Good Idea to Pay for a Good Deed?

The concept first showed up to me in Dan Ariely’s book “Predictably Irrational.” I just finished “Drive” by Dan Pink and he talks about it too. So it’s high time I mention it here.

Paying people for doing nice things for you is not only ineffective, it’s insulting. Think about how you might feel if you did a favor for someone and he turned around and said, “hey buddy, thanks a lot. Here’s 25 bucks.” Or a friend shows up to your dinner party and instead of presenting you with a nice bottle of wine or a yummy dessert, she hands you some cash. You’d think, wow, that’s kind of weird.

There are two sets of norms in our society – social norms and market norms. Social norms are the domain of friendly requests, good deeds and warm and fuzzy. Market norms are about monetary exchanges in transactions such as wages, prices, rents, etc. Life is good when you understand the difference and keep them separate.

Things get a little hairy though when you start mixing the two. And that’s what happens in business when you pay people for giving you referrals. Essentially, when you pay a commission to someone who is not an employee for giving you a referral, you’re making a financial transaction.

Many times people make referrals because they want to be helpful. They’re not necessarily looking for anything in return. It’s a social exchange. And in social exchanges, gifts are the most acceptable type of “reward.”

Not only are small gifts more the accepted norm, giving them instead of money actually increases the likelihood that they will continue to share information with you. Studies have shown people will work more for a cause (or something they believe is worthy) than for cash. Both Ariely’s and Pink’s books address the reasoning behind this in more depth and I recommend reading them. But suffice it to know that if you want more referral business, saying thank you with a small gift or gesture is more effective than offering legal tender. Yes, even in “this economy.”