Question

How managers can use rewards and discipline for shaping ethical behavior?

Answer 1

Business owners are responsible for promoting ethical behavior within their organizations. Motivating moral behavior can be difficult, but with a thoughtful combination of discipline and rewards, companies can encourage their employees to adopt attitudes and behaviors that result in a positive workplace and happy customers.

Instituting a code of ethics is an important first step. This code is your company’s statement of its values concerning ethics and social responsibility. It might clarify what you believe your company’s responsibilities are and how you want employees to treat customers and each other. Creating a code of ethics helps guide your organization’s behavior. Also, clear ethical guidelines let everyone know what types of behavior you won’t tolerate.

Managers can use rewards and discipline for shaping ethical behavior in following ways:

Rewards

One of the main purposes of providing rewards to employees is to shape their behavior. The key to ensuring that rewards have the most impact on shaping the employee’s behavior is knowing what behavior to reward, when to reward it and how to reward it. Rewards that are contingent upon certain behavior are critical in shaping future behavior.

Extensive research on ethical behavior strongly supports the conclusion that if ethical behavior is desired, the performance measurement, appraisal and reward systems must promote ethical behavior (Sims, 1992). Managers can determine the allocation of valued incentives such as promotions, bonuses, raises, attractive work assignments, time off and compliments. Trevino and Brown (2005) and Trevino (1986) observed that rewards can send powerful messages to employees supporting ethical or unethical conduct. “Senior managers need to work hard to catch new hires doing things right . . . then recognize and reward them for those behaviors”. Hegarty and Sims (1978) empirically demonstrated that “if unethical decision making is rewarded, then higher incidence of unethical behavior is likely to occur”. The challenge presented by the use of reward power is that some of the rewards may have limited perceived value to the employee. A compliment in lieu of a lucrative financial payoff may not be a sufficient incentive for an employee. Moreover, the ethical conduct may not be observed by top leadership. Finally, some rewards, such as salary increases or promotions, may be controlled by, or more heavily influenced by, direct supervisors within the organization. If these supervisors do not share the same values as top leadership, employees are likely to be rewarded for behaviors using performance metrics more salient to the supervisor.

Discipline

Managers can punish employees within an organization for noncompliance with ethical mandates by firing, demotion, reprimands, threats, denials of privilege, undesirable work assignments and other disincentives. Trevino and Brown (2005) determined that negative sanctions can send powerful messages throughout an organization about the appropriateness of unethical conduct, and Hegarty and Sims (1978) found that the threat of punishment discourages unethical conduct. The impact of coercive power can extend beyond the individual engaged in unethical conduct. By observing how other employees are disciplined for infractions, employees can learn vicariously about the consequences of unethical conduct and the leadership stance on such conduct. There is a challenge with the use of coercive power. Employees may choose not to engage in unethical conduct for “the wrong reason.” They may not participate in an unethical act due to a fear of being caught, rather than because they believe that the action is intrinsically unethical. As Bazerman and Tenbrunsel (2011) observed, a sanctioning approach to unethical conduct may increase the probability that employees contemplating an unethical act will engage in a cost-benefit analysis rather than evaluate the behavior on its own merits. If employees assess that there is a low probability of detection for engaging in unethical conduct, the impact of coercive power to shape an ethical climate may be limited.

Conclusion

Rewards and punishment can breed compliance, but truly ethical behavior depends on an inner desire to do the right thing. A business owner can promote moral behavior by fostering a culture that values teamwork and employee welfare. For example, helping employees progress in their careers nurtures a positive attitude, as does encouraging your employees to improve rather than berating them for failures. As a result, people in your organization are more optimistic, which makes them more likely to behave ethically.

Managers seeking to shape employee’s behavior should consider ethical and legal consequences as well as the impact that shaping may have on the employee when deciding which method to use.