Recent Articles

May 28Doug Smith

Are You Paying a Tip, or a Bribe?

May 28Doug Smith

Both tips and bribes are rewards for service, so why is one considered outside the boundaries of ethical behavior? Harvard Business School Professor Magnus Thor Torfason has investigated this thin line. His research was recently written up in an issue of the HBS Working Knowledge blog.tipping part-time cfo northern virginia

Few people see a relationship between tipping and bribing. But consider this: In places where people tip heavily, bribes are more likely to exchange hands as well.

New research shows that there’s actually a fine line between the socially acceptable act of tipping and the immoral act of bribing, according to Magnus Thor Torfason, an assistant professor in Harvard Business School’s Entrepreneurial Management Unit.

His article for Social Psychological & Personality Science, “Here’s a Tip: Prosocial Gratuities Are Linked to Corruption,” was coauthored with Francis J. Flynn, the Paul E. Holden Professor of Organizational Behavior at Stanford, and Daniella Kupor, a doctoral student at Stanford.

It is generally considered a good-natured prosocial thing to tip, but bribing is considered to be antisocial and negative,” Torfason says. “So this relationship between tipping and corruption is counterintuitive in the United States. But there is a fuzzy line between the two.” The research might help executives avoid falling into a trap where attitudes and beliefs about tipping lead to bribing.

Torfason and his colleagues found a link between these two behaviors when they studied cross-national data for 32 countries and controlled for per capita gross domestic product, income inequality, and other factors. In short, countries with higher rates of tipping behavior also tended to have higher rates of corruption.

Tips and bribes can possess striking similarities that may lead to their positive association, the researchers report. “In a sense, both are gifts intended to strengthen social bonds and each is offered in conjunction with advantageous service. One could even argue that the main difference between the two acts is merely the timing of the gift: Tips follow the rendering of a service, whereas bribes precede it.”

Torfason says the link between tipping and bribing may come in part from “temporal focus,” or how each individual thinks about and weighs the past and future. In some places, tips are provided not so much to reward good service but to encourage good service in the future—a perception that brings the tip closer to the purpose of a bribe, which is also focused on future service.

 A history of mixed messages

The mixed messages that can come with these cash exchanges have deep roots in history. During the Middle Ages, feudal lords traveling beyond their territories would toss coins to beggars in hopes that these acts of kindness would ensure safe trips. And in Tudor England, guests who stayed overnight were expected to leave payment for their hosts’ servants at the end of their stay as a way of compensating for the extra work their visit created.

Today, most people in Western societies draw a distinct line between tipping and bribery, and the fact that the two are linked runs counter to what most people would expect. When Torfason and his colleagues asked 51 participants from a national online pool about their impressions of the relationship between tipping and bribery, just 5.9 percent said they thought they were “probably positively related,” whereas 78.4 percent thought they were “probably not related.”

“In the United States, people assume tipping and bribery are not related,” Torfason says. “There’s a clear distinction between professions that are tipped and situations where informal payments would be considered a bribe.”

And yet, despite this distinction, corruption does exist in the United States, where consumers regularly tip restaurant wait staff, taxi drivers, hairdressers and others, Torfason says.

“Richer countries tend to have less corruption than poorer countries,” he notes. “But if you control for GDP in the US, our country is higher in tipping and also higher in corruption than other similarly rich countries.”

Examples from Canada and India

In their research, the Torfason team decided to take a particularly close look at Canada and India—which were similar in their tipping habits, but quite different in their bribery levels—with Canada seeing little bribing activity and India seeing substantially more.

The researchers concluded that the reason for this difference was rooted in the way people in the two countries viewed this exchange of money.

The Surprising Relationship Between Tips and Bribes

Indians were more likely than Canadians to tip with the hope that the offer would bring about better service in the future. Canadians viewed tipping more as a reward for a service received in the past. The researchers found that Indians also rated bribery as more morally acceptable than did Canadians.

“In the mind of someone who thinks of tipping as something that implies better future service, tipping and bribery are closer together,” Torfason says.

The researchers confirmed this intuition in a lab experiment. They exposed 40 participants to articles about tipping that differed in only one small aspect: whether tipping was framed as being intended to either “reward good service” or “encourage good service.” Those exposed to the “encourage good service” scenario viewed corruption less harshly. They felt that bribing a judge, for instance, or paying foreign officials to facilitate business contracts was less objectionable and immoral compared to the participants who were exposed to the “reward good service” scenario.

Blurring the lines

Extending the research results to the business world, Torfason says that corporate executives should be careful about the extent to which they engage in informal exchanges both within and outside their organizations.

“Once you start engaging in these informal tit-for-tat exchanges, it may increase your susceptibility to engage in certain acts of informal exchange that may not be acceptable,” explains Torfason.

It’s important for companies to have clear rules about what kinds of “favors” are acceptable when employees are interacting with business associates outside the company. And even within an organization, executives should avoid asking employees to step beyond their job duties by doing favors that benefit the executives personally.

“Executives can become quite skilled at managing things through informal exchanges and favors. But that means there is just a little step toward expecting their subordinates to do favors or run personal errands for them, even though that’s not what the employees are getting paid to do,” Torfason ssaysaid. “Executives need to be careful not to use their positions to start expecting benefits that go beyond their corporate role.”

In general, he adds, people should remain mindful of the association between tips and bribes so they can avoid blurring the lines.

“Informal exchanges are trickier to manage than people sometimes think,” Torfason says. “Once you are embedded in a web of informal transactions and favors, it can sometimes become harder to judge what’s appropriate and what’s not.”

 

B2B CFO®

Free Discovery AnalysisTM

Fill out the form to receive your
Free Discovery AnalysisTM (a $1600 value)