Using Alienation at Work to Explain Why Managers' Dishonesty Does Not Lead to Firm Performance

Abstract

Although prior studies provide growing evidence that managers' dishonesty is negatively related to firm performance, the reasons for this relationship remain unclear. The purpose of this study is to model the steps in the effect of the manager dishonesty on firm performance. Our model hypothesizes that followers' feelings of work alienation are mediators that explain why managers' dishonesty is negatively related to aspects of a company's financial performance (i.e., profit and growth). We used multi‐source survey data collected from 100 banks in London and analyzed 100 team leaders and 100 triads of followers (n = 300). Results confirmed that managers' dishonesty is related to financial performance, and they supported powerlessness (i.e., employee lack of control over their work) as the only studied element of work alienation that mediated in this link. Findings suggest that, when faced with managers' dishonesty, employees lose control over the product of their labor or the work process, which causes firm failure.