Creativity and criticism are business linchpins.

• Position: Innovation

In the 1960s and 1970s, few workplaces could boast of such brilliant engineers as Xerox's Palo Alto Research Company (PARC). Among their inventions were the first true personal computer and the world's first laser printer. Yet, few of their ideas ever earned much money for Xerox. The problem was not a lack of creativity, posits Jonathan Bendor, professor of political economics and organizations at Stanford (Calif.) Graduate School of Business. Instead, what the Xerox PARC engineers really needed was something their managers should have dispensed more freely: constructive criticism.

Bendor calls Xerox PARC "an example of where the technical people, the idea generation people, were not being pushed hard enough." He maintains it would have been far better if someone had told those engineers, "You guys are brilliant and you're coming up with really neat ideas, but where's the market value?"

Many people believe that criticism and creativity are incompatible in the workplace but, as Bendor sees it, they are like the Chinese principles of yin and yang: two complementary forces that interact to form a greater whole. "I think not only can they live together, they have to live together."

If a company has "a wild and crazy R&D unit and no scrutiny;' for instance, managers and executives will receive plenty of ideas, but they also run the risk of accepting some very bad ones. On the other hand, if it is a tough-minded firm, "with lots of hurdles that a new project has to get over," they may avoid adopting bad ideas, but stifle innovation. 'The really hard problem that entrepreneurs face," Bendor posits, "is how to reduce both types of errors to acceptable levels."

One way to give employees useful feedback is through a formal rubric, or scoring system, where their ideas are graded on various dimensions, such as technical merit and market potential. Unlike a...