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.