What Do You Recommend? The Effects of Communication on Misreporting in Autonomous Teams

Abstract

Many firms have started granting teams greater autonomy in determining how they organize and report on their work. This study examines how communication influences dishonest reporting within such autonomous teams. Through a series of three experiments, we analyze how team members use communication to influence one another and steer their team’s reporting decisions. Our first two experiments provide evidence of an asymmetric effect of communication on honesty: while communication from initially dishonest team members corrupts initially honest team members, the latter fail to discipline the former, resulting in a dishonesty shift. In the third experiment, where we make the adverse consequences of misreporting for the firm’s owner salient to the team members, the dishonesty shift disappears. Collectively, our findings are consistent with social norm theory, which suggests that communication can increase team misreporting depending on the activation and salience of different situational cues. Our study contributes to the literature on participative budgeting and dishonesty by revealing the process through which communication can escalate collective dishonesty in teams and identifying ways in which firms can mitigate this effect.

Daniel Schaupp

Assistant Professor of Strategy and Managerial Accounting

My research interests include performance evaluation, feedback, incentives and the impact of new digital technologies on management control.