The whole issue of pay, performance and employee rewards is very much in the news this week with RBS chief Stephen Hester bowing to public and political pressure and agreeing to waive his £1 million bonus.

Now most of us can only dream about a pay-out of this magnitude – but let me ask you something. If you received a nice hefty bonus for a job well done would you prefer to spend it on yourself or to give (at least some of it) away to others?

That may seem like an odd question to ask in these straitened times when most of us are tightening our belts and forgoing life’s little luxuries in order to pay the bills. Some of the latest psychological research, however, suggests that people are often more motivated by being able to give rather than simply just receiving.

Employee rewards: The gift that keeps on giving?

A recent blog from CAPP (Centre for Applied Positive Psychology) highlights a Canadian academic study into pro-social incentives – in other words bonuses that employees spend on others rather than on themselves.

In their study, Norton et al point out that businesses often dangle the ‘carrot’ of a financial bonus in front of employees in a bid to spur them on to bigger and better performance. These traditional incentives or employee rewards are, however, surprisingly ineffective in increasing employee morale or productivity – and can sometimes even backfire. This is because they are rooted in the premise that people are generally concerned with their own self-interest – whereas in fact numerous studies have shown that most of us have an innate desire to help others and that spending money on other people produces greater happiness than spending money on ourselves.

The academics set out to investigate whether pro-social bonuses and employee rewards had a greater impact on motivation and performance levels than the more conventional financial incentives. Their findings make interesting reading.

In one study, a group of Australian bank employees who were given a $100 voucher to give to charity reported significantly enhanced levels of happiness and job satisfaction. A second study went one stage further and tried to ascertain if pro-social bonuses did more than just create a nice warm feeling. Did they improve actual performance and have a corresponding impact on the bottom line?

A sample of Belgian pharmaceutical sales people and Canadian dodge ball players were the sample groups for this research. In both cases, the performance of the team as a whole was significantly higher when pro-social rather than personal bonuses were used as an incentive.

Some interesting implications then for the way businesses seek to drive performance and promote employee rewards? It’s certainly an issue worth thinking about for companies who are entertaining Generation Y in their workforce. Research has shown that this generation of future leaders prize the ability to give back to society highly and actively look for employers who will help them to do this.

Of course giving back doesn’t have to be purely in financial terms. Contributing to charity projects is a great way to help employees fulfil their altruistic tendencies – and the closer the cause is to their home or their hearts, the greater the motivation impact is likely to be.

So what do you think? Would your employees value the opportunity to contribute to their community or to donate their hard-won bonuses to charity – or do you think they are more likely to grab the money and run? 

The best HR software can help you have these discussion with your employee and find out what would work best for your company.

You may be interested in reading our guide to celebrating success in your business.

Erika Lucas author image

Erika Lucas

Writer and Communications Consultant

Erika Lucas is a writer and communications consultant with a special interest in HR, leadership, management and personal development. Her career has spanned journalism and PR, with previous roles in regional press, BBC Radio, PR consultancy, charities and business schools.