Employee incentives can lead to unethical behavior

Posted on under Today's research

Considering end-of-year bonuses for your employees? Bosses be forewarned, a new study finds that while incentive rewards can help motivate and increase employee performance they can also lead to unethical behavior. Oops!

What the researchers say: “Goal fixation can have a profound impact on employee behavior, and the damaging effects appear to be growing stronger in today’s competitive business landscape,” said the lead author.

The study provides valuable insight into the relationship between pay structures and motivation.

The findings suggest that setting compensation goals can increase dishonesty when managers are also paid a bonus for hitting certain targets. “These unintended negative consequences can lead to dishonesty, unethical behavior, increased risk-taking, and depletion of self-control,” say the researchers.

The study points to observations of unethical behaviors in the workplace that include employees falsifying or manipulating financial reporting information as well as time and expense reports.

“Using purely monetary incentives is almost always a double-edged sword,” said the lead researcher

So, what? The findings are hardly new, but the researchers nevertheless make an important points buried in the detail of the study. When supervisors have crossed the line into dishonesty their dishonest behavior increases, especially if there’s a monetary incentive. They note that it’s easy for a manager or a supervisor to take the first step and each time becomes easier.  They also find that in modern industry there’s rarely any turning back.

The reason for this, as other studies (reported in TR) have shown, is that the trust factor between supervisors and management in modern businesses is at a low ebb. This lack of trust and the resulting lack of loyalty encourages the increasing level of malfeasance that has been seen lately, for example, in banks and other financial institutions.