When bad news is sugarcoated: Information distortion, organizational search and the behavioral theory of the firm

Abstract

Most work in strategy and organization theory assumes that performance feedback is straightforward to interpret and truthfully reported. We raise the following question: How might the systematic distortion of negative performance information affect organizational learning and future performance? We formulate a model where (1) members do not always report the truth about what they know about their performance level, especially when performance is below aspiration and (2) their propensity to distort information is subject to social influence. We find that organizations that are characterized by a high level of information distortion tend to perform more poorly but that the effect of a low rate of sugarcoating may, in some conditions, be more benign than the literatures seem to suggest.

On the effects of authority on peer motivation: Learning from Wikipedia

“…Field‐empirical and experimental studies both confirm the relevance of related psychological mechanisms to those proposed by Van den Steen (). Building on work in social psychology (Fragale et al , ; Glass & Singer, ; Parker, ; Pennebaker et al , ; Seligman, ; Wortman, Brehm, & Berkowitz, ), organizational scholars recently suggested (Fang, Kim, & Milliken, ) and empirically corroborated within the setting of bureaucratic for‐profit corporations (Reitzig & Maciejovsky, ) that subordinates may detach from corporate‐wide decisions the more they are removed from the locus of decision‐making through layers of authority.…”

The Cognitive, Behavioral and Social Prospectives of Organizational Learning Through Information System

“…Behaviourists were focusing on the internal strength, development and innovations while economists were focusing on environmental changes, profit maximizations and perfect information (Schulz, 2001). Meanwhile, firm behavioural theory was presented by Cryert and March (1963) which stated that organizations are adoptive systems, learning from both internal and external changes and demands, adjusting itself between external shocks and internal operating procedure, but more focusing on internal autonomy instead of external driving factors (Gavetti, Greve, Levinthal, & Ocasio, 2012;Duckjung Shin, 2014;Argote & M.Guo, 2016;Fang, Kim, & Milliken, 2014). Adaptation Theory further enlarged the dilemma and even developed a tension between economists and behaviourists because economists were focusing on rational based long-term benefits and organizational adjustment according to the wave of external situations and behaviourists were strict to follow organizational procedure, welcoming internal ideas and innovations following limited rational policy (Gowdy, 2008;Dosi & Marengo, 2007).…”

“…Organizational adaptation or single-loop learning occurs when an organization's existing frames of reference accepts the interpretation (Geereddy, 2017). These all result in behavioural, social and behavioural and cognitive change (Fang, Kim, & Milliken, 2014).…”

Corporate hierarchy and vertical information flow inside the firm-a behavioral view

“…The flip side, "silence," or "organizational silence," is referred to as the process of withholding voice (Brinsfield, Edwards, and Greenberg, 2009). In a recent literature discussion of the main drivers of information distortion in hierarchical settings, Fang, Kim, and Milliken (2014) identify two main psychological mechanisms, evaluation apprehension and lack of control, which we discuss next.…”