Essec Business School

With Stefan Linder

Being socially responsible is an increasingly important goal for corporations and individuals alike, for both virtuous reasons (protecting the environment, bettering society) and less virtuous reasons (improving public image). Regardless of the underlying motivation, we can agree that more social responsibility initiatives are a good thing, and should be encouraged. Stefan Linder of ESSEC Business School and his colleagues Vincent Bouchet and Nicolas Mottis from Ecole Polytechnique explored the use of incentives to encourage managers to be more socially responsible, finding that they were not particularly driven by incentives but rather by their own internal motivation, but nor did these incentives overpower intrinsic motivation. 

Man vs the machine

Corporate social responsibility has become a major buzzword in recent years, with corporations putting more effort into CSR initiatives in order to satisfy customers, comply with regulations, and boost their image. A significant portion of the research has focused on organizational factors, like companies’ motivations for CSR and the effect of CSR initiatives. But it’s important to look at individual factors, too, since individuals make up the heart and soul of the organization. Organizations are starting to include social responsibility objectives in remuneration packages, making it an interesting question for both organizations and managers. Additionally, research into organizational factors has focused on evaluations of and reactions to CSR, and less so on the drivers of CSR and socially responsible behavior (SRB) of managers and employees, a gap that Stefan Linder together with Vincent Bouchet and Nicolas Mottis from Ecole Polytechnique sought to address. 

Whereas some are simply motivated by altruism, there’s significant evidence that external factors can boost SRB. Research has shown that people make larger donations if said donations are tax deductible, and that gaining social clout is a major motivation for prosocial behavior. This makes it interesting to examine if managers are more likely to be driven by their own internal motivations, separate from any incentives they are given, or if incentives significantly boost SRB actions. Going even further, does providing incentives actually undermine someone’s intrinsic motivation? There’s a theoretical argument to be had that providing incentives “changes” the motivation from an autonomous to extrinsic one thus replacing one source of motivation with another, rather than bolstering the level of motivation. The existence of such an effect of incentives on the type of motivation increasingly attracts attention among scholars and Human Resource professionals. The effect would question the effectiveness and efficiency of incentives for fostering desired behaviors. Since firms want to encourage their managers and employees to engage in SRB, it’s critical to build a strong understanding of how to foster a strong, enduring commitment and engagement.  

Why is socially responsible behavior important?

And what exactly is socially responsible behavior? In a nutshell, it refers to actions taken to benefit society or reduce harm to society. It’s a type of pro-social behavior, albeit one occurring strictly in a corporate setting and undertaken on behalf of the firm, not on behalf of the individual. For example, socially responsible behavior would be something like promoting a zero-waste canteen at the office, not something like volunteering as a tutor in one's free time. 

The question remains: does tying managers’ bonuses to SRB-related performance measures impact their autonomous motivation or their engagement in such behavior? 

Socially responsible behavior à la Française 

The researchers involved managers from French companies over the course of two studies. With much of the research being conducted in North America, this offers an international perspective. Having managers from a corporate setting also allows us to get an idea of how these actions play out in this type of environment.

They conducted two experimental studies. The first included 58 bank managers. There were three types of socially responsible behavior in order to cover various categories in case the type of SRB itself impacted their actions: training in eco-friendly driving for employees, hiring a parental leave replacement to alleviate the workload of other employees, and hiring a part-time employee to assist customers with special needs or senior citizens. There were three different reward systems in play: a flat salary system, a salary with an SRB-performance bonus of 15%, and a salary with a performance bonus of 30%. In the latter two cases, the bonus was granted based on their CSR and SRB-related performance. Looking at participants’ tendency to engage in the SRBs under different reward systems, the team found that financial rewards were not effective, but that autonomous motivation was indeed a driver of SRB. 

To look into this further, they conducted a second study, with a different type of scenario used and measuring motivation in a different way. As in the first experiment, participants were managers in the banking industry (42 in all). Yet, two of the scenarios were changed: the eco-friendly driving training remained, but the others were replaced by: the possibility of a new hire in a high-unemployment region, and the decision to undertake renovations in the agency that would reduce the carbon footprint. Results of the second study closely mirrored those from the first: financial incentives did not seem to drive SRBs, and autonomous motivation did. In both studies, Stefan Linder and colleagues found that financial incentives were ineffective for fostering SRB, yet at least did not undermine (“crowd out”) autonomous motivation for SRB. 

How can companies use this information?

Companies looking to boost their managers’ socially responsible actions should note that using incentives is not the most effective way to do so. Even though it does not interfere with someone’s existing motivation, it also doesn’t actually boost the behavior, either. Organizations looking to encourage socially responsible behavior might want to take a step back and focus their efforts rather on recruiting and retaining employees with strong autonomous motivation. In a recruitment context, this could be done through including survey measures in the interview process or integrated into an online application process. To retain socially responsible managers, companies could support initiatives that they do undertake and foster a culture where proactivity is encouraged and demonstrate that they value prosocial behavior. 

With much of the literature based in North America, this study offers a look at how this plays out in a European context, which adds a new perspective. With growing attention on CSR and on how organizations can make a positive impact on society, it’s critical to understand how organizations can foster socially responsible behavior in their workplace. From this research, we learn that selection for employees who are autonomously motivated to engage in such behavior, and encouraging and retaining those employees, is a more effective strategy than the use of financial incentives when aiming to increase socially responsible behavior. 

Reference

This study is available in the following book: 

Bouchet, V., Linder, S., & Mottis, N. (2022). Incentives, autonomous motivation, and bank managers' socially responsible behavior. In: Biggiero, L., de Jongh, D., Priddat, B., Wieland, J., Zicari, A., Fischer, D. (Eds.). The Relational View of Economics: A New Research Agenda for the Study of Relational Transactions. Switzerland: Springer International Publishing.