Group incentives, including share ownership, are effective ways of boosting employee productivity and satisfaction, according to a piece in the Harvard Business Review. The authors – Alex Bryson and Richard Freeman – point to their own research which finds that shared capitalism (for example, gifting shares to employees) improves employee satisfaction above and beyond the extra financial value that employees gain from increasing share value.
This effect is partly related to the ‘warm glow’ employees feel in response to the gift of free or discounted shares, and partly to the effect a share ownership scheme has in dampening the ‘bad’ aspects of a job. In contrast, individual performance pay does not produce this warm glow effect, the authors suggest.
‘Research points to some important motivations behind why group incentives work. For example, some forms of shared capitalism are viewed more as gift exchanges between the worker and the firm. In other words, the company offers something for free, such as shares, in anticipation of worker reciprocation in the form of additional effort. These feelings of reciprocity are often linked to perceptions of fairness and justice underpinning the exchange between labour and rewards, and they can generate organisational commitment and loyalty in a way that a simple bonus or raise cannot.’