Fit for Purpose: The Effect of Informal Control Communication Style an Contract Frames on Employee Goal Alignment

• In Event: Organizational Values and Contract Framing

Abstract

Firms often use informal controls such as vision statements as a way to elicit desirable behavior from employees. Yet, companies vary significantly in terms of how they communicate their vision statements, either as ideals emphasizing the overall values and strategies or as guidelines prescribing day-to-day practices. To better understand when vision communication can be most effective, we conduct an experiment to investigate how different communication styles in vision statements interact with formal contract frames in aligning employee behavior with organizational goals. Results suggest that employees are more likely to forgo self-interests and act in the best interest of the company when they experience a high fit between vision communication and contract frame. Specifically, when i) overall ideals are paired with bonus-framed contracts or ii) detailed practices are paired with penalty-framed contracts, vision communications are most effective in aligning employee behavior with organizational goals. Our findings suggest that no single style of disseminating organizational visions dominates, but instead must be implemented in tandem with a congruent formal contract frame.

Authors

• Jeffrey Hales, The University of Texas at Austin

• Wenqian Hu, Georgia Institute of Technology

• Jordan Samet, University of Illinois Urbana-Champaign