Scandinavian Working Papers in Economics
Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics
No 16/2024: To hide or not to hide? How fear and futility affect the decision to report a mistake
Malte Baader (), Sarah Bowen (), Anna Hochleitner () and Richard Mills ()
Additional contact information
Malte Baader: Dept. of Finance, University of Zurich, Postal: University of Zurich, Department of Finance, Plattenstrasse 32, 8032 Zurich, Switzerland
Sarah Bowen: Verian Group, Postal: Verian Group, Beeston, United Kingdom
Anna Hochleitner: Centre for Applied Research, Norwegian School of Economics and Business Administration, Postal: NHH/SNF, Centre for Applied Research, Helleveien 30, N-5045 Bergen, Norway
Richard Mills: School of Psychology, University of Nottingham, Postal: University of Nottingham, School of Psychology, University Park Nottingham , NG7 2RD , United Kingdom
Abstract: Even though reporting mistakes could substantially improve work processes and productivity within organisations, employees often hesitate to do so. This paper studies the role of fear (of being fired) and futility (i.e. reports being inconsequential) in explaining such employee silence. Drawing on a principal-agent framework with career concerns, we formalise mistakes as noisy signals of both agent quality and the work environment and show that optimal reporting decisions are affected by fear and futility considerations. We then use a novel experiment to exogenously manipulate the degree of fear and futility and test our theoretical predictions. In a 2x2 between-subject design, we vary the anonymity of reporting and the likelihood of organisational response. Results show that reducing fear and futility are complementary actions. Tackling both significantly increases reporting by about 20pp. This improvement in communication is accompanied by better organisational income, highlighting the value of improved reporting structures for firms and employees.
Keywords: Organisational communication; reporting mistakes
Language: English
66 pages, October 11, 2024
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