To better understand the underlying behavior of people making business decisions, participants in Tamara Lambert's study were told stories about "Joe" and "Rick." A story on p. 16 in Lehigh Business titled "Would You Tell a Lie to Get Your Bonus?" details the research.
Here are the stories that participants in the study were told.
Story given to participants in Study #1: Joe the equipment salesman
To better understand the underlying behavior, the team did three studies with the general public, not necessarily from the financial sector. The participants were told a story about “Joe the equipment salesman” and then rated the relative acceptability of Joe’s actions to get his bonus. In one scenario, Joe counted a sale before the paperwork was official (reporting distortion) to get it in on time to qualify for his bonus. In the other, Joe discounted the price on the equipment, so less paperwork was needed. Joe could beat his deadline and got the bonus (operating distortion).
They presented survey respondents with the following scenario and question:
Deserves: Joe sells equipment to construction companies and gets paid a bonus if he hits his sales goal. He has worked hard, but the poor economy has left him just short of his goal. A customer has decided to place an order large enough for Joe to hit his goal. Unfortunately, the customer's vacation schedule will keep them from getting the formal paperwork filed in time.
Do you think Joe deserves to receive the sales bonus?
Please respond on a scale of 1 to 10, where 1 is no, he definitely doesn't deserve the bonus, and 10 is yes, he definitely does deserve it.
They devised the scenario to connect us to prior research (by using a private business setting), and to allow wide diversity in views about whether Joe deserves the bonus (by having him fall short of the goal even though he did his part).
After providing the identical scenario to all respondents and asking the Deserves question, we split our sample in half, and tell one half that Joe hit his goal by distorting reporting, while telling the other half that Joe hit his goal by distorting operations.
Reporting Distortion: Recall that a customer decided to place an order large enough for Joe to hit his sales goal. Unfortunately, the customer's vacation schedule kept them from submitting the formal paperwork in time for Joe to hit his goal. Joe counted the sale anyway in the report that determines his bonus. The sale was completed before the report was reviewed.
Operating Distortion: Recall that a customer decided to place an order large enough for Joe to hit his sales goal. Unfortunately, the customer’s vacation schedule kept them from submitting the formal paperwork in time for Joe to hit his goal. Joe lowered the price enough that less paperwork was needed, and the sale went through in time for Joe to get his bonus; however, his company made less money than if he had waited. How acceptable was Joe's action? Please respond on a scale of 1 to 10, where 1 is totally unacceptable and 10 is totally acceptable.
We then measured how acceptable Joe’s action is by asking the following question:
How acceptable was Joe's action?
Please respond on a scale of 1 to 10, where 1 is totally unacceptable and 10 is totally acceptable.
Story given to participants in Study 2: Rick the administrator
As in Study 1, our key manipulation alters whether the actor engages in operational or reporting distortion. In half of the cells, respondents were presented with the operating distortion scenario first and the reporting distortion scenario second; for the other half, the order is reversed. Unlike Study 1, we chose a highly-emotional setting where harm would be greater and would apply not just to the firm but also to third-parties (patients).
We began the study by telling participants the following:
Rick Wilson, M.D. (or Rick Wilson, C.P.A., or Rick Wilson) is the Director of Springdale General Hospital, after many years in medicine (or accounting or sales). The hospital has had serious troubles in recent years, and the board of directors brought in Wilson to turn it around. Most people agree that, had it not been for Wilson, the hospital would have failed completely. Still, it looks like the hospital will fall just short of the performance goals that would allow Wilson to get a bonus this year, and allow the hospital to maintain full staff and services.
Next we asked about deservingness, similar to Study 1:
Deserves: Do you think Wilson deserves a bonus this year? As a reminder, the hospital has greatly improved under Wilson’s leadership, but it’s still just shy of its performance goals.
Please respond on a scale of 1-10 where 1 has the label “Definitely does not deserve a bonus” and 10 has the label “Definitely deserves a bonus.”
We then manipulate distortion type and measured the acceptability of each action within subjects, with order randomized.
Reporting Distortion: Wilson decided to improve the hospital's reported profits by directing his staff to delay reporting some high-cost treatments. Accounting standards require that the costs be reported this year, because delays often harm investors. But by delaying the reported costs until next year, Wilson will get a bonus this year, and the hospital will be able to maintain full staff and services.
Operating Distortion: Wilson decided to improve the hospital's reported profits by directing his staff to delay providing some high-cost treatments. Medical standards require that hospitals provide care as promptly as possible, because delays often harm patients. But by delaying the treatments until next year, Wilson will get a bonus this year, and the hospital will be able to maintain full staff and services.
They used a 101-point scale rather than the 10-point scale in Study 1 to allow for greater variation in responses.
If you found out about Wilson's directive, what would you recommend?
Please respond on a scale of 0 to 100 with the following labels:
0 = “Wilson should face prison time,”
20 = “Wilson should be fined or fired,”
40 = “Wilson should be paid his salary, but not a bonus,”
60 = “Wilson should receive both his salary and a bonus,”
80 = “Wilson should be awarded or promoted,”
and 100 = “The hospital should be renamed after Wilson.”
After participants answered both distortion questions, we asked them about the value of financial measures in assessing hospital performance, which we use to control for the possibility that variation in such beliefs causes variations in the acceptability of distorting financial measures.
Measure Quality: How much do you agree or disagree with the following statement:
Financial measures are a good way to assess hospitals’ performance. (Scale of 1 to 6 where 1 = “Strongly disagree” and 6 = “Strongly agree”).