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The Influence of Organizational Culture and Manager Communion on the Discretionary Labor Cost Reduction Decision

Valerie Chambers (Weber State University, USA)

Eric N. Johnson (University of Wyoming, USA)

Gary M. Fleischman (Texas Tech University, USA)

Kenneth Zheng (University of Wyoming, USA)

Advances in Management Accounting

ISBN: 978-1-83608-489-1, eISBN: 978-1-83608-488-4

Publication date: 6 September 2024

Abstract

Management discretion in the decision to reduce payroll costs is an important but under-researched issue in management accounting. The authors leverage the experimental environment to test the role of organizational culture (close vs. distant) and managerial communion (concern for others) along with their interaction with sales decline persistence (one vs. two periods) on planned layoff decisions. The authors find that communal managers are hesitant to downsize employees and that a close organizational culture interacts with one period sales declines to reduce layoffs although the influence of culture is reduced with persistent sales declines. The authors also examine the influence of culture and communion on managers’ preference for pay cuts as an alternative to layoffs. The authors find that a close culture and higher communion are associated with decisions to choose pay cuts over layoffs; however, these costs interact such that managers low in communion in a distant culture express a higher preference for layoffs. These findings illustrate the combined influence of economic, organizational, and dispositional factors on manager decisions about the extent and form of labor cost reductions due to sales declines.

Keywords

Acknowledgements

Acknowledgments

We wish to thank Todd Thornock and the other participants in the 2018 management accounting brown bag series for their very helpful suggestions in developing the experimental instrument for the study. We also thank participants from the University of Wyoming and Texas Tech University who helped us further refine the study experimental questionnaire.

Citation

Chambers, V., Johnson, E.N., Fleischman, G.M. and Zheng, K. (2024), "The Influence of Organizational Culture and Manager Communion on the Discretionary Labor Cost Reduction Decision", Akroyd, C. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 36), Emerald Publishing Limited, Leeds, pp. 57-83. https://doi.org/10.1108/S1474-787120240000036003

Publisher

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Emerald Publishing Limited