Adam Bryant conducts interviews of senior-level executives that appear in his “Corner Office” column each week in the SundayBusiness section of The New York Times. Here are a few insights provided during an interview of Andrew M. Thompson, co-founder and C.E.O. of Proteus, a biomedical company, says people shouldn’t try to concoct motivations for another’s behavior. “It’s like in tennis or volleyball, and you have to stay on your side of the net,” he says.

To read the complete interview as well as Bryant’s interviews of other executives, please click here.

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Speak Frankly, but Don’t Go ‘Over the Net’

Bryant: Can you talk about how to create an innovative culture?

Thompson: I’ve been an entrepreneur for 22 years in Silicon Valley, so that essentially creates a life that’s defined by doing things that are innovative and different. When you build a company or organization that’s going to take on those kinds of challenges, I think there are two things that are really important.

One is that you reward innovative and new things in ways that are very obvious and are very visible — it’s the culture of what you talk about, what you celebrate, what you reward, what you make visible.  For example, in this company, which is very heavily driven by intellectual property, if you file a patent or have your name on a patent, we give you a little foam brain.

But then, more important, right in our front lobby, there are shelves of big glass jars and everyone’s name in the company is on one of them — they’re like an apothecary jar.  And that’s where your brains go.  And so we have this huge wall that’s full of brains.

There’s no money in it.  We don’t pay people to file patents because we’re an innovative company.  That’s part of your job. But we recognize it and we make it extremely visible.  Everyone who walks in the front door just looks and says “wow.” That’s a very specific and extremely powerful way that we promote and reward innovation.

But there’s another thing that I think is probably a little less obvious: in the context of being an innovative company, it’s really important that you don’t penalize failure. In an innovative company, and particularly for a start-up company, you have to take risk. So you have to have a very strong bias to action over analytics, and for learning from mistakes and moving forward.

That’s very much what I call a leadership culture as opposed to a management culture, and it’s very counterintuitive to many people who come from large organizations where failure is absolutely clobbered.   I want to be clear about this:   It’s not that you reward failure.  You don’t penalize it.  What you focus on much more is risk-taking and a bias to action.  So the real sin in a small company is not making a mistake, it’s not moving.  That doesn’t always mean you move in the right direction.  But if you discover you’re moving in the wrong direction, you change direction.  It’s fairly easy to see and to reward people who have those instincts.

Bryant: Tell me more about that.

Thompson: In our company, at the senior team level, we talk about everybody in the company twice a year in a very structured way, where we spend several hours identifying people who we think are our golden seed.  These are people who have very strong leadership instincts, who understand how to move the ball forward. They know how to take risks, and how to either build on work that’s successful, or they are able to say that something doesn’t work, and let’s move on, let’s change that. And those people we try to promote quickly.

Bryant: How do you reinforce this in the culture of your company more broadly?

Thompson: If we have something we want to celebrate or talk about — let’s say we promote someone or want to recognize someone, for example — we’ll talk about it in a meeting. A big part of building a culture is around stories, right?  So the stories have to be real, and they have to be vivid. If you’ve got someone who’s an effective risk taker, you make that very clear and you tell the story. You want these things to become legends.

Bryant: What are some other things you do?

Thompson: Culture in our company is a really big deal, and we have a values system built around quality, teamwork and leadership.  One of the activities around that cultural framework is the idea that employees can recognize each other — groups or teams can recognize or be recognized by other employees for doing things that specifically demonstrate those values.

The way that works is that employees will write a nomination for other employees, and if it’s accepted, which it generally is, then at a company meeting the employees making the nomination will stand up and tell a story about how someone or a team of their colleagues was fantastic and here’s what they did that was of really high quality, or an example of great teamwork or really strong leadership.

The people who are recognized get a quarter-ounce gold coin, with the idea being that you can keep it as a trophy or sell it and have a few extra dollars. And the people who make the nomination get to go out to dinner.  What I like about this is that management doesn’t do this.  People do this for each other.   It really promotes what I’m going to call mutuality.

Bryant: What does that mean?

Thompson: People spend a lot of time in organizations being focused on hierarchy.  The best, strongest and most functional organizations are ones where the horizontal relationships are really powerful and where people trust each other, work with each other, support each other, help each other, hold each other’s hands and move forward together.

Bryant: That has the ring of truth, of course, but how do you make that happen?

Thompson: You have to build a very high level of trust, and a very mutually respectful organization where people work with each other and where employees are recognizing each other — rather than management doing it.

Bryant: What else about culture?

Thompson: We have three volunteer teams that work on different aspects of our culture. I think that maybe a third of the company is involved on a voluntary basis in organizational development.

And it’s working on a number of things. One team works on what they call “One Proteus,” which means making sure that there’s consistency, and there’s group identity, and that we all feel a part of one company, and that there aren’t sort of what I call intersite rivalries.

There’s another group that works on feedback. One challenge we wanted to address is that we wanted to be a company where people could talk to each other honestly and give each other feedback directly rather than letting it fester or going to their boss and saying “I can’t work with Fred” because he’s whatever.  It’s much better to go to Fred and say, “Hey, look, when you do X it makes me feel Y.”   So everyone in the company now has had feedback training.

As the C.E.O., that means that one of the first things that had to happen was that I went with the management group, which is a fairly large group of about 30 or 40 people. You sit in a big circle, and they can all give me feedback. Actually it’s a very positive experience because people have been trained so they know how to give it in a way that’s appropriate and balanced so they can get their message across.  So now everyone does that.  We’re still not that good at it, but we’re learning and we’re trying.

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Adam Bryant, deputy national editor of The New York Times, oversees coverage of education issues, military affairs, law, and works with reporters in many of the Times‘ domestic bureaus. He also conducts interviews with CEOs and other leaders for Corner Office, a weekly feature in the SundayBusiness section and on nytimes.com that he started in March 2009. In his new book, The Corner Office: Indispensable and Unexpected Lessons from CEOs on How to Lead and Succeed, (Times Books), he analyzes the broader lessons that emerge from his interviews with more than 70 leaders. To read an excerpt, please click here. To contact him, please click here.