Employer data confirms that setting performance-related goals for employees can often have unintended consequences for the team or wider organisation. In economics, this is referred to as an externality – an indirect cost that affects not the entity itself (which could be an individual, team, organisation or even country) but those around it.
Individuals who are paid primarily on commission may have an incentive to withhold information from colleagues or even to sabotage colleagues’ performance. As a result, some organisations use team-based incentives to boost collaboration.
Unscrupulous behaviour by one member can be advantageous to the whole team
However, new research led by business researcher Qiongjing Hu suggests that team targets and rewards may also have unintended effects. Gathering data from multiple organisations, the researchers found that team-based incentives reduced the likelihood of an employee speaking up when observing a fellow team member engaging in unethical behaviour. The effect disappeared when the observer and perpetrator were from different teams.
Under a team-based reward system, unscrupulous behaviour by one team member can be advantageous to the whole team. An employee who observes wrongdoing may therefore have a financial incentive to stay quiet.
The finding does not mean that team-based reward systems should no longer be used. However, leaders should understand potential externalities and put appropriate supports and processes in place to ensure their organisations are not inadvertently harmed.
More information
ACCA’s annual virtual conference, Accounting for the Future, features sessions to help you thrive in your career, including one with Dr Rob Yeung on skills for thinking critically about creativity. Register to attend live or on demand.
