My first experience with incentive bonuses came after our company was acquired on the lip of a recession. When that downturn gained traction, bonuses disappeared. That didn’t matter for my long-standing colleagues as we had never benefited from them, but our new colleagues were furious that they were working harder than ever and not getting remunerated accordingly. It was a sign to me that something was rotten in Incentiveland.
A study with bankers found evidence they put more money into risky investments when bonuses were at stake in a competitive situation, only the top producing ones being rewarded. “Once you’re in the rear, only taking higher risks offers you the opportunity to get to the front of the line and receive a bonus payment.
Various studies have shown people are more willing to lie to gain an advantage over another person. But again, there can be a relational retardant. If the damage becomes substantial to the other person, they are more likely to refrain from lying. In that vein, studies by Francesca Gino and Max Bazerman of Harvard Business School suggest that leaders should not tolerate minor ethical infractions because there can be a slippery slope of small-scale cheating leading to major corruption.