The hidden benefits of control: The effect of peer competition on employee responses to restrictive controls

Abstract

Managers must decide whether to grant their employees the freedom to make their own choices or to restrict their employees’ decision rights by proscribing specific actions, behaviors and decisions. Prior research finds that employees perceive restrictive controls as a signal that their manager does not trust them to behave appropriately. While this might be true sometimes, I argue that an employee’s belief as to why a restriction was imposed could depend on contextual factors, such as how competitive the workplace is. Specifically, I predict that, compared settings where there is little peer competition or the competition is not salient, experiencing stronger peer competition will push employees to view a restrictive control through a lens of how it affects their performance relative to their peers, increasing the likelihood that employees will view a restrictive control as improving fairness. If so, employees might respond positively to the imposition of a restrictive control rather than negatively, as suggested by prior research. The results of a laboratory experiment suggest that employee reactions to a control decision depends not only on the presence of peer competition, but also on the perceived cost incurred by management to impose the control.