Cheaters may prosper in your bonus system

Cheaters may prosper in your bonus system

Study finds pre-set practice goals for employee bonuses could lead to fudging.
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May 21, 2010
By dvm360.com staff

Bonus programs can tempt employees to cheat, according to a new study from Canada's Ryerson University and the University of Guelph. And the closer employees get to a goal, the more likely they are to fudge results to reach the magic number.

In the study, 200 students at the University of Guelph were asked to create as many words as possible from anagrams in one minute. Three groups of students completed the task with different pay-for-performance plans: linear piece-rate (employees receive a bonus for each unit produced or sold), tournament (employees receive bonuses in comparison to other employees' performance), or target-based (employees receive bonuses if the company hits a pre-set goal).

Afterwards, students rated each other's work and then were given a chance to correct errors to their own paper made by raters. Students in the target-based group who were close to the goal were most likely to cheat.

Lead researcher Fei Song says being close to the target was "a big apple, tempting them to cheat in order to get the bonus."

"To combat cheating, companies must have effective internal auditing and monitoring systems in place," Song says. "This will help to control and weed out any misrepresentation, which can occur under any payment scheme."

If you've never looked at the internal controls for your performance-based bonus system, now's the time. Even conscientious employees may be tempted to fudge just a little to hit your big practice goal. Remove the temptation by building in checks and balances to make sure every product or service sold is verified.

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