Intentions for Doing Good Matter for Doing Well: The Negative Effects of Prosocial Incentives
Many firms consider prosocial initiatives to be an effective tool to motivate workers. However, despite some initial supportive evidence, little is known about when and how prosocial incentives work. We argue that if prosocial incentives are used instrumentally, i.e., firm's perceived motive is to extract more effort from the workers, they can be perceived as unkind and, thus, can backfire. We test our predictions in a field experiment where we varied whether a charitable donation made by the firm was conditional or unconditional on workers' performance. Consistent with our theory we find that performance-based donations, which are, by construction, more instrumental than unconditional donations, lead to lower effort. As predicted, the negative effect is particularly strong for workers who do not care about charities and, thus, who do not face the countervailing effect of working harder in order to benefit the charity. Finally, we also find that the donations backfire even compared to a baseline with no incentives. These findings highlight some serious limitations of prosocial incentives: firms' perceived motives and pool of employees will be crucial for their effectiveness.