Wow. Has it really been 7 months since I last posted? Time flies! Just recently I posted a new blog at The Carrot for my new company ZS Associates about hyperbolic discounting and I thought I would share a few additional thoughts here and link over to it.
Hyperbolic discounting is an idea from from economics research that people value rewards now over bigger rewards later and has some interesting implications when it comes to variable pay. The key issue is timing. The closer the timing of the reward to the behavior the greater the percieved value of the reward. Assuming your compensation plans are in good shape, the problem falls to the administration of the compensation. How long from close of period to payroll is your cycle? Up until very recently I thought two weeks was a good benchmark, but now my thought process has completed changed. One week is as long as it should take and to maximise the value of your variable compensation spend one day should be the goal. The compensation administration cycle time is a large destructor of value. The key issue of timing is one of 6 motivational dimensions that greatly impact how you should be paying people and how the effeciency of the administration is key to getting the most bang for your buck.
1. Availability - right quality and quantity
2. Timeliness - decreasing value v. time
3. Performance Contingency - linkage
4. Durability - how to make it stick, intrinsic can be better than extrinsic – Gamification; achievement, accomplishment, challenge, accountability
5. Equity - sense of fair play
6. Visibility - reporting
I'll be writing more on the model and the other dimensions in the months to come.
Go check out the post and let me know what you think.
Blog Post can be found here:
The Carrot Blog
