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Winning at a Losing Game? Side-Effects of Perceived Tournament Promotion Incentives in Audit Firms

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A Correction to this article was published on 18 September 2018

This article has been updated

Abstract

Tournament-like promotion systems are the default in audit firms, which are generally internally owned professional partnerships. While awarding promotions in a contest-like fashion stimulates contestants’ motivation and productivity, it may also upset an organizations’ ethical climate and trigger ethically adverse behaviors. Since nearly all research on promotion tournaments in management has been conducted in public firms, little is known about how these incentive systems operate in professional partnerships. In this study, we analyze how the perception of the two controllable design parameters of promotion tournaments—the relative pay spread between winners and losers and tournament breadth in terms of the number of contestants that compete for a prize—affects audit firm behavior. Survey results provide evidence that the tournament’s perceived breadth prompts adverse behavior, as it does in public firms. Contrary to conventional wisdom, however, the perceived pay spread has no significant effect on adverse behavior, but triggers desirable behaviors instead. Our study suggests that promotion tournaments indeed provide powerful incentives, but also that understanding the unintended consequences of these incentives on organizational ethical climates and behavior requires tournament theory to be contextualized when it is applied in new settings like internally owned professional partnerships.

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Change history

  • 18 September 2018

    The name of the third author was incorrect in the initial online publication. The original article has been corrected.

Notes

  1. This is based on the transparency reports of the Big Four in the Netherlands (2016) and is comparable to partner representation around the world.

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Authors and Affiliations

  1. Desautels Faculty of Management, McGill University, 1001 Sherbrooke Street West, Suite 334, Montreal, H3A 1G5, QC, Canada

    Jorien L. Pruijssers

  2. Department of Strategic Management & Entrepreneurship, Rotterdam School of Management, Erasmus University, P.O. Box 1738, 3000 DR, Rotterdam, The Netherlands

    Pursey P. M. A. R. Heugens & J. van Oosterhout

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  1. Jorien L. Pruijssers
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  2. Pursey P. M. A. R. Heugens
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  3. J. van Oosterhout
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The original version of this article was revised: the name of the third author was corrected.

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Pruijssers, J.L., Heugens, P.P.M.A.R. & van Oosterhout, J. Winning at a Losing Game? Side-Effects of Perceived Tournament Promotion Incentives in Audit Firms. J Bus Ethics 162, 149–167 (2020). https://doi.org/10.1007/s10551-018-3991-2

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