The Effects of Transparency and Voice on Managerial Decisions and Employee Effort in Hierarchical Organizations

Organizations often promote procedural justice by increasing the transparency of managerial decisions and encouraging employees’ voice in the decision process. We experimentally investigate how implementing these control policies in hierarchical organizations (owners vs. managers vs. employees) affects managers’ resource-allocation decision and employee effort. We predict and find that managers allocate more resources to employees, lowering owners’ return, when the allocation decision is transparent than when it is not transparent, despite being incentivized to increase owners’ return. Further, managers allocate more resources to employees when employees can voice their desired outcome than when employees’ voice is not allowed, but only if the allocation decision is transparent. Managers’ intention to exchange gifts with employees mediates these effects. We also find that, when employees have a voice, their effort is influenced by whether the allocation reaches their desired level. The implications of our findings for management control theory and practice are discussed.