Many companies use loyalty incentives promised to be available at a later point in time as a way to provide recognition for their employees and to bind the employees to the company (e.g. a salary increase in future, stock options, another job title connected with more money,…).
In the beginning it seems to be a great gift for the employee, if (s)he stays (survives) until (s)he can really convert it to usable money. Thinking about the psychology behind these incentives, it leads to the same flaws as working with direct money compensation and therewith using extrinsic motivation. It makes the target (money) replace the real meaning of reaching something. Reaching that target becomes the main driver for decisions overcoming healthy and common sense decision-making.

What happens over the waiting period until the incentives are available could look like this


The incentive is promised to be available in 2 years. The employee will be highly motivated in the beginning as (s)he perceives this future incentive as a form of recognition of his/her value. This energy will not last that long as (s)he will very fast realize the game changing part of this extrinsic motivator. 
(S)he exchanged freedom with the future incentive.

From there on, the employee will arrange much more with the environment and adapt to circumstances in order to get what it already belongs to him/her. Adaptation and a more passive way of addressing all topics will be the result that could lead to trouble or a potential job loss in any way.
Especially in lead/management positions you need decision power, proper risk taking,  motivation to drive change and lead development. Passiveness stifles innovation and blocks or demotivates engaged team members that are dependent on a powerful management (as management often acts as the doorkeeper for investments, freedom and decisions). Another highly connected problem is that no one will get the picture of the driver behind passiveness and risk avoidance as the reason has to be hidden to ensure reaching the incentive.
The closer it gets to  the incentive target date the less risks the employee will take. During the last months an aggressive protection scheme will arise as it’s already perceived as a real loss (the employee survived that long and will not risk something that will endanger the incentive). 
Political games, walls and unpredictable behavior will shape the daily work. Interpreting behavior in such circumstances is really difficult as the employee will find many ways to hide and mask tactical moves. It’s really a working proxy (replacing sense and direction towards company goals with reaching the money goal).
 I guess it’s not at all the intention to create that zombie-like behavior.
What could you do to avoid these pitfalls but still let employees participate on companies success and value individual’s or even better, team’s contribution? The sense of individual incentives in team is questionable in complex environments…  But this would lead to another article.
It has to be unpredictable and unexpected. 
Why not for example providing money over time – as soon as the company can afford it…  Spontaneously…  And watch everyone’s overwhelming reactions. I can tell you about the tears in my eyes as I opened a letter from a previous company I worked with, telling me that I received an additional salary for a well done job. It was not expected at all and I can still recap the feeling – unforgettable. 
Forget about the long term binding by extrinsic motivation and base more on the intrinsic motivators (autonomy, purpose and mastery) and maybe use more money to create environments where people can flourish. You can get more in depth insights by reading “Drive” by Dan Pink and “Where good ideas come from” by Steve Johnson.
I do not recommend incentives promised for a later point in time to bind employees to the company. They endanger enthusiasm, power, risk taking and brave behavior – losing most of what you would like everyone to show in the first place.
Think about your environment! Are you using future-oriented incentivation schemes? Check for the hidden ones too!
Next time you are offered or willing to offer future incentives think about the behavior these incentives will generate and how this behavior will further influence your working environment!



Posted originally by me as guest author at the awesome blog of the 3 agile guys http://www.3agileguys.com/loyalty-incentives-passiveness/