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Under Pressure: How Organization Incentive Programs Can Lead To Fraud

I’ve had a lot of professional nicknames over the years. “Scary Mary” was popular for quite some time, but more recently people have called me “Nancy” as in Negative Nancy. I don’t think I’m negative — I’m more of a realist, or I just have an appropriate amount of professional skepticism. Lately the target of that professional skepticism has been incentive programs in particular.

Every organization uses incentive programs. Some organizations’ incentive programs can have positive outcomes and others only have moderate outcomes, but both can lead to fraud. So what causes one program to result in fraud while another does not? Unfortunately, there are many factors, but it starts with the purpose of the incentive program. Is the purpose to inspire, punish, influence or deter?

Pressure takes many forms — professional versus personal, real versus perceived and positive versus negative. An individual may have personal pressure such as financial debt, or an organization may create professional pressure though unrealistic expectations or incentive programs. Incentive programs can be either “positive” or “negative” in nature. Positive incentive programs reward desirable outcomes, such as accomplishing goals or exceeding expectations.

Negative incentive programs take the form of punishment, for example, when employees are punished for not meeting expectations or not achieving key performance indicators. Pressure can also be “real” — such as a negative incentive program that results in real consequences such as discipline or termination — or “perceived” pressure — believing “I deserve more” for my hard work and loyalty.