Incentives can lead employees to cheat or lie at work

The research reviewed by Park and his colleagues confirms this.

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In healthcare, for example, physicians who were rewarded for meeting goals like better patient outcomes received higher bonuses by selectively referring healthier patients, Park said. In education, the incidence of cheating on standardized tests by teachers or administrators was higher when teachers were rewarded for classes that performed better, according to data from Chicago public schools. In a for-profit company, CFOs were more likely to withhold negative information about their company when their bonuses were tied to the company’s financial goals.

The consequences of incentives have a lot to do with how they’re set up, Park said. People aren’t very motivated to cheat to achieve goals that are too easy or totally unattainable. But with incentives that are challenging but achievable, “people tend to focus on the goal rather than the value of their work,” Park said.

He pointed to a program at Sears decades ago that rewarded auto service workers for strict sales quotas. The company stopped paying commissions in 1992 after allegations that employees were cheating customers, overcharging, and charging for unnecessary repairs.

In a press conference at the time, then-Sears chairman Edward A. Brennan said, “It seems to me that our incentive compensation programs have created a great opportunity for failure,” according to a Los Angeles Times report.

It’s harder for workers to justify bad behavior when they’re acting solely on their own behalf, Park said. On the other hand, team-based incentives can encourage members to ignore or hide ethical flaws to avoid disrupting the group. Studies comparing employees in individual incentive systems and team-based systems have consistently shown that teams are more likely to falsify data and misrepresent product performance.

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Systems like these can create a workplace culture that alienates employees from their values, like the Wells Fargo scandal, according to Christian Busch, director of the Global Economy Program at New York University’s Center for Global Affairs.

“You stoke this fear in people that if you don’t do ‘x, y and z’ you’re out,” said Busch. “Because of that attitude [workers at Wells Fargo] didn’t have a lot of psychological security, so they didn’t feel like they could push back.”

Companies “often promote one thing and hope for something else,” said Bill Becker, associate professor of management at Virginia Tech. And while many incentives rely on financial rewards, the reality is that “money brings out the worst in people and almost never brings out the best,” Becker said.

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Becker worked on a study published in 2018 that found that setting compensation goals led to more examples of dishonest managers receiving bonuses for meeting certain goals. Such behavior creates a slippery slope: dishonesty got progressively worse once managers crossed a certain threshold, the researchers found.

People are much more motivated by recognition and positive reinforcement than by short-term rewards, Becker said.

“What we really want is respect and appreciation,” said Becker. “Then we really do our best work, but it takes great leaders to do that every day.”

Stress and pressure can also tempt employees to cut corners to meet goals, Park said. When workers are “cognitively or emotionally exhausted,” they lose their resources to self-regulate.

“If they lose those, they will only think about the short-term goals that are ahead of them,” Park said. “Then they’re more likely to act unethically.”

A lack of accountability measures can also encourage bad behavior in incentive programs. When an incentive to lie or cheat is presented without monitoring or punishment, “the likelihood of ethically questionable behaviors such as over-achieving increases,” according to research from the Academy of Management Annals.

In an experiment at a call center, workers were told their company would limit audits of their work. In reality, the company continued monitoring and found that employees were increasing bonuses by logging fake calls.

Incentives can be useful in some contexts, Park noted, particularly when organizations are explicitly trying to encourage ethical behavior such as whistleblowing.

For example, financial incentives for whistleblowers work best when employees believe the behavior is actually recognized and rewarded, according to a study. Another concluded that such incentives are particularly helpful when the level of misconduct is lower, as people already feel a stronger motivation to speak up – with or without reward – when faced with serious ethical violations.

The Washington Post

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