Digest 44. Can you get away with unethical behaviors to achieve your bonus?
Image by rawpixel.com on freepik
Performance appraisals (PA) constitute the bases for distributing several types and combinations of bonuses and incentives (see Digest 38). However, the use of bonuses may not always be all sunshine and roses as it may result in internal competition and self-interested behaviors among employees to manipulate performance ratings to gain bonuses (to read more about the unexpected effects of incentives check out Digests 40 and 42). This is especially the case when incentive systems have been poorly designed. For example, setting “aggressive” goals for employees may lead to unethical behaviors and unwanted consequences by directing employee attention exclusively on goal attainment, at the expense of other considerations. Therefore, employees can lie, cheat, or break the rules to achieve their goals and benefit themselves, violating norms of organizational justice and actively contributing to the creation of an unjust environment. For instance, an employee may well meet a $50,000 sales set incentive, but slash the price of the sold product to achieve such a goal, causing no profit for the firm. As another example, an employee may meet the customer satisfaction metric for the bonus, but manipulate the satisfaction survey results by only asking extremely satisfied customers to fill out the survey.
Such cheating and transgressive behaviors, not only lead to negative organizational outcomes but may also harm those employees who act ethically to achieve the goals, hurt their feelings towards the fairness of the PA and incentive systems, and, generally, influence their reactions to such systems. Furthermore, as we know that the culture of an organization influences the PA (see Digest 12), it is important to understand whether the way people respond to transgressions and cheating to get bonuses changes based on the values of a firm.
So, how do generally people react when goals and related bonuses are achieved via unethical behaviors? And how do organizational values influence these reactions?
To address these questions, Oberman and colleagues (2022) conducted a scenario-based study in the US in which 256 respondents were presented with seven fictitious sales employees who were either eligible or ineligible for receiving a bonus based on whether they met the metrics for sales and customer satisfaction. Respondents were also presented with how each of these seven sales employees achieved/did not achieve the goals, that is ethically vs. unethically. Then respondents had to rank the seven employees from the most deserving of a bonus to the least deserving. To account for the organizational values, the researchers conducted the study in a Christian publishing organization (52 participants), assuming that its members will share universalistic, religious-based values, and in a Secular organization (204 participants).
The results showed that participants ranked lower employees who behaved unethically against the shared norms of organizational justice to achieve the incentive goals, especially when these unethical behaviors compromised important organizational outcomes, functions or relationships. On the contrary, rankers rewarded employees who did not engage in dishonest activities and conformed to norms of organizational justice. Moreover, rankers tended to recompense employees who were negatively affected by unjust organizational procedures and practices and to punish those who benefitted from them instead. Finally, the researchers found that participants from religious-based organizations penalized employees who violated norms of personal morality (for instance, lying to get the bonus) more than participants from secular organizations.
Organizational implications
In designing bonus and incentive plans, HR practitioners and managers need to pay attention to the following:
Caution should be exercised when designing and distributing bonuses and incentives based on PA as this can impair perceptions of organizational justice.
While goal attainment is key for organizations, connecting incentives to aggressive goal setting might lead to unethical behaviors. Managers should set goals that are challenging but ethically achievable or HR practitioners should design a do-your-best system of rewards.
While bonuses given on harsh goal attainment may lead to unethical behaviors, rewarding ethical behaviors to avoid this might also have negative consequences (check out Digest 40). Therefore, the HR system should be designed in a way that discourage unethical behaviors altogether rather than making corrections by rewarding ethical behaviors.
Since organizational culture and values impact employees’ perceptions of justice, incentive systems should be designed based on their fit with such values rather than solely relying on “off- the-shelf” programs.
——
Reference: Oberman, W. D., Morrisette, S., Hunt, I., & Edwards, Y. (2022). Cheating, culture and incentives: Who deserves a bonus? Personnel Review, 51(1), 98–117. https://doi.org/10.1108/PR-04-2020-0232