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Post Leadership
Posted at 03:12 PM ET, 08/15/2011

What’s better than a bonus? Prosocial incentives — the bonus you give away


New studies on prosocial incentives--bonuses you spend on charities or colleagues rather than yourself--are shedding interesting light on workplace motivation. (Manish Swarup - AP)
What would motivate you more: A bonus you could spend on yourself, or a bonus you had to spend on someone else? Most people, surely, would instinctively say the former. Why on earth would I work smarter or better, or be more satisfied in my job, in exchange for something I had to turn around and give away?

But a new paper by researchers from Harvard Business School, the University of British Columbia and the University of Liege finds otherwise. (Hat tip to behavioral economist Dan Ariely, who points on his blog Monday to the not-yet-published paper, noting that “our intuitions are leading us down the wrong path when we assume that we will be happiest and most motivated when we earn money to spend on ourselves.”)

The researchers set up two studies in which prosocial incentives—“a novel type of bonus spent on others rather than on themselves”—were given to employees. In the first study, which was set up to measure the effects of these incentives on job satisfaction, Australian bank employees were given charity vouchers worth $25 or $50 to give to a charity of their choice. Compared to people who did not get the charity vouchers, the employees who donated $50 said they were happier and more satisfied with their jobs. (The opinions were unchanged among those who got the $25 donation.)

In the second study, the researchers wanted to measure whether such “prosocial incentives” could have an impact on performance. They decided to study the effect in both sales and sports, giving Belgian pharmaceutical sales teams and Canadian recreational dodge ball teams money. Some were told to spend it on themselves, while others had to spend it on a specified teammate. The researchers found that those who had to spend the money on other teammates performed better, in terms of sales made or games won, than those who spent the incentive on themselves.

It’s natural to be a skeptic when it comes to academic papers like this. For one, the researchers did not differentiate for high performers—one wonders if the results would have differed if they had been measured only in those who deserved the bonus first. And it’s hard to know what other factors—industry trends, economic headwinds or strength of the, well, recreational dodgeball schedule—might have affected the results.

Indeed, I’d be ready to chalk this one up to a quirky thought exercise if it wasn’t for the piece that Stephanie Clifford wrote in The New York Times recently about the sandwich chain Pret A Manger, which has three outposts in Washington. The story, which profiled the British chain’s customer service, looked at the various management tools Pret’s leaders use to get their employees to put customers first, using teamwork to do so. Bonuses are awarded on the basis of the entire team’s performance, not an individual’s. New hires only get the job once they get the thumbs-up from potential colleagues they work with in a six-hour trial shift.

And “when employees are promoted or pass training milestones, they receive at least £50 in vouchers, a payment that Pret calls a ‘shooting star,’” Clifford reports. “But instead of keeping the bonus, the employees must give the money to colleagues, people who have helped them along the way.” The message? You didn’t do it alone, and need to recognize those who helped you get there.

It’s an intriguing practice that’s unquestionably rare—bonuses are almost universally thought of as a reward for individual performance that should be enjoyed by the person who earned it. Ariely points to a new Credit Suisse bonus program that requires all bankers to give 2.5 percent of their bonuses away to charity. Perhaps it leads to greater job satisfaction; more likely, it leads to good P.R.

I highly doubt that “prosocial incentives” on their own would be enough to motivate most people to perform better or make them more satisfied with their jobs. But combined with individual bonuses that are correctly constructed, a healthy workplace that fairly rewards hard work, and an environment where employees know they have the opportunity to advance, it makes sense that they might provide an extra edge.

The researchers close their paper by noting that recent surveys show job satisfaction is at a 20-year low, “perhaps because over the same time frame, Americans have come to spend more and more of their time at work at the expense of devoting time to pursuits known to be linked to well-being,” such as volunteering or doing things for friends and family. “Rather than force employees to make a tradeoff between social life and work life, employers can co-opt this tradeoff.” In other words, if we got to do a little more ‘doing good’ at work, it might make us not only feel better about ourselves but feel better about working so hard.

More from On Leadership:

Paul O’Neill: Only the president can restart America’s engine

Bill George:Enough talk about jobs—where’s the action?

Michael Useem: Revising investor capitalism’s mantra

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By  |  03:12 PM ET, 08/15/2011

 
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