Timing matters: Why you should reconsider when, and how, you reward your employees

Employees like to be recognised for their efforts, and as employers, we can often sweat over the “what” of the reward. Should it be a gift or cold hard cash, for example? While the type of reward is important, we often overlook the “when”.

The timing of the reward — whether you pay upfront or at years-end, for example, and whether your employees even know there’s a reward on the table — can significantly affect motivation and performance.

Let’s look at three options.

Three kinds of rewards

1. If/then rewards

   The first is a contingent, if/then reward, where payment is contingent upon performance. If you do ‘x’ then you’ll get ‘y’. The promise is made upfront, the payment or reward is received once (and only if) the promise is fulfilled.

   This is the most common form of reward because there is little risk to the employer.

   However, waiting a period of time — like 12 months for a year-end bonus — is not an effective motivational strategy because the payment on a certain date has very little to do with day-to-day contribution.

   Bonuses paid at the end of a period of time do little to motivate performance in the moment. Just imagine an employee who is feeling a bit flat and slacking off; the promise of a bonus months from now will not pull them out of their funk.

   Worse still, these bonuses can be seen as an entitlement — a fait accompli — a condition of employment, rather than a reward for exceptional effort.

2. Upfront rewards

   Also known as “clawbacks”, upfront rewards are ones where you pay your employees a bonus upfront and they have to reimburse you if performance targets are not met.

   They can work because they are psychologically painful: no one likes having to pay money back, and behavioural research does show people work harder than they would for an if/then reward.

   But the problem is you risk is having very unhappy employees if they miss target. This can result in poor morale and even resignations.

   It also means you have to get the money back, which is not always simple if an employee leaves suddenly or are financially strapped.

   This means that with clawbacks you could end up looking like the bad guy, so I wouldn’t recommend this approach for anything other than small, occasional and simple performance goals, such as: “We’re taking on a two week challenge. Here’s $100 and if you don’t pull it off, you have to pay it back.”

3. “Now that” rewards

   Where if/then rewards make bonuses contingent on performance, “now that” rewards pay a bonus (or provide a gift) after something has happened.

   The difference is “now that” rewards are unexpected rather than entitled, and this creates a sense of reciprocity. Your employee will see your act of rewarding them in an unexpected way and want to work harder for you by way of thanks.

   It also means you can more tightly link the reward with the type of behaviour you want to see, so the employee is more likely to do it again in future. The shorter the time between the action and reward, the better.

   For these reasons, “now that” is the type of reward I recommend most.

Smaller, more frequent increases

A final point about timing: when it comes to pay rises, employee satisfaction has been found to be bolstered by the change to pay more than the level of pay. In other words, getting smaller but more frequent increases in pay has a more positive affect than the equivalent increase communicated and paid as a once-off.

Why? People love progress, and this more regularly reminds them they are advancing.

So when it comes to getting the timing right when rewarding employees, remember:

• “Now that” unexpected rewards are best because they engender reciprocity;
• Smaller, more frequent recognition is best; and
• The closer the reward happens to the employee’s action, the better.