Motivating Employees with Goal-Based Prosocial Rewards

A recent trend in organizations is to motivate employees with goal-based prosocial rewards, whereby employees must donate their reward to charities upon goal attainment. We conduct an experiment to examine the motivational effects of goal-based prosocial rewards versus goal-based cash rewards, and whether these effects depend on the goal difficulty. We find that when employees are assigned a difficult goal such that the probability of goal attainment is low, goal-based prosocial rewards motivate greater effort than cash rewards. Further, we find that decreasing goal difficulty attenuates the motivational advantage of goal-based prosocial rewards over cash rewards. Our study contributes to the understanding of why and when affect-rich rewards such as prosocial rewards can be more motivating than traditional cash rewards. Our results also suggest that compensation system designers can benefit from using goal-based prosocial rewards when employees face difficult performance goals.