How Can an Employer Incentivize Social Responsibility?

How Can an Employer Incentivize Social Responsibility?

At an all-company meeting last week, Facebook CEO Mark Zuckerberg announced that the company was retooling its employee bonus system to reflect a new set of priorities, focused on addressing the controversies surrounding the social media giant concerning the proliferation of hate speech and misinformation on its platform. In addition to traditional metrics like user growth and product quality, Facebook will reward employees this year based on their success at promoting the social good including combating fake accounts, protecting users’ safety, and making progress on other social issues affected by Facebook and the internet in general.

The decision to reward employees for doing social good reflects a challenge that many companies, particularly large corporations with major public profiles, are facing today. Investors, politicians, the media, and consumers are paying more attention than ever before to the social, environmental, and ethical consequences of what businesses do. And Facebook is not alone in this desire, for example, Chevron recently announced that it would tie executive compensation to reductions in the energy corporation’s greenhouse gas emissions. This dynamic, in turn, puts more pressure on corporate leaders to deliver sustainability and social responsibility as well as growth.

For Facebook, awarding bonuses to employees for meeting social responsibility goals will inevitably test the company’s ability to live up to two truisms: “actions speak louder than words,” and “what gets measured gets done.” To the first point, companies can articulate all the values they want, but at the end of the quarter or fiscal year, what matters is whether the organization actually lived up to those values in its day-to-day business practices. We’ve seen companies attempt to project an image of social responsibility, only to get called out for not really reflecting that image in their work. The impact of Facebook’s new policy will take time to fully materialize, but when it pays out bonuses for 2019, investors and reporters will be curious to see whether they have really rewarded the kind of choices they say they intend to, and whether those rewards reflect a real change.

As to the second point, Facebook has set itself an ambitious goal of identifying quantifiable metrics by which to determine progress against its goals of social good. Facebook has acknowledged that there is no easy or obvious formula for doing this, but they are looking at targets like number of fake accounts shut down daily or improvements to safety and security as possible metrics. Being a data-driven company, Facebook will likely get more granular and detailed about how it defines success, especially with both the media and governments paying closer and closer attention.

Here are four things that any company considering a similar change should be ready to do to make it more likely that an incentive program like this will be successful:

  1. Make a long-term commitment. If a company adopts a new bonus formula now and pays out bonuses annually, the first rewards based on that formula won’t be paid out until early next year. Judging whether the system is effective at driving socially responsible practices may take even longer. These new performance goals will require continual reinforcement to keep employees focused on tasks that they might not always see as the most productive use of their time. Getting the whole company on board and keeping them there will entail regular communication, role modeling by leaders, and transparency about how the system will work. Incentives can be a potent tool for influencing an organization’s culture, but this kind of mindset shift doesn’t happen overnight. Companies will need to make a multi-year commitment to this strategy if they hope to be successful.

  2. Understand—and embrace—the potential trade offs. For any business, the socially responsible choice sometimes aligns with traditional business metrics, but isn’t always the most profitable one; prioritizing social good often has an opportunity cost. Facebook plans to reward employees for devoting their time to shutting down fake accounts and protecting users from security threats, but how will it make that priority real for its workforce? What happens when an employee who excels at these tasks scores lower on other performance metrics, or when a high-performing employee in other respects doesn’t meet their social responsibility goals? Facebook will need to strike a balance in how it recognizes and rewards these two archetypical employees: If bonuses are still primarily based on traditional measures of value creation, then employees will learn to ignore their new ethical mandate, while leaning too heavily in the other direction may prove unsustainable.

  3. Design measurable, realistic goals. The process will be judged by its outcomes. A bonus program designed to reward socially responsible choices has the obvious goal of improving the social impact of the organization, and that impact will need to be measured. As long as performance metrics are well designed and clearly articulated, it should be possible to see which employees have fulfilled these social responsibility objectives and which have not. Companies should not only consider ways to measure what those societal outcomes are, but at a minimum develop a robust set of metrics that the company believes will lead to those outcomes.

  4. Maintain or increase bonus payouts. Employees will feel more engaged and committed to their employer if the are contributing to better societal outcomes. But employees also care about their total compensation. In order for a new system like this to work, total bonus payouts need to be maintained. If the average employee feel like their total bonus is actually smaller, then not only will the company fail to achieve their desired societal goals, but also disengage their workforce in the process.

As corporations become more prominent actors in the public sphere and as institutional investors pay more attention to the broader social impact of their portfolios, the challenge of incentivizing sustainable and ethical practices within a business will only grow. Whether or not Facebook’s experiment succeeds or how long that takes, it won’t be the last company to try aligning its incentive structures with social responsibility goals. Developing this kind of formula may soon become a priority for many companies and a point of interest for job candidates.