Can performance-based bonuses for employees ever be a bad thing? They can when extra pay turns co-workers against one another.

Attempts to spur employee productivity, when not implemented carefully, can have damaging effects on a company, according to Lamar Pierce, a Harrington Fellow spending the academic year with the University of Texas at Austin. As a visiting professor from Washington University in St. Louis through May, thanks to the support of the Donald D. Harrington Fellows Program, Pierce is spending his time in Austin conducting further research into the ways that employee behavior can harm organizations.

Pierce is concerned with more than simply motivating employees. “A lot of it is around the darker side of that, the flipside, which is not just the actions that are productive, but actions that are particularly destructive -- really what we think of as destroying value -- and we can refer to these as unethical, you can refer to them as illicit.” These can range from workers simply being lazy on the job up to more serious issues like embezzlement, corruption, fraud and discrimination, Pierce explains.

Such behaviors can have huge impacts on a company. “We know from what we read in the headlines that businesses can absolutely be put out of commission, they can be put into bankruptcy, by employees who act unethically or by employees who act illegally. I really don’t think there could be research that’s much more important than that,” says Robert Prentice, chair of the Department of Business, Government and Society, who encouraged Pierce to apply for the fellowship.

As an example of his work, Pierce describes a situation where a company posted productivity results on the factory wall in an attempt to motivate workers through competition. “Put that out there for a bunch of factory workers, particularly when the quotas aren’t necessarily set correctly, where people think that others are lying about their productivity, and suddenly it turns rather from being sort of a competitive motivating force to a cause of basically sort of bad competition within where everybody says, ‘Oh, so-and-so is lying.’ It’s very de-motivating,” he says.

Performance bonuses are another real life example. “If I put in place a high powered performance system and now people are getting differential bonuses that may cause a bunch of anger and resentment within the organization because people start seeing each other as the enemy. They start looking at somebody else and feeling envious toward what they have,” he says.

Companies need to consider the possibility of such unintended consequences. “If we’re trying to design organizations, whether they are public or private, you can’t just take a simple solution and expect it’s going to impact positive behavior without also impacting negative behavior,” Pierce says. “That really gets to the core of the research: how do you design organizations to improve positive outcomes or reduce the negative ones.”

His research stems from a view that people aren’t simply either good or bad. “We need to think very, very carefully about under what conditions are people going to do good things and under what conditions are people going to do bad things. Then we design an organization around or also our society around trying to minimize those situations and trying to make people aware of their own weaknesses.”

Early in his career, Pierce worked in operations management at Boeing. His time there sparked his interest in encouraging worker productivity while also preventing unproductive worker behaviors -- such as driving forklifts in the factory while high on cocaine. A native of the the Pacific Northwest, Pierce studied economics, music and mathematics as an undergraduate. After a few years in the corporate world, Pierce went back to graduate school at the University of California, Berkeley. His early research considered why a large number of car leasing firms were losing significant amounts of money.

“Originally, I was sort of thinking about it from a firm level, trying to understand market structure and things like that,” Pierce says. “The more I studied it and the further I got into it, the more I realized it’s really a behavioral issue. It really comes down to people making decisions when they have their own psychological biases, they have strong incentives, organizations are set up incorrectly and there are information asymmetries. The more I studied this and other issues, the more I became interested in decomposing a lot of what we see at the firm and industry level to individual behavior,” he says.

As a Harrington Fellow, Pierce welcomes the opportunity to spend an academic year focused on his research. “Certainly in our world and certainly at this stage in my career, that’s a huge benefit and a very generous one. As far as I can tell, I don’t think there’s anything like it anywhere else in the country. It’s a beautiful program.”

Pierce is among a distinguished group selected for the honor. "The Harrington Fellowships allow us to attract the nation's best young faculty and graduate students to campus and to cultivate lasting relationships between UT and their home institutions," President Bill Powers said in a press release.

Others agree that UT will benefit greatly from having Pierce here. “He is endlessly curious, endlessly energetic and just really, really a smart guy,” says Prentice, adding the smartest people in behavioral ethics had chosen to work with Pierce, which marked him as a highly intelligent researcher.

“Every day I talk to him about what paper he is working on today and it always seems to be a different paper and he’s always launching new projects,” Prentice says. “It’s just fun to listen to where his research is going and the questions he’s trying to answer and the questions he’s asking.”

Pierce believes the Harrington Fellows Program has the potential to gain even wider popularity, both outside Texas and across the globe. “I think everyone here understands exactly how cool it is and how important it is, but I think internationally it’s got a lot of potential as well,” Pierce says.