“The dark side of behaviour can be affected by pay-for-performance schemes,” said Fei Song, co-author of the study and a business professor at Ryerson’s Ted Rogers School of Management. “Faced with certain types of incentives, some people are tempted to make up or misrepresent their performance numbers, which can cause companies to lose revenue.”
This is the first study of its kind that compares employee cheating under different pay-for-performance compensation schemes. Bram Cadsby and Francis Tapon of the University of Guelph are the other co-authors of the study.
The researchers asked over 200 students at the University of Guelph to create as many words as they can from anagrams in one minute. Three groups of students completed this task using different pay-for-performance schemes as a financial incentive: a linear piece-rate system (employees receive a bonus for each unit they produce or sell); a tournament-based bonus system (payment is tied to an employee’s performance in relation to that of other workers); and a target-based scheme (employees only receive compensation if they achieve the company’s pre-set goal for sales or performance).
Afterwards, the students were asked to check each other’s work and were given a chance to correct any errors made by their rater before submitting their assignment to the researchers.
The researchers found that students cheated significantly more when the target-based compensation system was used compared to the other two incentive programs. In addition, the closer the participant’s actual performance was to their target goal, the more often they cheated.
“We speculate that people feel much worse if they miss a target by only a small margin rather than a large one,” said Song. “The employee knows how close they are to the target. It acts like a big apple, tempting them to cheat in order to get the bonus.”
Added Song: “Companies should be very cautious about the use of target-based bonuses.”
How can companies improve pay-for-performance systems to reduce deception in the workplace?
“To combat cheating, companies must have effective internal auditing/monitoring systems in place,” she said. “This will help to control and weed out any misrepresentation, which can occur under any payment scheme.”
The study, “Are You Paying Your Employees to Cheat? An Experimental Investigation,” was published in the 2010 issue of the B.E. Journal of Economic Analysis & Policy. The study was supported by a grant from the Social Sciences and Humanities Research Council of Canada.
Ryerson University is Canada’s leader in innovative, career-oriented education and a university clearly on the move. With a mission to serve societal need, and a long-standing commitment to engaging its community, Ryerson offers close to 100 undergraduate and graduate programs. Distinctly urban, culturally diverse and inclusive, the university is home to 28,000 students, including 2,000 master’s and PhD students, nearly 2,700 tenured and tenure-track faculty and staff, and more than 130,000 alumni worldwide. Research at Ryerson is on a trajectory of success and growth: externally funded research has doubled in the past four years. The G. Raymond Chang School of Continuing Education is Canada's leading provider of university-based adult education.
Suelan Toye | Newswise Science News
Corporate coworking as a driver of innovation
22.11.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
MPQ scientists achieve long storage times for photonic quantum bits which break the lower bound for direct teleportation in a global quantum network.
Concerning the development of quantum memories for the realization of global quantum networks, scientists of the Quantum Dynamics Division led by Professor...
Researchers have developed a water cloaking concept based on electromagnetic forces that could eliminate an object's wake, greatly reducing its drag while...
Tiny pores at a cell's entryway act as miniature bouncers, letting in some electrically charged atoms--ions--but blocking others. Operating as exquisitely sensitive filters, these "ion channels" play a critical role in biological functions such as muscle contraction and the firing of brain cells.
To rapidly transport the right ions through the cell membrane, the tiny channels rely on a complex interplay between the ions and surrounding molecules,...
The miniaturization of the current technology of storage media is hindered by fundamental limits of quantum mechanics. A new approach consists in using so-called spin-crossover molecules as the smallest possible storage unit. Similar to normal hard drives, these special molecules can save information via their magnetic state. A research team from Kiel University has now managed to successfully place a new class of spin-crossover molecules onto a surface and to improve the molecule’s storage capacity. The storage density of conventional hard drives could therefore theoretically be increased by more than one hundred fold. The study has been published in the scientific journal Nano Letters.
Over the past few years, the building blocks of storage media have gotten ever smaller. But further miniaturization of the current technology is hindered by...
With innovative experiments, researchers at the Helmholtz-Zentrums Geesthacht and the Technical University Hamburg unravel why tiny metallic structures are extremely strong
Light-weight and simultaneously strong – porous metallic nanomaterials promise interesting applications as, for instance, for future aeroplanes with enhanced...
11.12.2017 | Event News
08.12.2017 | Event News
07.12.2017 | Event News
13.12.2017 | Health and Medicine
13.12.2017 | Physics and Astronomy
13.12.2017 | Life Sciences