Zero-Sum Games & Zero-Sum Frames: Employee Cognitive Consequences of Financial Firm Performance

Abstract

This dissertation examines the psychological consequences of firms’ financial and prosocial strategies and practices pertaining to how firms define value and performance. Firms typically measure value and performance financially. However, we know little about how this affects the zero-sum perceptions and satisfaction of firms’ stakeholders, such as employees. In contrast, firms are increasingly considering social value in their strategic management of firm performance and including prosocial practices in their evaluations of employee performance, such as including CSR work in employees’ performance appraisals. Yet, we know little about how these strategies and practices affect workers’ satisfaction with the firm and other firm-stakeholder outcomes. I examine these questions through a mixed methods set of studies using field data from real firms. First, through seven field experiments, I find that reporting financial performance measures increases employees’ zero-sum perceptions and ultimately decreases workers' satisfaction with the firm. In contrast, through a unique dataset of survey responses from architecture firms engaged in pro bono work, I find that incorporating CSR into employee performance appraisals increases employee satisfaction. This suggests that a pluralistic orientation toward firm value may mitigate the zero-sum pitfalls of financial performance for employees and other stakeholders. Through exploring a unique combination of datasets, including parsed word counts of financial value and social value words from firms’ annual reports, and firm-level outcome data for employees, customers, shareholders, and the community, I find a preliminary positive relationship between collective stakeholder outcomes, particularly employee satisfaction and community impact ratings, and firms’ described activities toward both financial and social value; however, this relationship holds only in more recent years, possibly due to a potential shift in the institutional logics of firm value supporting firms’ consideration of social value. The research contributes to theories of strategic management, performance measurement, financial psychology, and employee satisfaction.