A “get tough” approach to poor employee performance may breed more unethical behaviour in financial services, new research reveals today.
Generating excitement about winning, rather than a fear of losing, is the key to innovative and engender ethical behaviour, according to the report from London Business School and consultants PwC.
Managers were 15 per cent more anxious than excited when presented with situations where the negative consequences for poor performance were highlighted, the study shows.
This makes them twice as likely to behave unethically, the report said.
But when the 2,431 managers were presented with the same situation but with positive outcomes of success highlighted, they were correspondingly more excited – leading them to be more than twice as likely to demonstrate innovative behaviour, the report said.
The findings comes amid regulatory upheaval in the financial sector after several high profile scandals, such as the jailing of UBS’ former rogue trader Kweku Aboboli and large fines meted out to banks accused of rate rigging.
“We are not suggesting that rules and penalties for bad behaviour should be abandoned as it’s essential that people know what is acceptable and what isn’t, and criminal behaviour should be punished,” said Duncan Wardley, a behavioural science specialist at PwC.
“This is about the sorts of pressures that push ordinary, well-meaning people into behaving less ethically that they would want to, by cutting corners and hiding mistakes.”
PwC head of pay, performance and reward Tom Gosling added: “Tough medicine prescribed by regulators to curb conduct issues meets the public appetite for retribution. But pay regulation based purely on pay structures and penalties can unintentionally create the very conditions that make unethical behaviour more likely.”