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Reaping the Rewards of Giving

A recent study concludes that giving employees a means to share a portion of their bonuses with co-workers or donate it to charities can have a positive impact on the bottom line. Some experts, however, suggest that employers considering such a model would still be wise to tread carefully.

Thursday, October 17, 2013
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Companies have long used bonuses to incent employees to stretch their abilities and improve their job performance and effectiveness. But would employers be better served by establishing a way for those employees to share some of their gains with co-workers or charities?

Researchers at Fuqua School of Business at Duke University and other institutions who recently tackled this question through three separate studies conclude that could very well be the case, noting their research found employees who share their bonuses with co-workers and charities are more satisfied and perform at a higher level than those who don't.

The research, Prosocial Bonuses Increase Employee Satisfaction and Team Performance, was posted earlier this month on the Public Library of Science website.

In the first of three studies, employees at an Australian bank who were given a $25 or $50 voucher to donate to a charity of their choice on behalf of their company reported enhanced "happiness" and "job satisfaction" -- and, in turn, a higher level of team performance -- compared to those who did not donate to the charity or donated a smaller amount.

The second and third studies involved 11 sports teams at the University of British Columbia and 14 pharmaceutical sales teams in Belgium, where the students and employees, respectively, received bonuses to either spend on themselves or their teammates. In both experiments, the researchers found that when participants spent their bonuses on teammates, the entire team performed significantly better than when individuals spent their bonuses on themselves.

Taken together, the researchers write, "the studies show that when organizations give employees the opportunity to spend money on others -- whether it's their co-workers or those in need -- both the employee and the company can benefit, with increased happiness and job satisfaction, and even improved team performance."

Lalin Anik, a post-doctoral fellow at Duke's Fuqua School and one of the study's authors, adds that many employers will also appreciate the public-relations benefits of a model that divides bonuses among employees and lets them decide how they're distributed.

In some ways, experts point out, a prosocial bonus program would be an extension of programs already in place at many companies.

"It's not too much of a stretch to say that employers are already doing some of this through giving initiatives like the United Way," says Amy E. Polefrone, president and CEO of HR Strategy Group in Ellicott City, Md. "It's simply taking that strategic giving to a different level."

Polefrone and other experts interviewed for this article, however, could name companies that have set up a "prosocial bonus" program.

Some believe such an approach, especially as it applies to charitable giving, would particularly resonate with millennial workers.

Of the different generations, millennials would be more open to having some of their bonus' benefit local communities that they care about, says Dan Schawbel, founder of New York-based Millennial Branding and author of Promote Yourself. "They want a company to stand for more than just profit. They want them to make a societal difference. They want meaningful work and to give back because it makes them feel good."

Not everyone, however, is convinced "prosocial bonuses" would be as effective as the research suggests.

"It would make sense that giving money to a charity would make a person more happy, since selfless actions tend to give us more happiness," says Bob Nelson, president of Nelson Motivation Inc. in San Diego and author of 1501 Ways to Reward Employees. "If employees had to direct a portion of their earned bonus to a charity, however, this would most likely take away from the intrinsic action of giving and, in some cases, cause more bad will and resentment if employees felt they were denied monies they had earned and were due them, perhaps for pressing bills and expenses."

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That said, Nelson notes that it makes sense that money an employee was able to direct to their peers would improve the relationship that person had with others with whom they work. "Since most employees need to interact with others to get their work done, those interactions and subsequent relationships would tend to be more positive and productive, leading to better teamwork and hence enhanced performance among staff," he says.

The keys to such a strategy, Nelson says, would likely be that "the largess that employees shared did not diminish their own earned bonus" and that the employees would have control over who the recipients were.

Michael Levy, president of Dallas-based incentive provider Online Rewards, suggests that companies, were they to implement such a program, might struggle to gain traction.

"In the world of employee incentives, where employees are awarded ‘points' that they are allowed to accrue to use for charities, gift cards to retailers or restaurants, or merchandise," Levy says, "less than 1 percent of employees tend to donate points to charities."

The exception, he says, is during a period of crisis, such as an earthquake or tsunami.

Levy notes that the role of charitable giving also needs to be considered within the context of the "financial economies" of the employee population as well as the overall culture of the organization.

"The higher the income level of employees," he says, "the more likely they are to donate points to a related charity during a time of crisis; the lower the income levels of employees, the more likely they are to continue to use their accrued points as a cash substitute for themselves and their families for basic needs."

Anik of the Fuqua School admits further research is needed. For example, she says the study didn't explore how such a model would play out between supervisors and employees.

"It would be interesting to see if people participating in such a program would be more comfortable taking feedback or providing feedback," she says.

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