Rule 17: Timing

The Timing Rule:  Make Performance Incentive Payments as Soon as Possible After They are Earned

Do you remember in any detail what you did and how you did it 120 days ago?  60 days?  30 days? 

Therein is the fundamental challenge with waiting too long to pay out to the workforce the incentives they’ve earned:  excessive time lags between performance and reward dissipates any positive behavioral or educational performance improvement benefits that result from the actual reward pay-out. 

If a workforce member earns an incentive that is less than desired, and it is paid 90 days after they did the work to generate their results, they’ll be 60 days too late to change their behaviors to improve their results. 

From an employee performance improvement perspective, it is far more advantageous to pay out incentives as soon after performance happens; and, for most organizations that means bimonthly or at month end.

Some organizations, because of insurmountable technical or process limitations, simply cannot pay out incentives at the end of each month frequency.  In these cases it is recommended to report earned incentives at the earliest/soonest point possible, and distribute actual cumulative payments at quarter end.  Make quarterly incentive bonus check distributions a company-wide “special event”, with personal CEO (or line of business leader) delivery of bonus checks to top earners, special check formats or delivery packaging, award meetings, announcements, or other events. 

For most of the workforce, just knowing how much they’re going to get paid (even if they have to wait one or two months) gives them the behavioral improvement impact desired from performance incentive programs:  “I spent that $500 I earned ten different ways in my mind before I actually even received the money, it was great”!

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>>> Rule 18