“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
Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)
Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO
University of Maryland researchers contribute to historic detection of gravitational waves and light created by event
On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...
Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.
Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....
Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).
When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...
Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.
How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...
Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.
It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...
17.10.2017 | Event News
10.10.2017 | Event News
10.10.2017 | Event News
20.10.2017 | Information Technology
20.10.2017 | Materials Sciences
20.10.2017 | Interdisciplinary Research