29 Oct 2012  Research & Ideas

Are You Paying a Tip--or a Bribe?

Both are rewards for service, so why is one considered outside the boundaries of ethical behavior? Harvard Business School professor Magnus Thor Torfason on the thin line.

 

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."

Countries with higher rates of tipping behavior also tended to have higher rates of corruption

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.

"Tips follow the rendering of a service, whereas bribes precede it"

"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."

About the author

Dina Gerdeman is a freelance writer based in Mansfield, Massachusetts.

Comments

    • Keith Williams
    • Project Manager, The Yes Project

    In a workshop about Cialdini's six categories of Weapons of Influence and Persuasion (The Psychology of Persuasion:Cialdini R B;Collins 2007) There was debate about tipping; is it giving or repaying in the context of reciprocation and indebtedness. Which did your research suggest?

     
     
     
    • Ed Wolcott
    • retired

    This is probably an accurate observation. However, most of "bribes" I have seen are called "expediting fees" , "processing fees" or similar names. Here's where it get tough. In the United States, you can pay an expediting fee to get a passport processed quickly and this is legitimate, but if you pay an expediting fee in Mexico to get a permit for a store processed quickly, you are guilty of bribery. The line between these gets pretty blurred in many countries.

     
     
     
    • Leon

    This flies in the face of my experience in northeast China were corruption and bribery are part of everyday life, however tipping is frowned upon. In fact, in restaurants and taxis getting someone to accept a tip can be a real chore in itself.

     
     
     
    • William Messenger

    A thought-provoking article, and the empirical relationship between tipping and bribery is interesting. But the article ignores the crucial distinction between tipping and bribery -- fiduciary duty. In tipping, the reward is given to someone for doing what they are in fact supposed to be doing in their job. In bribery, the reward is given to influence the receiver to violate what they are supposed to be doing. A hair dresser receives a tip for dressing hair. A building inspector receives a tip for lax enforcement of building codes or putting the briber's application in line ahead of others.

    There is overlap between tipping and bribery in situations where the receiver threatens to withhold service that the give is entitled to. If the building inspector demands a payment to issue a permit even for properly-done work, it's a bribe, even though it's a payment for doing what the inspector is supposed to do. The difference here is abuse of power by the person demanding the bribe. That only occurs in monopoly situations, especially government, in which the person being asked to give a bribe has no other means to obtain the service. I suppose that if there is only hairdresser in town, and her or she adds a mandatory tip to the bill, then that would indeed cross over into bribery.

    Perhaps the relationship between government involvement (whether by ownership or regulation) in business and corruption would be even stronger than the relationship between individual temporal expectations and corruption. Do more-regulated economies have higher rates of corruption? How about occupations that require licenses (such as hairdresser), compared to ones that don't (such as checkout clerk)?

     
     
     
    • RT

    There was a time when tips where a reward for a job well done, however those days are gone. The "tip" has evolved and in many situations and is nothing more than an "expectation tax". A tip is expected, it is not a reward. Of course, there are places where a bribe is also a form of expectation tax. In these places, the difference between a tip and a bribe is just a matter of timing.

     
     
     
    • Anonymous

    Tips express gratitude for a legal service that has been rendered. Bribes are used to receive an illegal service or advantage that should not be rendered or received. Grease money is payment for a service that should be rendered but won't get done (quickly) without payment. The giver may not be at fault for paying grease money if they are being extorted to receive a service that they should legally receive.

     
     
     
    • Amanda Bucklow

    The premise that a bribe is before the event and a 'tips' is after is actually incorrect and may be partly responsible for the clear distinction made by some participants in the research. A tips (not a tip) stands for To Insure Prompt Service and originated in the coffee houses of London close to the grain and other markets. Boxes were placed on the counter for them and by placing money in the box you 'insured' that the service would be prompt and that you could enjoy your coffee and be back in the trading ring in time for the session.

    Even today, tips are often given on arrival at restaurants to insure a good table. The habit of leaving money after the event is possibly a result of economy of effort: getting the money out once and not twice and perhaps a desire for credit!

    My sense is that the difference between bribes and tips is more to do with intention and effects rather than timing and that fear, wants and moral compass have more influence in where the line is crossed.

     
     
     
    • Vijaya L Ramam
    • Management consultant, L.V.Prasad Eye institute

    Prof.Torfason & his team 's observations are quite in practice in Indian Context & it has become an accepted norm in the system and very often even a good samaritan is lured to get into the trap of accepting a tip in due course. But, we can overcome this menace if an individual or an organization is strong enough, not to succumb to such malpractices.. The organization that I am associated with , (a hospital & research institute in India ) over the past 25 years made it a rule that neither will they bribe anyone to get the work done nor allow their employees to accept tips from a patient .This was proved by sacking an employee for accepting a tip during inception stages, sent shock waves across , which holds good even to date among the work force ,lest they may lose their jobs. Unfortunately , such organisztions are very few in India who stand for principles & ethos , but is possible!!!

     
     
     
    • Sam Chandar
    • CEO, GOF

    A couple of decades back the Indian on the street was perplexed to find the word 'kickback' on the front page and not in the football column as one would normally expect. Like the recoil of a gun, it struck the shoulder of the common man with a totally new meaning. This word has gone through several avatars and sprung different heads spreading its tentacles to grasp everything in sight or reach. Transactions,be it business or otherwise, can come in different colors; but Integrity is always in black or white. Forget euphemisms. Does it spring from the largeness of your heart or from the meanness of your mind? The Tip is the fine edge of your character. It is what maintains your integrity balance. In how much you desire the good of others in relation to your own.

     
     
     
    • Jane Cudmore

    Why is tipping even an option? In OZ & NZ people don't tip in restaurants, the staff are paid reasonable wages. And surprise! The final bill is the same!

    Tipping is not a reward, it is de riguer and has gone from 10% on the pre-tax bill to 15% on the entire bill.

     
     
     
    • Maureen Rabotin
    • Global Executive Coach, Effective Global Leadership

    Thank you! I have often had to distinguish between tipping and bribing as I accompany executives who navigate the currents of globalization. The explanation of before or after good service is right on target. Relationship-oriented cultures tend to build the relationship with the tip, not reward the task. Maureen Rabotin

     
     
     
    • Prof.V.G.Patnaik
    • Director, MITS ENGINEERING COLLEGE, RAYAGADA, ORISSA, INDIA

    Dear Prof. Torfason, I congratulate you for choosing such an interesting topic. Large scale tipping from good old days has led to the catastrophic scams that exist today in India. While scams are not accepted by the good citizens, tipping for a service provided is a well accepted practice in India from the days immemorial. So much so that in many service sectors it has taken the shape of a birth right and you can not escape paying the tip. It is now an officially accepted practice to charge in the Bill itself an amount of 5-10% levied as service charge. Even corporate have accepted silently to pay all claims for reimbursement of tips paid by their executives on official outdoor duties. Even the auditors and the IT department too turn a blind eye to such expenses these days. Going by what is presently happening in India, it will be unfortunate when in the days to come even bribery gets the official nod in this country. India practiced caste and occupation based tipping habits since its civilization born over 5000 years ago. It is genetically embedded in the system. There exists no blur in the system. The boundary between a tip and bribe is well drawn and understood. When paid to a poor person, it is called a tip and is called a bribe when paid to a Government bureaucrat or minister in power. In either case the axe is on the common man seeking the service. I am of the view that your study covering the Indian aspects is little under nourished. It deserved a better exploration. regards, Prof.V.GPatnaik

     
     
     
    • Anonymous

    In India, tips are considered more out of sympathy or embarassment of visiting again while bribes are like a form of additional payment for a service to be expedited, avoiding hassles and paperwork, etc... both become an issue when the recipient starts demanding it else no work.

     
     
     
    • Bruce Horwitz
    • President, TechRoadmap Inc.

    A couple of thoughts. First, I think I can differentiate between a tip and bribe using my mother's guidance - would I want my action (and would the receiver want his action) on the front page of the the New York Times.

    Second, in the US we have created a number of jobs in which a "tip" has become an expected part of the person's compensation. For example, wait staff have their own, lower, minimum wage. Thus, whatever the historic basis, a tip is now simply part of the cost of the service that reasonable people pay, knowing that the wait staff needs the additional income. Some restaurants now add a "service charge", making clear that the cost of the meal, including service, is that much more expensive than the listed menu price.

    A final thought: it is almost certainly an urban legend that a "TIP(s)" is an acronym for "To Insure Prompt Service", particularly since the English understood the difference between INsure and ENsure.

    Oh, and the "tip" given a maitre d' before seating is a bribe as it is given to the individual (rather than the establishment) to receive preferential treatment not afforded other guests.

     
     
     
    • Mark Clark
    • CFO, Seebridge Media

    As others have suggested, the tip is often simply an expected component of the cost of the service consumed. In that context it bears little resemblance to a bribe. However if we define the tip as the incremental payment over the standard expectation (i.e. 15%-20% at a restaurant); it is a more compelling argument that the intent is to motivate future service. While it would seem the distinction of a bribe as influencing illegal future service may be clear, the corollation presented in the research is interesting.

     
     
     
    • Brian Ahearn
    • Owner, Influence PEOPLE

    There may be a correlation but I don't see the connection because they're different acts that engage people in different ways. Bribery is all about proactively trying to influence behavior. Offering a server money up front in hopes of getting better service would be a variation of bribing. It's a form of reciprocity whereas tipping is reactive. Actually, the server is the one engaging reciprocity in hopes of something in return - a nice tip.

     
     
     
    • Kirk OConnor
    • Product Manager, Visual Network Systems

    To take it one step further, the US number one economy is the "service industry." And, I believe, that tipping is the reason. No matter what socio-economic status you are within the US, you have either worked for tips or gone out for dinner and paid a tip. It is part of the US economy to provide good service...because we all grew up with it or worked for it....

    My definition would be: a bribe is a tip before the typical services are rendered and a tip is after the typical services are rendered.

    People in the US prefer to have the services rendered prior to tipping, just to make sure they are getting their services.

    Restuarant owners have just passed on their employee wages to their customers and increased their profits without having to pay their employees.

     
     
     
    • Srini
    • Director, HP

    I can understand the India context from the research. Like all things in life - there's a thin line which is nebulous in all these topics. When the overall intentions are honourable (not what's externally espoused but truly internally felt) - it's easier for human beings to make the judgement as to when we are bribing or tipping. [This is easier said than done.]

    Look at the corporate world even in developed countries. You hear of terms like people/ corporate "lobbying" the elected representatives; people funding the elections (another great one - if you see the amount of dollars which are effectively done in the US). Later you would not be surprised when in the (so called) larger national interest, certain rules are set which benefit these people/ corporations who stood by you during the elections. What would we call that implicit quid-pro-quo? For some it's just normal life and legal, for others this is an abhorable practice.

    There's always a thin line in all these cases, and its the inner conscience of the people who are involved that drives the difference between tipping/ lobbying/ supporting or bribing/ influencing...

     
     
     
    • Kapil Kumar Sopory
    • Company Secretary, SMEC(India) Private Limited

    I don't agree that there is only a thin line of difference between a tip and a bribe. The former is an optional payment generally after satisfactory services are enjoyed. The latter, on the other hand, is a payment made out of compulsion to grease the palms of the sevice provider in the hope of getting results accomplished through him/her. Thus, bribe - for giver as well as receiver - is a highly unethical practice and needs to be curbed. The author's assertion that tip is at times given for expected better service in future is not acceptable for it is unsure same outlet would be used in future too.

     
     
     
    • Abdul Qayyum
    • Internal Auditor, The Ritz Carlton DIFC

    Tip should be given after the work done and Bribes given before the work done both are having difference attittute. AFter work done it is kind of rewards that people are given but before work paying is real bribes that work can not be done if you dont pay but due to paying work to be done.

     
     
     
    • Dr Terence Ascott
    • CEO, SAT-7

    The differences between a tip or gift and a bribe is clear, with the latter being, according to the Old Testament, "to pervert the course of justice".

    The article could have done a better job at exploring the origins of the gift which, before monetary systems and the era of paid civil servants, was the only form of income for people with power or gate-keeper roles and no other formal sources of income. We are looking at this subject from a very North American, 21st Century perspective!

     
     
     
    • Eric
    • Admin finance officer, SMAC

    When paying the tips you do not only mean to get future better services but you mean to support the waiter, but when you are paying the pribe you mean this person to facilitate or to do the job and if you do not pay you will suffer. Therefore ,I can say the purpose/aim of the two is different. M.A.Eric Somaliland , Hargeisa

     
     
     
    • wasil
    • deputy director, management

    the articl is so simple but got complicated through academic exercises.it should have included the motive behind paying hands. geneuine motive is required.

     
     
     
    • Sanjay Mishra
    • V.P., Cotmac

    Interesting topic !!. In corporate world we may be using the words tip and bribe interchangeably but I feel they are different. The tip is more by wish and bribe is more by compulsion. Secondly normally we give tip to appreciate the services rendered in past and to ensure the same in future. In India, the tip is more popular in hotel industries and not in all service industry. However bribe is on that that job in discussion and even amount is also discussed and mutually agreed. . All people rendering services will happily accept the tip but everybody will not accept it.