Employee Outlook Dispersion and Firm Operating Efficiency

Abstract

This study examines how the distribution of information among rank-and-file employees affects firms’ operating efficiency. Organizations depend on successful collaboration among employees to achieve desired operational outcomes. Collaboration is more effective when employees share common information. We use dispersion in employees’ outlooks from their Glassdoor reviews to capture the distribution of information among employees; higher dispersion in employee outlook reflects a less uniform distribution of information (i.e., less common information). We find that firms with greater dispersion in employee outlooks are less efficient in transforming inputs to outputs. We also examine the role of collaboration through cross-sectional analyses. The results indicate that the negative implication of employee outlook dispersion for firm efficiency is more pronounced when employee collaboration is more important to firms’ operations and for dispersion among employees who are more likely to collaborate. These findings contribute to the growing literature on the contributions of rank-and-file employees by demonstrating that information asymmetry among employees significantly undermines the value they generate.

Keywords: Employee outlook dispersion, Firm efficiency, Collaboration, Information asymmetry, Glassdoor

JEL Classification: M5, L25