The effects of explanations on negative reactions to deceit

Administrative Science Quarterly,  Dec, 1991  by Debra L. Shapiro

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Managers must occasionally tell employees that requested resources are unobtainable and that unwanted changes, such as layoffs or paycuts, are necessary. Researchers have found that under such circumstances, explanations reduce employees' tendency to perceive injustice, complain, and withdraw support for the leader (Bies and Shapiro, 1988; Bies, Shapiro, and Cummings, 1988), become less committed (Brockner et al., 1990), and steal from the organization (Greenberg, 1990). Given the costly implications of such reactions, all may be characterized as negative. Researchers have thus concluded that explanations mitigate negative reactions.

In all of these studies, however, certain characteristics were necessary for the explanations to have this effect. Specifically, explanations mitigated negative reactions in Bies, Shapiro and Cummings' (1988) study only when recipients judged the explanations to be adequate; in Greenberg's (1990) study, only when the explanations were thoroughly and sensitively stated; and in Brockner et al.'s (1990) study, only when the layoff decision had great rather than little significance to the "survivors" (retained workers). These qualifying circumstances' mitigating effect has boundaries. They therefore also indicate that managers who make unpopular decisions cannot expect to escape negative reactions simply by providing explanations.

This investigation was designed to provide the experimental control necessary to draw causal inferences about the boundaries of the mitigating effect of explanations. Since the perceived adequacy of explanations has been identified as an important mediator of their mitigating effect on negative reactions (cf. Bies, Shapiro, and Cummings, 1988), in this investigation I present and test a causal model of the predicted boundary conditions of explanations that includes this important intervening variable and its predicted determinants.

The present study differs in several ways from previous studies of the effects of explanations. First, instead of examining the effect of providing versus not providing explanations, this study examines the impact that various types of explanations have on negative reactions. It therefore tests the relative effectiveness of explanations that Bies (1987) and others (e.g., Thomas and Pondy, 1977) have identified as having the potential to mitigate negative reactions.

Second, this study tests the extent to which explanations mitigate negative reactions when actions of varying severity are being explained. All employees in Bies, Shapiro, and Cummings' (1988) study had received resource refusals; all in Brockner et al.'s (1990) study were layoff survivors. Knovsky and Folger (1991) examined the reactions of layoff victims and found that explanations failed to mitigate negative reactions. Given the greater severity of being laid off, relative to being refused resources or not having been laid off, Knovsky and Folger's finding suggests that the mitigating effect of explanations may be limited to circumstances in which the bad news is relatively mild. But Brockner et al. (1990) found the converse to be true: explanations mitigated layoff survivors' negative reactions when they felt more rather than less concerned about management's layoff decision. The studies by Brockner et al. (1990), Bies, Shapiro, and Cummings (1988), and Knovsky and Folger (1991), however, all lacked the experimental control necessary to draw causal inferences. Such control is provided in the laboratory study reported here.

Finally, this study examines the circumstances in which the bad news is exposed deceit, specifically, when one learns a (simulated) business partner has misled another by the critical omission or misrepresentation of information. I chose this context because many current events--including the Iran Scandal, the HUD Scandal, the financial scandals of the Keating Five, and numerous investment banking-related scandals--indicate that deceitful acts and their exposure are issues relevant to management. Another reason I chose this context is that news of another's deceitfulness typically evokes emotional reactions. Victims of deceit often feel angry, embarrassed, humiliated, and cheated (Bies and Moag, 1986; Werth and Flaherty, 1986) and therefore eager to punish the deceiver (Miller and Vidmar, 1981). For example, when creditors learned that a firm's management had actively concealed information about its impending bankruptcy, their attitude was: "They lied to me! Those SOBs burned me for a bunch of money, I'll never do anything for them again!" (Sutton and Callahan, 1987: 426). Many involved in the scandals listed above have stood trial, faced jail sentences, significant fines, damaged reputations, and terminated careers. Given the strength of the negative outcomes often experienced by those who discover others have acted deceptively, the context of exposed deceit should offer a rigorous test of the mitigating effects of explanations.