New study reveals unintended ethical faultline in team-based reward systems

Compared to employees who are individually rewarded, workers in team-based reward systems are more likely to remain silent when they observe a fellow team member engaging in unethical behaviour, according to the findings of the study “Turning a Blind Eye to Team Members’ Unethical Behaviour: The Role of Reward Systems.”

“Team-based reward systems, initially sparked by Japanese corporate success, have been widely adopted and they have become a staple of good management practice with proven benefits. But managers should be aware that they may be stoking up trouble for the future in terms of undesirable employee behaviour,” said Professor Hajo Adam, co-author of the research.

Professor Adam, an organisational psychologist who studies culture and conflict, said the four behavioural studies within the research showed unethical behaviour in team-based reward systems was less likely to be reported than in those where individuals were rewarded, explaining why some organisations may be prone to corrupt conduct and poor behaviour.

“With team-based incentives, unethical behaviours become relatively advantageous for all team members, thereby suppressing the likelihood that such transgressions get reported. This can become an issue for managers, who run the risk of underestimating the prevalence of undesirable behaviour,” he said.

An additional risk lies in the nature of team-based reward systems, which are usually intended to foster a positive and collaborative working climate. Ironically, the desire to preserve that team ethos and environment can mask underlying problems and allow them to fester, the researchers noted.

Alongside managers needing to understand the inherent ethical risks in team-based reward systems and to be more vigilant, Professor Adam said there were two further solutions that employers should consider.

“First, managers might consider implementing a tailored reward system, mixing team-based and individual rewards in a balance that works for their particular industry or sector. The second is about culture — creating an environment where employees can blow the whistle on bad behaviour and can act safely on their moral anger generated by witnessing such acts,” he said.

Professor Adam said managers who wanted to encourage employees to report the unethical behaviour of colleagues should prioritise the importance of moral intuition and emotions, developing these so-called soft skills alongside the conventional hard skills of business. Integrating training sessions on emotional intelligence can enable employees to accurately recognize and label moral anger and emphasise the potential organisational benefits of acting on such emotions, he added.

The research, published in the Journal of Business Ethics, was co-authored by Professor Adam, Dr Qiongjing Hu and Dr Shenjiang Mo, both of the School of Management, Zhejiang University, and Dr Sreedhari Desai of the Kenan-Flagler Business School, The University of North Carolina.