Question

Provide positive feedback:

Pay-for-Performance Link. Based on your understanding of linking organization strategy to compensation and performance management, as discussed in Chapter 9, discuss how to strengthen the pay-for-performance link.

Powerful incentives can cause undesired behaviors. Suggest ways to solve this problem, using something you know a great deal about – academic performance.

Oooh, fascinating question! At the end of last year I read Smartest Kids in the World by Amanda Ripley. One of the stories a South Korean boy killed his mom and hid her corpse in their apartment for months. He was under so much stress about his high school graduation exams and had so much pressure to preform well for his family that he snapped. That would be pretty extreme in the US.  

Here I would expect cheating if incentives became too high. Maybe it would be in the form of buying paper. Maybe it would be in the form of parents bribing administrators or admissions counselors.

To promote ethical behavior teachers could try to promote class unity by recognizing accomplishments in a way that does not pit students against each other in competition. Maybe schools could offer teaching classes on ethics. Maybe they could lower the incentives or increase punishments for fraud and cheating.

How would you design a pay-performance system that uses powerful incentives to motivate behavior, yet keep the behavior from veering into the unethical? (Hint: You want to keep the powerful incentive effect of pay. So don’t recommend eliminating incentive pay or reducing the size of the incentive component.) What’s left?

We could try increasing the punishments for unethical behavior. We could do things to promote group unity or at least keep students in pairs - oh but I had group projects. We could try peer reviews to verify that those who are receiving top incentives deserve them honestly.  

   How do you ensure ethical behavior?

My first thought is to hire ethical employees. Another thought is to encourage ethical behavior from the top down and to be quick to remove anyone caught committing fraud. At the end of the day, I don't think we can totally ensure other people's ethical behavior.

Answer 1

In this competitive world, where everyone is racing to achieve something a high incentive pay could lead to unethical behavior.

a) Distribution of Incentives: A particular Key Result Area (KRA) which is linked to incentive can lead to unethical behavior. For eg: Incentive earned on incremental sales. Instead the incentives can be weighted across different KRAs like Sales, managing portfolio, service, complaints solving self development etc. In this way a person expert in sales will do good in that but will be capped to earn incentive in sales because he also needs to concentrate in managing the customers also. Its not necessary to have same KRA weightage across the firm. Sales channel can have more weightage for sales, service channel can have more for servicing the client.

b) Highlight ethical behavior at workplace: Ethical instances needs to be highlighted at workplace. If the person is awarded for ethical behavior and is highlighted for his behavior, it will encourage this behavior across the firm. It will also remind the employees to remember that company promotes and awards ethical behavior.

c) One on One discussion: The one on one discussion with your subordinates can educate the employees about the ethical behavior.

d) Checks at various points: There should not be only one decision maker in the organization. It should always be maker-checker roles and sales people should not be mingling with service people, this kind of firewall will prevent misusing of unwanted information

e) Code of Conduct: The most important one, have a training and development session of all employees in batches for code of conduct and ethical behavior.