Leadership

The Secret to Employee Loyalty: People Love Surprises

A new Harvard Business School study finds employees are much more likely to react positively to unexpected perks than ones they see coming from a mile away. Here's what that means for you.

A new Harvard Business School study finds employees are much more likely to react positively to unexpected rewards than ones they see coming from a mile away. Here’s what that means for you.

If you offer attractive pay, you’ll probably succeed in hiring good employees. But if you reward employees with something unexpected, you’re likely to get more productivity out of them.

The key is to understand you are dealing with human beings who work hard not simply because of financial incentives, but because of a whole host of other factors.

That’s what a recent study by three Harvard Business School researchers found. Using a common work-for-hire platform, the trio paid different types of employees different levels of compensation and determined that the ones who got more than they were expecting did the best. How does that work?

The methodology: The researchers relied on the online freelance platform oDesk, which allows employers to hire contractors at various wage levels. They used it to directly hire workers for data-entry tasks for experimentation purposes, rather than “simply posting a job publicly and waiting for applications,” according to the study’s authors [PDF]. The researchers then paid employees at three different hourly rates—$3, $3 with an unexpected $1 raise, and $4 flat—based on the levels recommended to them by the employees’ profiles.

The results: According to the researchers, the most productive group was the one that received the surprise raise—the contractors in that group had a 20 percent higher productivity rate than those in either of the other groups, according to the study. “Altogether, our results suggest that unexpected gifts (3+1) targeted at those who least expect them can increase productivity—sometimes even in a cost-effective manner—but that such reciprocity is due to the unexpected nature of the gift and not due to the fact that a worker is receiving a higher, above-market wage,” the authors wrote.

The takeaway: The lesson goes beyond the simple test that the researchers undertook. They say it shows that the right strategy can lead to stronger results. In an interview with the Harvard Gazette, researcher Deepak Malhotra suggested that employers should “think carefully not just about what to pay employees, but also how to pay them. The same amount of compensation can be structured in ways that will be more or less appreciated and reciprocated.” Malhotra, a Harvard Business School professor in the Negotiations, Organizations and Markets Unit, also said the study showed the value of nonmonetary gifts in influencing worker productivity. “The key is to understand you are dealing with human beings who work hard not simply because of financial incentives, but because of a whole host of other factors,” he said.

So here’s the question this raises for you: How can employers show they value their employees beyond the paycheck? Let us know your take in the comments.

(iStock/Thinkstock)

Ernie Smith

By Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. MORE

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