People Work Harder for Responsible Companies

Charitable incentives boosted productivity 13 percent in a recent study.
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Charitable incentives boosted productivity 13 percent in a recent study.
(Photo: ummella/Flickr)

(Photo: ummella/Flickr)

Footwear brand Toms first made a name for itself by promising to donate one pair of shoes to children living in poverty every time they sold a pair of slip-ons. While that sort of corporate social responsibility has been proven a dubious strategy to alleviate poverty, Toms and other companies have certainly capitalized on the buying-as-giving model. Now, a pair of economists report there's another benefit to corporate charity: more productive workers.

Giving employees the power to direct money to charities had a substantial effect on productivity.

Researchers Mirco Tonin and Michael Vlassopoulos reached that conclusion while contemplating how a company's philanthropic endeavors might shape employee behavior. Past research suggests that employees are more committed to companies that help fund or otherwise support charities, while job seekers find those companies more attractive than others, and are more likely to view good corporate citizenship as part of their own job descriptions. Still, the collection of empirical studies of corporate social responsibility on workers' attitudes and actions remains thin. In particular, no one's sure whether a company's charitable side has any effect on workers' productivity, despite the general interest in how to get people more motivated to work.

Hoping to remedy that situation, Tonin and Vlassopoulos conducted an online experiment in which 100 university students did real work—entering bibliographic information for academic journal papers—in exchange for 20 pounds plus two and a half pence per entry. The workers did one session of work using the standard pay scheme, and then did three more sessions in which they had the option to donate money to charity in three different ways: by directing the researchers to donate a lump sum of either 10 pounds or 10 pence per bibliographic entry they made, and by deciding how much of a 10 pence per entry bonus to keep for themselves or pass on to their preferred charity.

Giving employees the power to direct money to charities had a substantial effect on productivity, Tonin and Vlassopoulos found. A statistical analysis indicated that workers made about 13 percent more entries when they could give to charity compared with sessions in which they couldn't donate any money—roughly the effect of tripling the base pay rate, additional data suggest. Surprisingly, that productivity bump was largely independent of the mode of the donations, though the authors note their experiment had a somewhat limited ability to distinguish the effects of lump-sum versus productivity-based donations on workers' output.

"Our results indicate that social incentives may be less effective than financial incentives in motivating workers, but the difference is not so large as one might have expected," Tonin and Vlassopoulos write in the journal Management Science. Executives and academics alike would do well to take that fact into consideration in the future.