How Managing Failure Perceptions Affects Performance: Evidence from a Field Experiment

Abstract

We conducted a clustered randomized field experiment with 20 Brazilian distributorships of a multi-national direct sales organization to examine whether controlling failure perceptions through formal communications increases performance. We used the organization’s weekly sales meetings to deliver a video-based message from the regional head that either communicates failure is a normal part of business that is embraced by the organization (treatment condition) or simply summarizes the organization’s history (control condition). We find that those who were assigned to the treatment condition were more likely to sustain their effort in response to economic adversity that coincided with our experiment. Additional analyses suggest that our experimental treatment accomplished this by increasing job-specific confidence, and by reinforcing social norms that encourage workers to persevere after failure. Overall, our findings highlight the benefits of using formal communications from senior management to control how workers interpret and respond to failure.