A new study [PDF] suggests that managers can boost team performance by offering “prosocial” bonuses. The study’s authors say that teams do better when individuals get bonus compensation which they are then instructed to spend on another team member or a charitable group.
The Harvard Business School working paper was released this month and written by Lalin Anik, Duke University; Lara B. Aknin, University of British Columbia; Michael I. Norton, Harvard Business School; Elizabeth W. Dunn, University of British Columbia; and Jordi Quoidbach, University of Liège. The researchers were looking for ways around common problems caused by traditional bonuses, which have been shown to be ineffective in increasing morale and productivity.
According to Anik et al, prosocial bonuses, or bonuses that are spent on other people, may be the answer. Teams that employed prosocial bonuses reported higher productivity and more satisfied employees than those that only used traditional bonuses. They write, “These results suggest that a minor adjustment to employee bonuses – shifting the focus from the self to others – can produce measurable benefits for employees and organizations.”
Apparently, the sense that they are doing good can motivate people to work better together – here’s how.
Bonuses have long been used to reward individuals and teams for outsized behavior – and they are effective – up to a point. But they present challenges as well. Anik and her colleagues write, for example, that “individual incentives – such as large bonuses – are often surprisingly ineffective in increasing employee morale and productivity.”
Individual incentives can cause team mates to compete against one another, rather than working together for the good of the group. “Rewarding individual employees can produce negative outcomes by eroding workplace cohesion, as employees become reluctant to share information with others even at the expense of reduced output,” the researchers explain.
Team-based bonus schemes can also backfire, causing the sense that the poorest performers are freeloaders. Top performers may become de-motivated if they feel their team will miss out on a bonus because of less successful colleagues. The researchers write, “Thus while team-based bonuses have the potential to improve relationships between co-workers, they can also lead to ‘antisocial’ behaviors – and decreased employee outcomes.”
Anik and her colleagues decided to investigate whether a team’s dynamic could be improved by changing what bonuses look like. They write:
“We examine whether randomly assigning employees to engage in prosocial behavior – via prosocial bonuses – can have a causal impact on employee well-being, job satisfaction, and job performance. In both field studies, some employees and teammates are given non-contingent ‘prosocial bonuses’ – money that they receive as a windfall that they are encouraged to spend in a prosocial manner.”
The team performed two experiments. In the first, employees at an Australian bank received bonus money to spend at a charity of their choice. In the second experiment, employees on pharmaceutical sales teams and members of sports teams were given bonus money to spend on a colleague. In both studies, prosocial bonuses produced stronger results than the traditional bonuses.
For example, in the second experiment the sales team showed a “large and significant” increase in performance after the implementation of the prosocial bonus scheme. There was no increase for teams that simply received personal bonuses. Similarly, at the Australian bank, employee happiness and job satisfaction increased significantly for individuals who received a $100 AUS voucher for charity, whereas there was no change for those who received a $50 AUS voucher or no voucher. Anik and her colleagues write:
“Across the studies, we show that prosocial bonuses can benefit both individuals and teams, on both psychological and ‘bottom line’ indicators, in both the short and long-term. Unlike some research suggesting a weak link between factors that improve job satisfaction and those that improve job performance our results suggest that prosocial bonuses have a meaningful impact on both metrics.”
The study suggests that by “shifting the focus from the self to others,” managers can better leverage the motivating benefits of bonuses, while avoiding the competitive nature of traditional bonuses that can demotivate team members. They do caution, however, that prosocial bonuses should not take the place of traditional bonuses overnight. “In particular, it seems likely that prosocial bonuses could backfire if they were introduced by companies as a replacement for more standard bonuses.”
Finally, they add, prosocial bonuses can help bridge the growing struggle between work and life that is exacerbated as people spend more and more time in the office. “We suggest that rather than force
employees to make a losing tradeoff between social life and work life, employers can focus instead on using prosocial bonuses to create a more altruistic, satisfying, and productive workplace.”
The research indicates that by introducing elements of altruism, connection, and choice into the compensation structure, managers may be able to get more from their employees. What do you think? How would your team respond to a prosocial bonus structure?