Are You Paying Your Employees to Cheat?
New academic research finds that target-based compensation programs may provide more incentive for employees to cheat compared to other compensation models. What can HR do to ensure fair play and fair pay for all? By Michael O'Brien When organizations use a pay-for-performance model to compensate their employees, they may unwittingly be giving workers an avenue in which to cheat in order to increase their own compensation, according to new research. Are You Paying Your Employees to Cheat? An Experimental Investigation was written by co-authors C. Bram Cadsby and Francis Tapon, both professors of economics at the University of Guelph (Canada), and Fei Song, who is both a professor at the Ted Rogers School of Business Management at Ryerson University as well as Cadsby's wife. It was published this year in the B.E. Journal of Economic Analysis. The experiment compared misrepresentations of performance under a target-based compensation system with those under both a linear piece-rate system and a tournament-based bonus system using a laboratory experiment with salient financial incentives, according to the group's report. Using an anagram game with university students, results showed that productivity -- defined as the number of correct words a participant created during seven experimental rounds -- was similar and statistically indistinguishable with the three pay-for-performance schemes, according to the authors. But when considering the number of over-claimed words created by students, the number of work/pay periods in which over-claims occur, or the number of participants making an over-claim at least once, one result becomes clear. Target-based compensation produced significantly more cheating than either of the other two systems, the authors report. Co-author Cadbsy says he was surprised by the results of his group's experiments, despite previous research into the topic by Michael Jensen, a prominent researcher in finance. made the argument that target-based bonuses were adversely affecting the productivity of many companies because of their effects on cheating and misrepresentation, Cadsby says. He urged that they be replaced by piece-rate pay-for-performance systems. We found his arguments compelling, but we nonetheless wondered whether other pay-for-performance systems, such as piece-rate and tournament-based systems might not also tempt people to cheat. I was rather surprised that the experimental results supported Jenson's argument so completely and unambiguously even in the absence of monitoring, he says. With no monitoring, I thought it quite possible that cheating rates would be quite high under piece rates, since under that system a lot of cheating is required to increase one's earnings substantially. But Ravin Jesuthasan, a managing director at Towers Watson's Chicago office, says he was not surprised by the study's findings, based solely on the parameters used in the experiments. The study appears to be very narrowly defined and looks to test the potential for misrepresentation based purely on design, he says. Cadsby acknowledges that the results of their study do not concern the effectiveness of pay-for-performance schemes in general. Rather, they suggest that one kind of pay-for-performance scheme, a target-based bonus, may lead to more cheating than other kinds of pay-for-performance schemes, in particular piece-rate and tournament-based schemes, in the absence of monitoring. But the group's research also found that cheating is more likely to occur under a target-based scheme the closer a participant's actual production is to the target. When asked why such a spike would occur there, Cadsby says that, under the bonus scheme, participants often came close to the target, just missing it by a small amount. Such participants may have felt that they worked hard and deserved to be paid for their efforts. This feeling acts as a rationalization for cheating, mitigating feelings of guilt, he says. If the compensation system is viewed as unfair because it does not reward people in proportion to their efforts, cheating when one just misses the target may be viewed as a legitimate response to unfair treatment. Ultimately, Jesuthasan says he does not think target-based compensation systems are a breeding ground for cheaters, per se. How an incentive plan affects a participant's behavior is a function of not just the design mechanics, but the governance and other related processes, he says. For example, how are the targets set? Does the participant have a role in setting the targets? Does the participant have influence over how performance is reported? Cadbsy and his co-authors suggest that before HR leaders implement any compensation system, they must consider the characteristics of their workforce and the nature of the work. There is a large amount of literature available on what kinds of compensation systems work best in different contexts, he says. For example, another research project of ours suggests that pay-for-performance schemes work more effectively to improve performance when workers are more tolerant of financial uncertainty. Workers who are uncertainty- or risk-averse often seem to improve less under pay-for-performance schemes, sometimes even performing less well than under a fixed salary. Managers must weigh a number of factors when making decisions about what kind of compensation scheme to implement, Cadsby says. In particular, they must consider the predicted effect of different kinds of schemes on productivity in their particular work environment. They must also consider the cost and practicality of different levels of monitoring. The message of this study is that target-based schemes represent a special temptation to cheat. Thus, they should either be avoided, or if deemed essential to motivate effort, be accompanied by a high level of monitoring. Jesuthasan says the topic should cause HR leaders to ask the right questions. Most importantly, how does pay for performance align with both the business model and support the engagement of the workforce. How does it further the primary objectives of any reward system? With the final word, Cadsby says any organization that is using a target-based compensation scheme to reward its employees should reassess the effectiveness of such a scheme. It might want to consider whether other forms of pay for performance could achieve similar productivity goals without tempting employees to engage in cheating behaviors, he says. However, regardless of what kind of pay-for-performance schemes is used, it is essential that an effective and appropriate monitoring scheme be in place since incentives to perform are impossible to separate entirely from the temptation to cheat. 行业动态 您可能感兴趣的文章 摩托罗拉移动晋升产品管理高管为新总裁兼COO 2014-04-10 聚焦大学生就业:热门专业不吃香 冷门求职遭抢 2014-06-18 美国前政府官员加盟亚马逊董事会 2012-02-13 最近文章 TEST 2018年01月15日 嫖娼被抓不属无故旷工，公司解雇赔4万！（法院判决） 2018年01月15日 如何判断你是否具有HRBP胜任力？
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