FORTUNE -- With compensation budgets still suffering a post-recession hangover, and the average U.S. salary hike hovering around 3% a year, compensation strategy has become a hot topic. How do you design a pay plan that motivates people to do their best work? A new study by three Harvard Business School researchers suggests a novel answer: Shortly after you hire new workers, give them a raise.
"Previous research has shown that paying people more than they expect may elicit reciprocity in the form of greater productivity," notes Deepak Malhotra, a Harvard business-administration professor who worked on the study. What he and his colleagues found, however, was that the connection between more pay and extra effort depends on presenting the increase "as a gift -- that is, as something you've chosen to do purely as a nice gesture, with no strings attached."
Malhotra and his team studied 266 people hired by oDesk, a global online network of freelancers, to do a one-time data-entry project for four hours. All of the new hires were people in developing countries, for whom hourly wages of $3 and $4 were higher than what they had been making in previous jobs.
The researchers split the group up into three parts. One group was told they would earn $3 an hour. A second group was initially hired at $3 an hour but, before they started working, they got a surprise: The budget for the project had expanded unexpectedly, they were told, and they would now be paid $4 an hour. The third group was offered $4 an hour from the start and given no increase.
Even though the second and third groups were ultimately paid the same amount, the second group worked harder and produced more -- about 20% more -- than either of the other two. People in the second group also showed the most stamina, maintaining their focus all the way through the assigned task and performing especially well toward the end of the four hours. Interestingly, the more experienced employees in the high-performing group were the most productive of all, apparently because their previous work experience led them to appreciate the rarity of an unexpected raise.
Contrary to conventional wisdom, Malhotra points out that higher pay, in and of itself, didn't boost productivity: People who made $4 an hour from the outset worked no harder than those who were hired at $3 and were then paid $3.
To get the most impact from their pay plans, he adds, companies might consider not only what to pay new hires, but when to pay it.
"The key thing is how you present [the reason for an increase]," he says. Doling out extra money could boost productivity most "if you make it clear that the pay raise is something you're choosing to do just because you can. Our theory is that people will reciprocate. If you do something nice, they'll do something nice back."
There are plenty of good arguments for working remotely. To persuade a skeptical boss, you'll probably need to use more than one.Anne Fisher, contributor - Nov 15, 2013 1:38 PM ET
A recent government report ties Spain's productivity problems to the country's membership in the Central European time zone. And it blames the Germans.Oct 4, 2013 5:00 AM ET
Companies can now do more with less, says a new study, for a surprising reason: The least productive workers stepped up their game.Anne Fisher, contributor - Oct 3, 2013 12:23 PM ET
The answer: yes.
By Laura Vanderkam
FORTUNE -- For a while, working from home was the hip corporate perk. Best Buy got glowing press for its Results Only Work Environment in which corporate employees could work anytime, anywhere. The federal government embraced telecommuting arrangements, in part for the ability to regroup in emergencies, and several studies showed that telecommuting had upsides for performance and retention.
But over the past year, there's been MOREJul 22, 2013 10:37 AM ET
It seems most people would rather come in to an office than work from home, but they wish coworkers would stop wasting their time.Anne Fisher, contributor - Jun 12, 2013 12:23 PM ET
Eight out of ten employees now gulp a quick lunch at their desks, says a new survey. But not taking a breather during the day, even for just a few minutes, is a recipe for burnout.
FORTUNE -- Lunching al desko again today? You've got lots of company. Only 21% of people now regularly leave their workstations for a midday meal, according to a poll of 1,023 U.S. employees by talent MOREAnne Fisher, contributor - Nov 8, 2012 10:30 AM ET
Distractions abound in summer, but there are ways to help people stay focused on their jobs. One thing that doesn't work, one expert says: "Fake fun." By Anne FisherAnne Fisher, contributor - Aug 16, 2012 1:04 PM ET
Rudeness, trash talk, and general incivility are on the rise in workplaces, and that's bad for business. But can you do anything about it? By Anne FisherAnne Fisher, contributor - Jun 7, 2012 12:12 PM ET
Plenty of people believe that doing several things at once makes them more productive. In fact, the opposite is true. By Anne FisherJan 6, 2012 11:11 AM ET
|Obama wants to expand overtime pay|
|NJ agrees to ban Tesla direct sales|
|Inside the underground sex economy|
|Tesla lashes out at Chris Christie|
|Plug the financial leaks, now!|