Unethical behavior under relative performance evaluation: Evidence and remedy

• Published date: 01 November 2018
• DOI: http://doi.org/10.1002/hrm.21913
• Author: Konstantina Tzini,Kriti Jain
• Date: 01 November 2018

HR SCIENCE FORUM

Unethical behavior under relative performance evaluation:

Evidence and remedy

Konstantina Tzini

1∗

| Kriti Jain

2∗

1

INCAE Business School, Alajuela, Costa Rica

2

IE Business School, IE University, Madrid,

Spain

Correspondence

Konstantina Tzini, INCAE Business School,

Campus Walter Kissling Gam, Alajuela, Costa

Rica.

Email: konstantina.tzini@incae.edu

Funding information

People Programme (Marie Curie Actions) of the

European Union's Seventh Framework

Programme (FP7/2007-2013), REA grant

agreement No. 631070/IJ-KJP.

Relative performance evaluation, wherein the performance of employees is evaluated relative

to the performance of their peers, is popular within organizations. In this article, we report four

experimental studies to explore the impact that such an evaluation system has on unethical

behavior. We find that participants under relative performance evaluation expect others to be

more likely to use unethical means (Study 1) and indulge more in unethical behavior themselves

(Study 2). Drawing on these results, in Study 3 we propose a technique that we call consequen-

tial reflection to reduce intentions of unethical behavior, and we also test for the mediating role

of perceived risks and benefits. In Study 4, we explore how individual differences in rational–

intuitive decision-making styles moderate the effectiveness of consequential reflection. Overall,

the article provides evidence of moral side effects of relative performance evaluation. Further-

more, keeping in mind the constraints and needs of practitioners, we suggest a simple interven-

tion to curb tendencies toward unethical behavior.

KEYWORDS

decision making, ethics, intervention, performance evaluation, relative performance

1|INTRODUCTION

Unethical behavior in the workplace is an important concern for orga-

nizations. Corporate scandals arising from employee misconduct

often dominate the headlines and can result in significant conse-

quences: the collapse of Lehman Brothers and Barings Bank, the

Volkswagen emissions scandal (e.g., Wright, 2015), financial institu-

tions fined billions of dollars for manipulating foreign currency

exchanges (e.g., Binham & Arnold, 2015), and the Wells Fargo scandal

of sham accounts (e.g., Gray, 2016). A recent report by the Associa-

tion of Certified Fraud Examiners (2016) identified more than 2,000

cases of occupational fraud between 2014 and 2015 that resulted in

$6.3 billion in losses. The same report (pp. 68–70) attributed approxi-

mately 12% of these cases to excessive pressure toward performance

and success. Furthermore, academia has suffered retractions of

research papers due to nonreplicable studies or nontraceable data

(e.g., Carey, 2015) that have propelled debates about the side effects

of a tenure system fundamentally based on a fierce publication race.

Obviously, unethical behaviors—that is, behaviors that are “either

illegal or morally unacceptable to the larger community”(Jones, 1991,

p. 367)—within organizations differ in scale and magnitude. Irrespec-

tive of whether such behaviors result in full-blown scandals or incon-

sequential damage, there are important questions that require

answers: Why do these behaviors occur, and what can organizations

do to minimize their occurrence? Certainly, controlling for all possible

individual and situational factors that could tempt employees to act

unethically is a daunting task. This article addresses one potential

cause of unethical behavior that organizations can actually control—

performance evaluation systems—and possibly resolve through

behavioral interventions.

Performance evaluation serves many functions within an organi-

zation (Baron & Kreps, 1999; Cleveland, Murphy, & Williams, 1989)

such as communicating values, monitoring the achievement of goals,

understanding training and development needs, providing feedback,

and forming the basis of compensation and career progression. Since

performance evaluations hold employees accountable and are usually

linked to some form of rewards, they may entail behaviors related to

active manipulation on the part of employees (for a review, see Ferris,

Munyon, Basik, & Buckley, 2008). Based on this and given the grow-

ing interest in reshaping performance management systems (Deloitte,

2015), we suggest that unethical behavior is a critical, yet overlooked,

factor.

∗

Both authors contributed equally in this article.

DOI: 10.1002/hrm.21913

Hum Resour Manage. 2018;57:1399–1413. wileyonlinelibrary.com/journal/hrm © 2018 Wiley Periodicals, Inc. 1399