff. But what do you want them to focus on, the annoying paperwork or the creative work you hired them to do?

GMJ: It sounds like managing creative people takes a very creative manager.

Florida: The real art is understanding individual psychology. A concern for structure and organizational charts and programs and policies is far less important than getting the individual psychology right. The structure will take care of itself; the real challenge of the creative age is figuring out how to deal with all of these different intrinsic needs and reward structures while consistently motivating people with the rewards that matter to them. The manager's task is to create a structure that enables creativity to occur. This requires a complete and total break with the industrial organization structure, the hierarchical model.

GMJ: You're talking about rebuilding most companies' management structures, their entire psychology, from the ground up. How's that supposed to work?

Florida: What's going to happen is the Darwinian process. This is exactly the way Toyota beat General Motors and Ford. Sooner or later, companies in other fields will figure this out, and they will move to the head of the pack; the rest will be swallowed by the competition. I think you already see this happening. For managers, CEOs, or political leaders, the challenge is "How do I motivate? I see that the old, top-down, hierarchical, follow-me, my-way-or-the-highway style of leadership doesn't cut it anymore." The leaders who will be successful today, in business or politics, will be those who can stimulate and harness the creative capabilities of the greatest number of people. I know it's not easy. I think a lot of people got used to working in large hierarchical bureaucracies, but they know the world is changing. They react against it because they don't see how they fit in that environment. Management has to make it possible for those folks to see how they fit, how their role fits. One of the great things I learned in my studies -- not just of creative organizations, but also of high-performing, high-quality business management practices -- is that the biggest impediment to real motivation is middle management. The biggest task for top management is to say, "This is the right thing to do." They must mitigate the fear and reaction of the middle managers.

GMJ: Come clean. Are creative workers job-hoppers?

Florida: Well, it's important to realize that companies are no longer hiring an employee for life. I criticize those who complain about "those big, bad companies downsizing and rightsizing, and letting people go." In one of the most important studies of downsizing and rightsizing that has ever been done, Stephen Barley and his colleagues at Stanford found that people didn't leave because they were fired. People were much more likely to leave because they wanted to take more control of their lives. So the whole idea of the downsizing, rightsizing, oppressive corporation is a myth. Managers must realize that their employees increasingly see themselves as free agents; they want security, they want a great job, and they want challenge, but they also want the opportunity to move around. So great management means harnessing the creativity and productivity of employees for the period of time you have them. Develop a great relationship with your employees, and try to retain them for as long as you can, but understand that an inward and outward flow of people is a reality.

GMJ: So what's the biggest challenge for creative workers, and by extension, their companies?

Florida: It's the always-on, 24/7, stressed-out, burned-out worker. The great addiction of our time is e-mail. It's the classic psychological need for immediate response. They call Blackberries "crackberries" for a reason. In the United States, we believe that this attitude gives us a productivity advantage. Bubkus! It doesn't give us a productivity advantage. It gives us people who have been hollowed out. Creative people need downtime, need moments to recharge. Being creative is not a sprint, it's a marathon. Again, the best example is the Toyota method: At Toyota, they aren't necessarily the first to invent something, but they excel at developing systems that institutionalize best practices in a stable and sustainable way. -- Interviewed by Jennifer Robison

GMJ: Does every business have a creative component? And how can you evaluate creativity?

Dr. Florida: Every single human activity requires creativity, and anyone who tells you differently doesn't get it. Whether it's farming, the production of automobiles, or hair cutting -- every job role has a creative component, and every person is creative. But it can be hard to evaluate creativity. What tends to happen is that companies give the toughest problems to the best people, but then they can't evaluate who's best because the best people -- the most productive people, the brightest people -- have the toughest problems to solve. That makes it hard to compare because people are working on different kinds of problems. But people also have different abilities, people have different skill sets, and people have different capabilities. Everyone needs the opportunity to contribute their creativity. The organizations that will win over time in this Darwinian competition will be those that consistently and continuously harness talent, creativity, knowledge, and ability everywhere.

GMJ: So how should managers cultivate creativity in their employees?

Florida: Make sure that each employee has the opportunity to contribute. Make sure that every worker feels challenged and motivated. Make sure that your creative people have time to apply themselves creatively and are not putting out silly and counterproductive fires all day. Remember that people really want the respect of their peers; peer recognition and the power of the team really work. So make sure that workers can gain peer respect, and don't be afraid to use peer pressure to hold employees accountable for what they're doing. I mean, it's just common sense. But don't think that you can evaluate creativity by a time clock. Any manager who believes that productivity can be measured by the number of hours employees work should immediately be moved to another job. Creative people want the freedom to work on their own terms and on their own time. They want to be responsible. That doesn't mean there's no accountability, but the accountability doesn't come from sitting at a desk counting time. Instead, the accountability is: "Do you deliver? Do you meet your performance measurements? Do you produce quality work in a timely way? Do you contribute?"

GMJ: What value does creativity add to an organization?

Florida: The real source of value in a company is increasingly the creative energy of its workforce. The great lesson of the 1980s, which Toyota taught the world, was that we could increase efficiency and quality by getting more and more workers involved. Toyota's management system harnesses shop floor workers' intelligence to gain efficiencies through continuous improvement. But I think that those lessons have now been learned. Being a high-quality and efficient producer of goods and services isn't enough -- organizations really need to harness the creative energy of their workforce. I think we've gone down the wrong road of trying to manage creative workers. We've tried to apply a lot of industrial management techniques, which don't work, and we have to break nearly entirely with that.

GMJ: How do creative workers interact? Is there a team mentality for creativity?

Florida: There's another component to creative capital. The value of the organization isn't just embedded in individuals' heads; it also exists in the relationships between people. It exists in the relationships between software developers and engineers, for example, but it also exists between the user and the representative of the company. Companies should limit turnover not just because replacing workers costs a ridiculously high amount of money, but also because it breaks up those long-term relationships. The SAS Institute and other incredibly creative companies constantly monitor and learn from their environment. They see users and customers not only as the source of money, but as the source of key relationships, and SAS has a 98% customer retention rate. So if a customer works with the same salesperson, and the salesperson works with the same sales engineer, and the sales engineer can call someone on the development team that he's known for years, they build up an accumulated stock of knowledge and interaction. This is real creative capital, but it's stored in the relationships that exist among the employees and customers of organizations -- and it's invaluable to both inventing new products and solving problems.

GMJ: What do creative workers really want? If the creative class earns half the salaries, is it money?

Florida: Virtually all the literature on the psychology of creativity and of creative people suggests that creative people simply do not respond to financial incentives. The grave lesson that we learned from the Internet bubble and dot-com bust is that attempts to use stock options and financial incentives to motivate creative people is just fraught with problems. At the height of the Internet bubble, Peter Drucker said that you cannot bribe the knowledge workers on whom these industries depend -- you need to treat them as if they are volunteers whose commitment to your organization is contingent. Creative people respond to intrinsic rewards; they are trying to enact their personalities in their creative work, and it's a mistake to think they're motivated by financial incentives. When I wrote The Rise of the Creative Class, we looked in detail at the Information Week surveys of 20,000 workers over two years. When people were asked what motivates them in their work, salary ranked fourth. Things like tough challenges and having flexibility and stability ranked higher. Bonuses and stock options weren't even in the top 25. That was true before and after the dot-com crash.

GMJ: Then what's the single greatest motivator for creative workers?

Florida: Creative people respond to challenge, but that challenge is different for different people. A software developer wants to work with other great developers and with really cool technology on cutting-edge projects. A salesperson wants to make quota, but creative salespeople are not necessarily motivated just by the money -- doing better than other salespeople motivates them. Landscapers want to make really elegant and beautiful gardens. Each of these creative people has an intrinsic reward structure, but each is different. Organizations must keep them challenged, then keep hassles away from them. This is just so important. Most companies say it's the worker's responsibility to deal with all this stuff. But what do you want them to focus on, the annoying paperwork or the creative work you hired them to do?

GMJ: It sounds like managing creative people takes a very creative manager.

Florida: The real art is understanding individual psychology. A concern for structure and organizational charts and programs and policies is far less important than getting the individual psychology right. The structure will take care of itself; the real challenge of the creative age is figuring out how to deal with all of these different intrinsic needs and reward structures while consistently motivating people with the rewards that matter to them. The manager's task is to create a structure that enables creativity to occur. This requires a complete and total break with the industrial organization structure, the hierarchical model.

GMJ: You're talking about rebuilding most companies' management structures, their entire psychology, from the ground up. How's that supposed to work?

Florida: What's going to happen is the Darwinian process. This is exactly the way Toyota beat General Motors and Ford. Sooner or later, companies in other fields will figure this out, and they will move to the head of the pack; the rest will be swallowed by the competition. I think you already see this happening. For managers, CEOs, or political leaders, the challenge is "How do I motivate? I see that the old, top-down, hierarchical, follow-me, my-way-or-the-highway style of leadership doesn't cut it anymore." The leaders who will be successful today, in business or politics, will be those who can stimulate and harness the creative capabilities of the greatest number of people. I know it's not easy. I think a lot of people got used to working in large hierarchical bureaucracies, but they know the world is changing. They react against it because they don't see how they fit in that environment. Management has to make it possible for those folks to see how they fit, how their role fits. One of the great things I learned in my studies -- not just of creative organizations, but also of high-performing, high-quality business management practices -- is that the biggest impediment to real motivation is middle management. The biggest task for top management is to say, "This is the right thing to do." They must mitigate the fear and reaction of the middle managers.

GMJ: Come clean. Are creative workers job-hoppers?

Florida: Well, it's important to realize that companies are no longer hiring an employee for life. I criticize those who complain about "those big, bad companies downsizing and rightsizing, and letting people go." In one of the most important studies of downsizing and rightsizing that has ever been done, Stephen Barley and his colleagues at Stanford found that people didn't leave because they were fired. People were much more likely to leave because they wanted to take more control of their lives. So the whole idea of the downsizing, rightsizing, oppressive corporation is a myth. Managers must realize that their employees increasingly see themselves as free agents; they want security, they want a great job, and they want challenge, but they also want the opportunity to move around. So great management means harnessing the creativity and productivity of employees for the period of time you have them. Develop a great relationship with your employees, and try to retain them for as long as you can, but understand that an inward and outward flow of people is a reality.

GMJ: So what's the biggest challenge for creative workers, and by extension, their companies?

Florida: It's the always-on, 24/7, stressed-out, burned-out worker. The great addiction of our time is e-mail. It's the classic psychological need for immediate response. They call Blackberries "crackberries" for a reason. In the United States, we believe that this attitude gives us a productivity advantage. Bubkus! It doesn't give us a productivity advantage. It gives us people who have been hollowed out. Creative people need downtime, need moments to recharge. Being creative is not a sprint, it's a marathon. Again, the best example is the Toyota method: At Toyota, they aren't necessarily the first to invent something, but they excel at developing systems that institutionalize best practices in a stable and sustainable way.

-- Interviewed by Jennifer Robison GMJ: Does every business have a creative component? And how can you evaluate creativity?

@Dr. Florida: Every single human activity requires creativity, and anyone who tells you differently doesn't get it. Whether it's farming, the production of automobiles, or hair cutting -- every job role has a creative component, and every person is creative. But it can be hard to evaluate creativity. What tends to happen is that companies give the toughest problems to the best people, but then they can't evaluate who's best because the best people -- the most productive people, the brightest people -- have the toughest problems to solve. That makes it hard to compare because people are working on different kinds of problems. But people also have different abilities, people have different skill sets, and people have different capabilities. Everyone needs the opportunity to contribute their creativity. The organizations that will win over time in this Darwinian competition will be those that consistently and continuously harness talent, creativity, knowledge, and ability everywhere.

GMJ: So how should managers cultivate creativity in their employees?

Florida: Make sure that each employee has the opportunity to contribute. Make sure that every worker feels challenged and motivated. Make sure that your creative people have time to apply themselves creatively and are not putting out silly and counterproductive fires all day. Remember that people really want the respect of their peers; peer recognition and the power of the team really work. So make sure that workers can gain peer respect, and don't be afraid to use peer pressure to hold employees accountable for what they're doing. I mean, it's just common sense. But don't think that you can evaluate creativity by a time clock. Any manager who believes that productivity can be measured by the number of hours employees work should immediately be moved to another job. Creative people want the freedom to work on their own terms and on their own time. They want to be responsible. That doesn't mean there's no accountability, but the accountability doesn't come from sitting at a desk counting time. Instead, the accountability is: "Do you deliver? Do you meet your performance measurements? Do you produce quality work in a timely way? Do you contribute?"

GMJ: What value does creativity add to an organization?

Florida: The real source of value in a company is increasingly the creative energy of its workforce. The great lesson of the 1980s, which Toyota taught the world, was that we could increase efficiency and quality by getting more and more workers involved. Toyota's management system harnesses shop floor workers' intelligence to gain efficiencies through continuous improvement. But I think that those lessons have now been learned. Being a high-quality and efficient producer of goods and services isn't enough -- organizations really need to harness the creative energy of their workforce. I think we've gone down the wrong road of trying to manage creative workers. We've tried to apply a lot of industrial management techniques, which don't work, and we have to break nearly entirely with that.

GMJ: How do creative workers interact? Is there a team mentality for creativity?

Florida: There's another component to creative capital. The value of the organization isn't just embedded in individuals' heads; it also exists in the relationships between people. It exists in the relationships between software developers and engineers, for example, but it also exists between the user and the representative of the company. Companies should limit turnover not just because replacing workers costs a ridiculously high amount of money, but also because it breaks up those long-term relationships. The SAS Institute and other incredibly creative companies constantly monitor and learn from their environment. They see users and customers not only as the source of money, but as the source of key relationships, and SAS has a 98% customer retention rate. So if a customer works with the same salesperson, and the salesperson works with the same sales engineer, and the sales engineer can call someone on the development team that he's known for years, they build up an accumulated stock of knowledge and interaction. This is real creative capital, but it's stored in the relationships that exist among the employees and customers of organizations -- and it's invaluable to both inventing new products and solving problems.

GMJ: What do creative workers really want? If the creative class earns half the salaries, is it money?

Florida: Virtually all the literature on the psychology of creativity and of creative people suggests that creative people simply do not respond to financial incentives. The grave lesson that we learned from the Internet bubble and dot-com bust is that attempts to use stock options and financial incentives to motivate creative people is just fraught with problems. At the height of the Internet bubble, Peter Drucker said that you cannot bribe the knowledge workers on whom these industries depend -- you need to treat them as if they are volunteers whose commitment to your organization is contingent. Creative people respond to intrinsic rewards; they are trying to enact their personalities in their creative work, and it's a mistake to think they're motivated by financial incentives. When I wrote The Rise of the Creative Class, we looked in detail at the Information Week surveys of 20,000 workers over two years. When people were asked what motivates them in their work, salary ranked fourth. Things like tough challenges and having flexibility and stability ranked higher. Bonuses and stock options weren't even in the top 25. That was true before and after the dot-com crash.

GMJ: Then what's the single greatest motivator for creative workers?

Florida: Creative people respond to challenge, but that challenge is different for different people. A software developer wants to work with other great developers and with really cool technology on cutting-edge projects. A salesperson wants to make quota, but creative salespeople are not necessarily motivated just by the money -- doing better than other salespeople motivates them. Landscapers want to make really elegant and beautiful gardens. Each of these creative people has an intrinsic reward structure, but each is different. Organizations must keep them challenged, then keep hassles away from them. This is just so important. Most companies say it's the worker's responsibility to deal with all this stuff. But what do you want them to focus on, the annoying paperwork or the creative work you hired them to do?

GMJ: It sounds like managing creative people takes a very creative manager.

Florida: The real art is understanding individual psychology. A concern for structure and organizational charts and programs and policies is far less important than getting the individual psychology right. The structure will take care of itself; the real challenge of the creative age is figuring out how to deal with all of these different intrinsic needs and reward structures while consistently motivating people with the rewards that matter to them. The manager's task is to create a structure that enables creativity to occur. This requires a complete and total break with the industrial organization structure, the hierarchical model.

GMJ: You're talking about rebuilding most companies' management structures, their entire psychology, from the ground up. How's that supposed to work?

Florida: What's going to happen is the Darwinian process. This is exactly the way Toyota beat General Motors and Ford. Sooner or later, companies in other fields will figure this out, and they will move to the head of the pack; the rest will be swallowed by the competition. I think you already see this happening. For managers, CEOs, or political leaders, the challenge is "How do I motivate? I see that the old, top-down, hierarchical, follow-me, my-way-or-the-highway style of leadership doesn't cut it anymore." The leaders who will be successful today, in business or politics, will be those who can stimulate and harness the creative capabilities of the greatest number of people. I know it's not easy. I think a lot of people got used to working in large hierarchical bureaucracies, but they know the world is changing. They react against it because they don't see how they fit in that environment. Management has to make it possible for those folks to see how they fit, how their role fits. One of the great things I learned in my studies -- not just of creative organizations, but also of high-performing, high-quality business management practices -- is that the biggest impediment to real motivation is middle management. The biggest task for top management is to say, "This is the right thing to do." They must mitigate the fear and reaction of the middle managers.

GMJ: Come clean. Are creative workers job-hoppers?

Florida: Well, it's important to realize that companies are no longer hiring an employee for life. I criticize those who complain about "those big, bad companies downsizing and rightsizing, and letting people go." In one of the most important studies of downsizing and rightsizing that has ever been done, Stephen Barley and his colleagues at Stanford found that people didn't leave because they were fired. People were much more likely to leave because they wanted to take more control of their lives. So the whole idea of the downsizing, rightsizing, oppressive corporation is a myth. Managers must realize that their employees increasingly see themselves as free agents; they want security, they want a great job, and they want challenge, but they also want the opportunity to move around. So great management means harnessing the creativity and productivity of employees for the period of time you have them. Develop a great relationship with your employees, and try to retain them for as long as you can, but understand that an inward and outward flow of people is a reality.

GMJ: So what's the biggest challenge for creative workers, and by extension, their companies?

Florida: It's the always-on, 24/7, stressed-out, burned-out worker. The great addiction of our time is e-mail. It's the classic psychological need for immediate response. They call Blackberries "crackberries" for a reason. In the United States, we believe that this attitude gives us a productivity advantage. Bubkus! It doesn't give us a productivity advantage. It gives us people who have been hollowed out. Creative people need downtime, need moments to recharge. Being creative is not a sprint, it's a marathon. Again, the best example is the Toyota method: At Toyota, they aren't necessarily the first to invent something, but they excel at developing systems that institutionalize best practices in a stable and sustainable way. -- Interviewed by Jennifer Robison

GMJ: Does every business have a creative component? And how can you evaluate creativity?

Dr. Florida: Every single human activity requires creativity, and anyone who tells you differently doesn't get it. Whether it's farming, the production of automobiles, or hair cutting -- every job role has a creative component, and every person is creative. But it can be hard to evaluate creativity. What tends to happen is that companies give the toughest problems to the best people, but then they can't evaluate who's best because the best people -- the most productive people, the brightest people -- have the toughest problems to solve. That makes it hard to compare because people are working on different kinds of problems. But people also have different abilities, people have different skill sets, and people have different capabilities. Everyone needs the opportunity to contribute their creativity. The organizations that will win over time in this Darwinian competition will be those that consistently and continuously harness talent, creativity, knowledge, and ability everywhere.

GMJ: So how should managers cultivate creativity in their employees?

Florida: Make sure that each employee has the opportunity to contribute. Make sure that every worker feels challenged and motivated. Make sure that your creative people have time to apply themselves creatively and are not putting out silly and counterproductive fires all day. Remember that people really want the respect of their peers; peer recognition and the power of the team really work. So make sure that workers can gain peer respect, and don't be afraid to use peer pressure to hold employees accountable for what they're doing. I mean, it's just common sense. But don't think that you can evaluate creativity by a time clock. Any manager who believes that productivity can be measured by the number of hours employees work should immediately be moved to another job. Creative people want the freedom to work on their own terms and on their own time. They want to be responsible. That doesn't mean there's no accountability, but the accountability doesn't come from sitting at a desk counting time. Instead, the accountability is: "Do you deliver? Do you meet your performance measurements? Do you produce quality work in a timely way? Do you contribute?"

GMJ: What value does creativity add to an organization?

Florida: The real source of value in a company is increasingly the creative energy of its workforce. The great lesson of the 1980s, which Toyota taught the world, was that we could increase efficiency and quality by getting more and more workers involved. Toyota's management system harnesses shop floor workers' intelligence to gain efficiencies through continuous improvement. But I think that those lessons have now been learned. Being a high-quality and efficient producer of goods and services isn't enough -- organizations really need to harness the creative energy of their workforce. I think we've gone down the wrong road of trying to manage creative workers. We've tried to apply a lot of industrial management techniques, which don't work, and we have to break nearly entirely with that.

GMJ: How do creative workers interact? Is there a team mentality for creativity?

Florida: There's another component to creative capital. The value of the organization isn't just embedded in individuals' heads; it also exists in the relationships between people. It exists in the relationships between software developers and engineers, for example, but it also exists between the user and the representative of the company. Companies should limit turnover not just because replacing workers costs a ridiculously high amount of money, but also because it breaks up those long-term relationships. The SAS Institute and other incredibly creative companies constantly monitor and learn from their environment. They see users and customers not only as the source of money, but as the source of key relationships, and SAS has a 98% customer retention rate. So if a customer works with the same salesperson, and the salesperson works with the same sales engineer, and the sales engineer can call someone on the development team that he's known for years, they build up an accumulated stock of knowledge and interaction. This is real creative capital, but it's stored in the relationships that exist among the employees and customers of organizations -- and it's invaluable to both inventing new products and solving problems.

GMJ: What do creative workers really want? If the creative class earns half the salaries, is it money?

Florida: Virtually all the literature on the psychology of creativity and of creative people suggests that creative people simply do not respond to financial incentives. The grave lesson that we learned from the Internet bubble and dot-com bust is that attempts to use stock options and financial incentives to motivate creative people is just fraught with problems. At the height of the Internet bubble, Peter Drucker said that you cannot bribe the knowledge workers on whom these industries depend -- you need to treat them as if they are volunteers whose commitment to your organization is contingent. Creative people respond to intrinsic rewards; they are trying to enact their personalities in their creative work, and it's a mistake to think they're motivated by financial incentives. When I wrote The Rise of the Creative Class, we looked in detail at the Information Week surveys of 20,000 workers over two years. When people were asked what motivates them in their work, salary ranked fourth. Things like tough challenges and having flexibility and stability ranked higher. Bonuses and stock options weren't even in the top 25. That was true before and after the dot-com crash.

GMJ: Then what's the single greatest motivator for creative workers?

Florida: Creative people respond to challenge, but that challenge is different for different people. A software developer wants to work with other great developers and with really cool technology on cutting-edge projects. A salesperson wants to make quota, but creative salespeople are not necessarily motivated just by the money -- doing better than other salespeople motivates them. Landscapers want to make really elegant and beautiful gardens. Each of these creative people has an intrinsic reward structure, but each is different. Organizations must keep them challenged, then keep hassles away from them. This is just so important. Most companies say it's the worker's responsibility to deal with all this stuff. But what do you want them to focus on, the annoying paperwork or the creative work you hired them to do?

GMJ: It sounds like managing creative people takes a very creative manager.

Florida: The real art is understanding individual psychology. A concern for structure and organizational charts and programs and policies is far less important than getting the individual psychology right. The structure will take care of itself; the real challenge of the creative age is figuring out how to deal with all of these different intrinsic needs and reward structures while consistently motivating people with the rewards that matter to them. The manager's task is to create a structure that enables creativity to occur. This requires a complete and total break with the industrial organization structure, the hierarchical model.

GMJ: You're talking about rebuilding most companies' management structures, their entire psychology, from the ground up. How's that supposed to work?

Florida: What's going to happen is the Darwinian process. This is exactly the way Toyota beat General Motors and Ford. Sooner or later, companies in other fields will figure this out, and they will move to the head of the pack; the rest will be swallowed by the competition. I think you already see this happening. For managers, CEOs, or political leaders, the challenge is "How do I motivate? I see that the old, top-down, hierarchical, follow-me, my-way-or-the-highway style of leadership doesn't cut it anymore." The leaders who will be successful today, in business or politics, will be those who can stimulate and harness the creative capabilities of the greatest number of people. I know it's not easy. I think a lot of people got used to working in large hierarchical bureaucracies, but they know the world is changing. They react against it because they don't see how they fit in that environment. Management has to make it possible for those folks to see how they fit, how their role fits. One of the great things I learned in my studies -- not just of creative organizations, but also of high-performing, high-quality business management practices -- is that the biggest impediment to real motivation is middle management. The biggest task for top management is to say, "This is the right thing to do." They must mitigate the fear and reaction of the middle managers.

GMJ: Come clean. Are creative workers job-hoppers?

Florida: Well, it's important to realize that companies are no longer hiring an employee for life. I criticize those who complain about "those big, bad companies downsizing and rightsizing, and letting people go." In one of the most important studies of downsizing and rightsizing that has ever been done, Stephen Barley and his colleagues at Stanford found that people didn't leave because they were fired. People were much more likely to leave because they wanted to take more control of their lives. So the whole idea of the downsizing, rightsizing, oppressive corporation is a myth. Managers must realize that their employees increasingly see themselves as free agents; they want security, they want a great job, and they want challenge, but they also want the opportunity to move around. So great management means harnessing the creativity and productivity of employees for the period of time you have them. Develop a great relationship with your employees, and try to retain them for as long as you can, but understand that an inward and outward flow of people is a reality.

GMJ: So what's the biggest challenge for creative workers, and by extension, their companies?

Florida: It's the always-on, 24/7, stressed-out, burned-out worker. The great addiction of our time is e-mail. It's the classic psychological need for immediate response. They call Blackberries "crackberries" for a reason. In the United States, we believe that this attitude gives us a productivity advantage. Bubkus! It doesn't give us a productivity advantage. It gives us people who have been hollowed out. Creative people need downtime, need moments to recharge. Being creative is not a sprint, it's a marathon. Again, the best example is the Toyota method: At Toyota, they aren't necessarily the first to invent something, but they excel at developing systems that institutionalize best practices in a stable and sustainable way.

-- Interviewed by Jennifer Robison