The authors investigate the joint effects of two environmental variables, performance-based pay (PBP) and performance monitoring (PM), on behavioral dishonesty in a setting where the controls subsequently are absent. In a laboratory study using 88 participants in a 2×2 experimental design, simulating a work environment, the authors manipulate the presence of PBP and PM. Once the participants are accustomed to their assigned work environment and have completed contractual tasks unrelated to the dishonesty experiment, the authors allow them to privately roll dice to determine the size of a bonus gift card. Dishonesty levels are inferred from differences between treatment groups in the prizes claimed. The authors find an interaction effect, where inferred dishonesty in the performance-based-pay group is higher than the fixed-pay group when there is no PM, but lower when there is PM. Although theory and existing literature did not lead us to hypothesize these exact results, they offer important insights into a complex relationship. By jointly examining the effects of worker contracts and workplace monitoring on dishonesty, this research extends the understanding of the potential consequences of formal controls. As the workplace grows more complex, employers increasingly rely on information provided by frontline employees and managers. Thus, unintended effects of managerial controls on honesty are an important topic in the business literature.
We appreciate the help of research assistants Rebecca Taylor and Jaime Laird. The comments from Tim Fogarty and an anonymous reviewer for the 2016 Research Ethics Symposium at the AAA Annual Meeting were invaluable. Brian Laird received support from Arkansas State University in the form of a summer research grant. The work also was supported in part by a grant from the Fogelman College of Business and Economics at the University of Memphis. This research support does not imply endorsement of the research results by either the Fogelman College or the University of Memphis.
Bailey, C., Fessler, N. and Laird, B. (2019), "Performance-Based Pay, Performance Monitoring, and Dishonest Behavior: The Plot Thickens", Burney, L.L. and Malina, M.A. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 31), Emerald Publishing Limited, Bingley, pp. 91-112. https://doi.org/10.1108/S1474-787120190000031005
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