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Ethics Versus Outcomes: Managerial Responses to Incentive-Driven and Goal-Induced Employee Behavior

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Abstract

Management plays an important role in reinforcing ethics in organizations. To support this aim, managers must use incentive and goal programs in ethical ways. This study examines experimentally the potential ethical costs associated with incentive-driven and goal-induced employee behavior from a managerial perspective. In a quasi-experimental setting, 243 MBA students with significant professional work experience evaluated a hypothetical employee’s ethical behavior under incentive pay systems modeled on a business case. In the role of the employee’s manager, participants evaluated the ethicality of the employee’s incentive-driven and goal-induced ethical/unethical behavior and the outcomes of behavior, with consequences that were either favorable or unfavorable to the organization. The results indicated that participants discounted the ethical considerations of incentive-driven and goal-induced behavior when consequences were favorable to the organization. Participants’ morals and outcome orientations were also significantly related to their ethical judgments and intentions to intervene. The implications of these findings for research and practice are discussed.

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Notes

  1. In order to test for interactions between employee behavior and managers’ morals and outcomes orientation, we partition the scale scores for both morals orientation and outcome orientation into two-level factors as further discussed in Methods section.

  2. Our hypothetical scenarios involved a “generic” auto repair shop with no identifying company information. Additionally, no reference was made to the Sears Auto Case in any of the courses in which our participants were enrolled. Thus, it is unlikely that participants’ familiarity with the Sears Auto Center case, which was approximately 20 years old at the time of data collection, influenced their responses.

  3. We performed principal components analysis with varimax rotation to verify that the two scales measured distinct constructs. Results (untabulated) indicate that each set of scale items (morals and outcomes) loaded on a separate factor in a two-factor solution. Together, the two factors (principal components) explained 46.7 percent of the variance in scale items.

  4. The practice of transforming continuous variables into two-level factors for analysis of variance (ANOVA) is common in empirical ethics studies where the experimental effects of interest are likely to involve interactions between two or more factors (see, for example, Dalton and Radtke 2013; Kim and Johnson 2013; Bodur et al. 2014).

  5. Because the two dependent measures are highly positively correlated (Pearson r = 0.94; p < .001), as predicted by Hypothesis 1, we initially examined the relationships between our independent and dependent measures in a multivariate analysis of variance (MANOVA) which considered both dependent measures simultaneously. Results (untabulated) indicate significant relationships between each of the experimental factors (Behavior, Consequences, and Morals/Outcomes Orientation) and the two dependent measures, in patterns that are consistent with our hypotheses.

  6. We administered the Marlowe–Crown Social Desirability Scale (SDS) to our participants and included SDS scores as a control variable in preliminary data analysis. SDS scores did not significantly affect participants’ responses (all p values > .10); accordingly, this variable was excluded in the analyses reported in the paper.

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Author information

Authors and Affiliations

  1. Rawls College of Business, Texas Tech University, Box 42101, Lubbock, TX, 79409-2101, USA

    Gary M. Fleischman

  2. College of Business, University of Wyoming, 1000 E. University Ave., Laramie, WY, 82071, USA

    Eric N. Johnson

  3. Fogelman College of Business, University of Memphis, Memphis, TN, 38152, USA

    Kenton B. Walker

  4. Department of Management, University of North Dakota, 293 Centennial Drive, Mailstop 8377, Grand Forks, ND, 58202-8377, USA

    Sean R. Valentine

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  1. Gary M. Fleischman
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  2. Eric N. Johnson
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  3. Kenton B. Walker
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  4. Sean R. Valentine
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Correspondence to Sean R. Valentine.

Ethics declarations

Conflict of interest

The authors declare they have no conflicts of interest.

Ethical Approval

Informed consent was obtained for human subjects in compliance with the Helsinki standards, which were followed by working with a university IRB.

Informed Consent

Participants were not coerced into participating in this self-report attitude survey; anonymity and confidentiality were ensured through proper data collection and handling.

Appendices

Appendix A: Experimental Scenarios

Unethical Behavior: Favorable Consequences

Jim Yand, an automobile repair shop employee that you supervise, is anxious to meet quotas so that he may earn additional commissions on repair sales and an added bonus. Jim decided to routinely recommend completely unnecessary (and expensive) auto repair services to unsuspecting customers to help him exceed these quotas. Jim’s customers are impressed with the perceived thoroughness of his work, which has resulted in increased customer demand that boosted profitability 18% for the automobile repair shop this year

 

Unethical Behavior: Unfavorable consequences

Jim Yand, an automobile repair shop employee that you supervise, is anxious to meet quotas so that he may earn additional commissions on repair sales and an added bonus. Jim decided to routinely recommend completely unnecessary (and expensive) auto repair services to unsuspecting customers to help him exceed these quotas. Recently, however, word got out about Jim’s strategy, causing the repair shop to lose a number of good customers and hurting overall profitability by 18% this year

 

Ethical Behavior: Favorable Consequences

Jim Yand, an automobile repair shop employee that you supervise, has observed that a number of other employees at the shop are anxious to meet quotas so that they may earn additional commissions on repair sales and added bonuses. These employees routinely recommend completely unnecessary (and expensive) auto repair services to unsuspecting customers to help them exceed their quotas. Jim thinks this is an inappropriate strategy and, in a recent employee meeting, he brought up this issue and advised other employees against this approach. Jim received some support in the meeting but also received some criticism. Over the next several months, employees who followed Jim’s recommendation attracted more customers to the repair shop than those who did not follow Jim’s recommendation, increasing overall profitability by 18% this year

 

Ethical Behavior: Unfavorable Consequences

Jim Yand, an automobile repair shop employee that you supervise, has observed that a number of other employees at the shop are anxious to meet quotas so that they may earn additional commissions on repair sales and added bonuses. These employees routinely recommend completely unnecessary (and expensive) auto repair services to unsuspecting customers to help them exceed their quotas. Jim thinks this is an inappropriate strategy and, in a recent employee meeting, he brought up this issue and advised other employees against this approach. Jim received some support in the meeting but also received some criticism. Over the next several months, employees who followed Jim’s recommendation attracted fewer new customers and lost more long-standing customers as compared to those who continued to suggest unnecessary services, causing company profitability to decrease by 18% this year

 

Appendix B: Ethical Judgment and Intention to Intervene Scales

Ethical Judgment (Moral Equity Scale, Reidenbach and Robin 1990)

Next is a set of adjectives that allow you to share your overall general beliefs about the situation above regarding Jim Y and’s behavior. (Please place a check mark in the space that accurately reflects your opinion).

Intentions to Intervene (Hunt and Vasquez-Parraga 1993)

For the next question about the situation above, please use the following response scale and write the NUMBER that indicates your perception regarding the actions that you would take if you were Jim Y and’s supervisor.

1 = VERY STRONG REPRIMAND

 

5 = MILD ENCOURAGEMENT

2 = STRONG REPRIMAND

4 = NO ACTION AT ALL

6 = STRONG ENCOURAGEMENT

3 = MILD REPRIMAND

 

7 = VERY STRONG ENCOURAGEMENT

If I were Jim Yand’s supervisor, I would take the following action regarding his behavior in Situation A by communicating to him a: _______ (please write the appropriate number).

Appendix C: Morals Orientation and Outcomes Orientation Scales (Burns and Kiecker 1995)

Morals Orientation

Strongly disagree

Moderately disagree

Slightly disagree

Neither agree nor disagree

Slightly disagree

Moderately disagree

Strongly disagree

1

2

3

4

5

6

7

____________ It is important to do the right thing, even if one’s self and/or family suffer greatly as a result

_________ Before knowing the consequences of an action, it can be said to be either right or wrong

_________ It is wrong to decide whether or not to perform an act by balancing the act’s positive consequences against its negative consequences

________ Some actions are simply wrong, even though they may result in positive consequences for many people

________ There are important rules determining whether an action is right or wrong that do not depend on the consequences of the action

Outcomes Orientation

Strongly disagree

Moderately disagree

Slightly disagree

Neither agree nor disagree

Slightly disagree

Moderately disagree

Strongly disagree

1

2

3

4

5

6

7

________ It is not possible to determine the rightness or wrongness of an action without considering its consequences

________ A right action is one that provides the greatest good for the greatest number of people

_______ A right action is one that provides the greatest good for me, my family and those for whom I care greatly

_____ As the probability of positive consequences resulting from an action increases, the action increasingly becomes the right thing to do

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Fleischman, G.M., Johnson, E.N., Walker, K.B. et al. Ethics Versus Outcomes: Managerial Responses to Incentive-Driven and Goal-Induced Employee Behavior. J Bus Ethics 158, 951–967 (2019). https://doi.org/10.1007/s10551-017-3695-z

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