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Many companies use a performance-based bonus approach, called “pay for performance (PfP)” systems, for employee motivation. These systems produce the desired, performance-boosting behavior at work, but they do have a drawback. PfP systems encourage social comparison and competition, even leading to aggressive behavior among employees. This can escalate to the point that colleagues actively harm each other. These are the findings of Professor Niels Van Quaquebeke from Kühne Logistics University and Daniel Gläser (RespectResearchGroup, University of Hamburg), who studied the collateral effects of PfP systems in organizations together with Dr. Suzanne van Gils from Maastricht University.
PfP systems are successfully established in a range of sectors, from health care to banking. They are considered a particularly effective means of boosting motivation: employees receive financial bonuses for achieving specific targets. The drawbacks of these systems have been ignored until now. In a cross-sectional study across sectors and two experiments, the authors examined PfP’s negative consequences for individual employees and organizations as a whole. Gläser summarizes the results: “PfP may become a problem for organizations. In a company whose success depends on the exchange of knowledge among employees and managers, innovation, and close collegial collaboration, aggressive competition among colleagues can poison the working climate.” Competition does not even need to be an explicit feature of the system. Employees will naturally compare themselves to each other and sense a climate of competition. “When employees harm each other and high performers leave the company, the whole company suffers in the long term,” said Gläser.
For this reason, the authors urge organizations that use a PfP system to inform their employees about the possible negative effects and keep an eye on the competition their PfP system has encouraged. Van Quaquebeke explains: “This especially applies to employees whose individual profiles contain a component of competitive drive. People who are strongly inclined to compare themselves to others and always want to be better will have strong reactions to the incentives of bonus systems. This can lead to aggressive behavior.” Of course the authors recommend organizations a detailed analysis of whether there is a possible conflict between short-term economic targets and the corporate culture they aspire to in the long term before implementing PfP systems. Various examples from the past showed that the over-ambitious pursuit of profit could damage a company’s image or lead to a serious entrepreneurial crisis.
The authors’ article, "Pay-for-Performance and Interpersonal Deviance: Competitiveness as the Match that Lights the Fire", will appear in the next issue of Journal of Personnel Psychology.
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About KLU
Kühne Logistics University – Wissenschaftliche Hochschule für Logistik und Unternehmensführung (KLU) is a private university located in Hamburg's HafenCity. The independent, state-certified university focuses on the areas of logistics and management. With one BSc and four MSc degree programs, a PhD program, and a part-time Executive MBA, KLU offers its 275 full-time students a high level of specialization and excellent learning conditions. In open, customized management seminar series, industry specialists and managers benefit from the application of academic findings to practical issues. KLU has an international team of 23 professors who teach in English. The programs are oriented toward students from Germany and abroad. Research at KLU is concentrated on the Key Competence Areas of Digital Transformation, Creating Value, and Sustainability for the benefit of transportation, global logistics, and supply chain management.
The most recent Handelsblatt rankings identify KLU as one of the leading research universities in Germany, Austria, and Switzerland based on research output per professor. In the newest CHE university rankings, KLU obtained the highest ranking in all major criteria.
For more information, visit www.the-klu.org.
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