Are human resource practices linked to employee misconduct?

Written by: Rachel Wells

This blog post is based on the Human Resource Management Review article “Are human resource practices linked to employee misconduct? A rational choice perspective” by James Werbel and David B. Balkin.

Employee Misconduct

Werbel and Balkin define employee misconduct as a form of unethical behavior in organizations. When compared to something broad like organizational deviance, employee misconduct has a more narrow range of unethical behaviors. These behaviors are related to corporate wrongdoing that can be seen in the recent collapse of AIG and Merrill Lynch. In these cases bankers sold pub-prime loans to customers in order to gain pay incentives for themselves.

This article suggests that “at the individual level of analysis, employees approach misconduct rationally by considering the opportunities to be gained from misconduct (rewards/incentives) compared to the fear of being caught (performance assessment)” (Werbel and Balkin 319). If the opportunities to be gained outweighs the fear of being caught, then the employee will engage in misconduct.

Linking to HR Practices

The authors link specific and well intended HR practices associated with both performance appraisal and compensation as an organizational context that shapes misconduct. (Werbel and Balkin 318). The HR practices that the article directly links to misconduct are:

• The proportion of incentive pay to base pay and the use of discontinuous incentives

• Performance appraisals (outcome-based compared to behavior-based)
• Lack of 360 degree performance appraisals
• When a supervisor and subordinate's performance outcomes are linked

Compensation

When an employee's base pay is low and the majority of their compensation comes from incentives, there is a greater likelihood that misconduct will occur. Also, the use of discontinuous incentives adds to the likelihood of misconduct. Discontinuous pay incentives is when an employee has to reach a specific quota. If the quota is not reached, no incentive is given. When these two HR practices are used the benefit to the employee of committing misconduct increases. Employees focus more on increasing sales and reaching their quota, and lose focus on how they are achieving these goals. A recommendation for a mixture of guaranteed base salary and lowered commission rates is given in the text (Mathis and Jackson 411).

Performance Appraisals

Werbel and Balkin believe that outcome-based performance appraisals decrease employee fear of being caught in misconduct because they are only being evaluated on their amount of sales and customer satisfaction. Supervisors spend most of their time focusing on data associated with performance outcomes, and less time on observing how employees reach these outcomes. The text agrees that when only results are emphasized, how the results are achieved is not considered (Mathis and Jackson 326). With decreased fear of being caught, employees are more likely to engage in misconduct. The lack of 360 degree performance appraisals is said to contribute to misconduct because 360 degree performance appraisals increase employee fear of being caught. Since this type of performance appraisals captures information from multiple sources about an employee, there is a higher chance that misconduct can be brought to a supervisor's attention.

Supervisor and Subordinate Relationship

Supervisors are more likely to encourage or ignore a subordinate's misconduct if their performance outcomes are directly linked. For example, if a store manager only gets a bonus if all her employees reach their sales quotas, then she would be willing to let her employees engage in misconduct to increase sales.

Conclusion

I believe this information can be used by students who are in a sales based job now, or might be in the future, to help them stay ethical. They can use this article to evaluate which one of these HR practices are being used at their organization, and can then be aware of the temptation to commit misconduct. For HR professionals this can also be used to implement or change HR polices because recommendations for HR practices are given to reduce the likelihood of misconduct.

Mathis, Robert L., and John H. Jackson. Human Resource Management. 13th ed. Mason: South-Western Cengage Learning, 2011.

Werbel, James, and David B. Balkin. “Are human resource practices linked to employee misconduct? A rational choice perspective.” Human Resource Management Review 20 (2010): 317-326.

Recruiting Smarter Teachers

Written by: Stephen Grassi

This blog post is based on The Journal of Human Resources article “Recruiting Smarter Teachers” by Dale Ballou and Michael Podgursky.

A Problem

“A weak faculty operates a weak program that attracts weak students.” In 1969, these were the words of the president of the Council for Basic Education. It’s odd that things in the world of education have changed so little in over 40 years. A good education is one of the keys to a successful career, and a good education is taught by good teachers. But where do you find the good teachers? And how do you recruit them?

A Pay Raise?

Messrs. Ballou and Podgursky (who will henceforth be referred to as “the authors”) state that many college students who are education majors tend to have the lowest SAT scores among all college graduates and that the “better students who do enter the profession tend to be the first to leave. Some have recommended that increases in teacher salaries will attract “more capable persons” to the field of teaching. Across-the-board pay raises have indeed been implemented in many districts and institutions, since enough people agreed upon this idea.

The article goes on to object to this theory. Since the supply of teachers in the US outweighs the demand, it is illogical to think simply raising the pay of all teachers will attract better, more capable teachers. In fact, the authors found that when teachers’ salaries were raised by 20% across the board, there was at best a “modest” increase in workforce quality and that it was even possible for the quality of the workforce to decline.

A Statistical Analysis

By engaging in statistical analysis of this issue, the authors have discovered: (1) “Higher salaries encourage candidates of all levels of ability to enter teaching.” This will attract some individuals with higher levels of ability, but it will “also slow the rate of exit from the work force.” This means that older workers would choose to work longer instead of retiring. (2) “Because the applicant pool is growing while the number of vacancies is falling, the probability of receiving [a job offer] declines” Because of these conclusions, it is impossible to tell (without further statistical investigation) if across-the-board salary increases actually hurt or help the situation.

Further statistical investigation reveals that across-the-board salary increases are only marginally effective in attracting and hiring higher-ability individuals. However, when salary increases are restricted to individuals in the top two statistical categories of ability, there is a “considerably more effective” attraction of higher-level talent. This restricted salary increase is able to work because the 2 discoveries mentioned in the previous paragraph are not taking place. A salary increase for the individuals with top talent levels will not “encourage candidates of all levels of ability to enter teaching.” It will not (significantly) “slow the rate of exit from the work force.” Human Resource Management by Mathis and Jackson indicates on page 386 that pay-for-performance strategies, such as the one put forth in this blog post, are gaining popularity and are specifically designed to reward and retain top-performing employees.

A Conclusion

This article concludes that offering salary increases to the individuals with top-level talent is an effective way of increasing the quality of individuals in the teaching profession. Not only does it attract individuals with higher talent, but it also does it in a cost-effective way. There is little money wasted, which stands in stark contrast to the high cost and low return on investment of the across-the-board raises.

“Recruiting Smarter Teachers” by Dale Ballou and Michael Podgursky offers a fascinating look into the recruiting process and how to attract top talent in the field of teaching. It is hard to believe that a process which seems so simple could possibly be so complex, and yet the authors had to engage in in-depth statistical analysis to determine a recruiting method that would yield the best results. I encourage you to look up and read the article for yourself. It will be beneficial to understand these processes when you are looking to attract talented people to your organization or as you yourself are looking for a job.

“Recruiting Smarter Teachers”

Dale Ballou and Michael Podgursky

The Journal of Human Resources , Vol. 30, No. 2 (Spring, 1995), pp. 326-338

Published by: University of Wisconsin Press

Article Stable URL: http://www.jstor.org/stable/146122