Feature Article - April/May 2020

Hit the Spot

The Impact of Just-in-Time Rewards

By Joe Bush

The concept and practice of spot rewards, sometimes called "just in time" awards, are fascinating in several ways.

The compensation tactic sparks discussion of pay inequality; conscious and subconscious bias; the value of training those with spot-award discretion; and of monitoring reward targets, reasons and appropriate amounts.

The use of a system of continuous pay throughout a year, in addition to a salary, is a response to changing work structures and competition for talent, according to a 2018 article by Gabby Burlacu and Lauren Bidwell, researchers with human capital management firm SAP SuccessFactors.

Burlacu and Bidwell write that because employees have more access to compensation information and thus inequality evidence, and because today's workforce and work structures have changed, there is increasing demand for non-traditional compensation methods.

According to their research, while spot awards can be a solution to these factors, they can also exacerbate inequity and heighten frustration among employees through bias from managers who have spot award authority.

"Unconscious bias influences what managers notice, how they evaluate performance and how they make other key decisions that affect employees' careers," the pair wrote. "Research has shown that similarity between supervisors and subordinates can result in more favorable outcomes, including hiring likelihood, performance evaluations and job advancement."

For instance, the article cites a meta-analysis of the effects of race in performance ratings that revealed both black and white people gave much higher ratings to members of their own race, and that this bias was more likely to happen in environments with a small percentage of black people in the workforce.

Bias can be non-racial as well, they said. In a case study of professional service firms, a majority of the 120 participating evaluators described "fit"—similarity in leisure activities, personal experiences and self-presentation styles—as a top-three standard used to judge job candidates.

The authors suggest that to help avoid bias issues, incentive programs like spot awards should be tracked and analyzed for inequity factors just as salary and total compensation packages are. They also suggest:

  • Be sure that managers have training to recognize behavior that is spot-award-worthy. Having set policies on awardable work and levels of awards based on that work would cut down on gut feelings and basing amounts of rewards on how much is left in a manager's spot awards budget, for example.
  • Communicate reasons for spot awards to the winners and share the news department- or company-wide just as you would with regular incentives. Especially in a company that is just beginning to use spot awards, it's important to relay just what will merit the new awards. Communicating the amount of the awards to anyone but the winner is not necessary.
  • Be alert for award distribution patterns at times of high manager work volume and stress. "Biased decision-making is most likely to occur when managers are tired or overwhelmed," they wrote. "When we are drained mentally, we are more likely to use 'heuristics,' or cognitive shortcuts, when making decisions. This suggests that a manager might be more likely to reward an employee who has received an award in the past than an employee who has never received an award before, potentially further perpetuating inequitable distribution."
  • Regularly review spot awards just as with any other compensation, in the pursuit of pay equality. Spot awards can be monitored and measured for reasons, frequency, amounts and demographics.

Chris Dornfeld, COO at Maritz Motivation, said that every program should be looked at as an experiment to measure impact and continually improve.

"Measuring many data points on the program might feel a little tedious, but the ability to understand the value of the program enables everyone to feel good about investing in these types of programs," he said. "Good measurements will also help demonstrate where programs are working and how they can be improved.

Because employees have more access to compensation information and thus inequality evidence, and because today's workforce and work structures have changed, there is increasing demand for non-traditional compensation methods.

"Are the right behaviors being reinforced and celebrated? Is the program being administered in a fair way? What is the return on investment? All of these questions can easily be answered with a well-designed program."

Eliminating bias is crucial for any incentive program, but especially for one with power delegated to so many for spontaneous action, said David Gould, CEO of Corporate Rewards. One of the moves to achieve this is to have job descriptions and key performance indicators (KPI) documented and tweaked on a regular basis, Gould said.