When Tough Performance Goals Lead to Cheating

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When Enron, one of the world’s largest energy companies, collapsed in 2001, it sent shock waves through the corporate world. Revelations of systematic fraud, deception, and corruption across the organization showed the devastating consequences of unethical behavior in organizations. The Enron scandal raised the fundamental question of why such behavior occurred — and became institutionalized — in the first place. One answer, provided by both independent investigators and company officials, was that Enron’s goal-setting practices, which involved setting difficult and specific performance goals for employees, were at the heart of the misconduct.

Setting goals is one of the established tools that managers have to increase staff motivation and performance. Goals are an integral part of most employee review processes and are commonly tied to pay, rewards, and bonuses. Yet they have been linked to unethical behavior — not only in the case of Enron and other corporate scandals but also in a growing body of academic research demonstrating that giving people specific, challenging performance goals causes them to cheat on tasks or misrepresent their performance. This inspired us to investigate the link between goal setting and unethical behavior more thoroughly. In particular, we wanted to resolve one obvious question: If goal setting can cause people to act unethically, then why is the managerial practice still so popular in business? And given the widespread use of goal setting, why isn’t unethical behavior more widespread?

We propose that the answer lies in personality differences. While some people might act unethically when given a performance goal, others might resist the temptation to cheat. So we designed an experiment to test this idea. The personality trait we focused on was moral justification, or the tendency to portray an unethical act as being in the service of some valued or moral purpose. We reasoned that people with high moral justification might use performance goals as an excuse for acting unethically, whereas those with low moral justification would not see goals as a rationale for cheating.

We recruited 106 full-time workers of varying levels of seniority from across a number of industries to complete our study online. All participants took a test of moral justification, which had them rate their agreement with statements such as, “It is all right to exaggerate the truth to keep your company out of trouble,” on a scale from one (strongly disagree) to five (strongly agree). Higher scores on the test indicated higher levels of moral justification. Following this, participants completed two tests of unethical behavior. We gave half of them a challenging, specific performance goal to strive toward during these tasks, while we told the rest to simply do their best. This research was recently published in the Journal of Business Ethics.

In one of our tests, we asked participants to complete three rounds of an anagram task, in which they had to form different words from a string of letters. We falsely informed them that we could not see their responses and would rely on them to self-report how many words they made. This gave people an opportunity to cheat by overstating how well they had done.

We found that participants who were given a specific performance goal of forming nine words from each string of letters (a level of performance we expected from the top 10% of people) were more likely to overstate their performance than those told to “do your best” — but only if they had scored highly in moral justification. These participants, with high moral justification and a specific goal, overstated their performance by an average of almost five words across the three rounds of the task. People with low moral justification did not overstate their performance, even when given a specific goal. In other words, only people prone to moral justification used the performance goal as an excuse to cheat. This suggests that while goal setting may indeed have negative consequences on ethical behavior in organizations, only people with particularly susceptible personality traits may be prone to the effect.

However, in our second test we found that goals could increase an individual’s willingness to act unethically, regardless of their level of moral justification. We asked the participants to explain how they would respond to a realistic business scenario. Each person played the role of a sales manager and answered a series of questions about the business they “worked” for. For each question, participants had to choose between acting unethically, which would reap financial rewards or avoid losses (by withholding information from customers about a reduction in the durability of the product being sold), and acting ethically, which would prove less lucrative (by providing customers with the relevant information).

Here we found that participants who were given a specific performance goal for how much revenue they had to earn were almost twice as willing to use unethical methods to achieve it than those given a vague goal, irrespective of their moral justification. This means that even people with low moral justification were more likely to engage in some types of unethical behavior when faced with a specific, challenging performance goal.

Why did moral justification matter in only one of our tests? One possibility is that the unethical behaviors we presented in each task differed in terms of seriousness. In the anagram task participants had to explicitly lie about their performance, whereas in the business scenario task they only had to indicate an intention to act unethically, which might be considered less severe than actual misconduct. Having a challenging performance goal may have been enough incentive for participants to say they would cheat in the scenario task, while only those who were able to morally justify their behavior may have actually been willing to lie on the anagram task.

Given the prevalence and cost of unethical behavior in the workplace, our findings have important implications for organizations. While it wouldn’t make sense to abandon the practice of goal setting, it is important to consider goals’ unintended consequences and find ways to minimize the risks. Since moral justification is used to rationalize unethical behavior being necessary for achieving certain goals, organizations can reduce the opportunity to make such justifications by stressing that reaching goals is secondary to ethics. This would require ethical behavior to be embedded in an organization’s culture, which communicates to employees the kind of behavior that is valued and accepted. Our findings also demonstrate that when employees are striving to achieve goals, it might be wise to monitor the methods that they use.

However, in considering the above implications, it is important to keep in mind the limitations of our study. In particular, in order to provide a strong empirical test, we used an experimental design that does not capture the context of an actual work environment. If someone is contemplating unethical behavior in a real-world situation, with more significant consequences, the psychological barriers preventing such behavior would most likely be stronger than in an experimental context. We also cannot say that moral justification caused individuals to act unethically. It is possible that individuals high in this personality trait chose to act unethically, and then justified their behavior retrospectively. There may also be other personality traits, aside from moral justification, that could make people even more (or less) susceptible to cheating to achieve goals. Finally, the relatively small sample size in our research means that replicating the study with a larger number of people will give greater confidence in the findings.

As stories of corporate malpractice, such as the recent emissions scandal at Volkswagen, continue to make headlines across the world, it is clear that the issue of unethical behavior in organizations persists, bringing with it significant costs for businesses, customers, and society. The evidence from our research indicates that a combination of organizational practices and individual characteristics enables this unethical behavior. It is therefore vital that researchers and practitioners continue to identify the practices and traits that increase the risk of malfeasance and to develop appropriate procedural, organizational, and HR safeguards that may prevent the next corporate scandal from developing.

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