When it comes to encouraging extra effort on the job, offering a bonus would seem like just the ticket to help ramp up productivity.
But could dangling the carrot of a cash incentive lead to people telling white lies in a bid to reach their target — and net a little more dough? New research suggests individuals may be encouraged to cheat to help assure they’ll land a bonus.
A trio of researchers from the University of Guelph and Ryerson University conducted the study published in the B.E. Journal of Economic Analysis and Policy. It’s part of a broader project looking at the effects of different forms of compensation not just on cheating and misrepresentation of behaviour but also on productivity.
Researchers aimed to compare levels of cheating by using three different compensation systems: bonus, piece-rate or tournament.
In the bonus system, employees are compensated if they reach a target. With piece-rate, workers are rewarded for each completed task — the more productive the employee, the more they earn. With a tournament system, only those with the highest productivity receive the extra cash.
“All three of those situations give people incentives to cheat because if they do cheat, they’re going to make more money,” said University of Guelph economics professor Bram Cadsby, who co-authored the study with Guelph colleague Francis Tapon and Ryerson professor Fei Song.
“The idea was to look at these three different types of pay-per-performance and see whether one of them seemed to encourage people to cheat more than the others.”
Canadian university undergrads were given the task of taking seven letters and making as many words as possible in one minute.
Participants completed seven rounds of the word-scramble task. They then had another participant mark their work, and were responsible for reporting their final scores to researchers.
“People could have made a decision prior to that if they were going to cheat, but that’s kind of the crunch time where they have to make a final decision,” Cadsby said.
All participants were paid $3 for word-checking, but compensated in different ways.
In the target system, they received an additional $3.60 for each of the seven rounds where they created nine or more words. Under piece-rate, they earned 40 cents for each word created. In the tournament system, they pocketed $3.60 for each of the seven rounds they were above the 85 percentile relative to other participants.
Researchers found that those rewarded in the bonus system were more likely to cheat. What’s more, the closer they were to reaching the nine-word target, the greater the chance they would exaggerate the scores.
“Most people seemed to be much more tempted if they could tell a small lie,” Cadsby said.
“That is, if they could say, ‘I made one more word than I did, or I made two more words than I did’ and then get a lump sum bonus, than telling a big lie, which is what you have to do to make a substantial amount of money under the piece rate system.”
In looking at the implications of the research in the real world, Cadsby said he thinks firms should look carefully at their incentive programs and consider the possible impact on productivity.
“The research suggests rewarding people in proportion to their productivity doesn’t lead to excessive amounts of cheating,” Cadsby said. “It’s when you can be close to a target and by cheating, you can convince your employer that you made that target and get a large bonus as a result that you tend to see a great deal of cheating.”
“If I had that kind of incentive program in place, I’d want to reconsider it.”