Business leaders are more desirous of social approval than we may think, says Tuck professor Pino Audia.
The federal minimum wage is the same today as it was six years ago: $7.25 per hour. But you wouldn’t know it by the raft of corporations—Walmart, McDonalds, Starbucks, Ikea, Aetna, and Gap, just to name a few—who have decided in the past year to increase the wages of their entry-level workers to $9, $10, or even $16 per hour. All these companies offer sound business decisions for paying their employees more: higher employee retention, better customer service. And yet one must wonder why this cascade of raises is happening now.
Pino Audia, professor of management and organizations at Tuck, thinks that these decisions are not necessarily driven by market forces but rather by subtle pressures that stem from public opinion. In a 2014 Pew Research Center poll, 73 percent of those surveyed supported increasing the federal minimum wage to $10.10 per hour. When the people speak with such a unified voice, Audia contends, businesses tend to listen, sometimes even better than politicians do. “We’re not used to thinking about public opinion as a factor influencing business,” Audia said. “The language of polls is largely associated with the world of political campaigns, but it doesn’t just apply to winning an election.”
Audia’s interest in public opinion is part of a broader research agenda in which he examines how the social context influences organizational leaders. Building on a theoretical paper, “Self-enhancement and Learning from Performance Feedback,” in which he theorized that feeling accountable to an audience impacts how decision-makers assess the performance of their organizations, Audia decided to study public opinion as a source of accountability pressures. In a new working paper titled “The Symbolic Management of Performance: Public Opinion and Attention to Performance in a Public Arena During the Iraq War,” Audia looks at Pentagon press briefings from 2003 to 2006 to see how they changed in content as public support of the war shifted.
Public opinion, when unambiguous, impacts policy decisions, Supreme Court opinions (even though Justices are appointed for life), the decision to go to war, and the proposal and ratification of bills. The primary theory behind this has been that in a democratic system, elected officials try to secure re-election by showing their responsiveness to their constituents. Now mounting evidence from outside the political sphere is showing that the desire to secure the approval of the public is a bigger factor than the desire to be re-elected.
Audia draws on social psychological research to explain why public opinion also affects the “symbolic management of performance,” or the way organizations of all kinds inform their constituents of how well they are meeting their goals. It’s about accountability: the natural desire to justify your conduct to those whose support you seek.
Interestingly, the influence of accountability shifts according to when an organization makes a decision. Before a decision happens, organizations tend to be more open to public opinion. But, “this openness cedes the way to defensiveness when individuals have irrevocably committed themselves to a course of action,” Audia writes. In those cases, leaders engage in “defensive bolstering,” where instead of “acknowledging mistakes they may have made, they form more rigidly defensive views and have a hard time writing off sunk costs.”
How did these tendencies play out during the Iraq war? Pretty much as Audia expected. By searching the text of the Pentagon press briefings for words associated with combat, reconstruction, and rebuilding government—key performance indicators in a war setting—Audia was able to discern how the Pentagon talked in public about its performance. He then looked at the relationship between the Pentagon’s performance-oriented communications and public opinion polls.
The results suggest that people are reluctant to acknowledge failure when they perceive external opposition. When public support of the war was high, the press briefings gave more attention to combat performance, even if that performance was lackluster. But when public opinion about the war began to plummet—as the conflict dragged on and U.S. casualties mounted—the press briefings were much more silent about performance. “Opposition inclines leaders to be less transparent, when the decision is irrevocable,” Audia said. “The pressure of accountability can make things worse.”
For Audia, this research on public opinion and public assessment of performance is applicable to leaders in the business world as well, since leaders of large organizations, whether in government or the private sector, face similar levels of accountability pressures.
That recent boost in wages? It may well have been an example of pre-decisional accountability in the face of vigorous public criticism: when a decision is revocable, such as raising wages, decision-makers may respond to accountability pressures by displaying openness to their audiences’ views. But whether organizations’ response may be defensiveness or openness, keep an eye on the next polls. Organizations may be less immune to their influence than we generally assume.