Do “rising stars” avoid risk?: status-based labels and decision making
Leadership & Organization Development Journal
ISSN: 0143-7739
Article publication date: 25 February 2014
Abstract
Purpose
The purpose of this paper is to empirically examine how status-based labels, based on future capabilities, can impact people's risk tolerance in decision making.
Design/methodology/approach
In this paper the authors developed and tested theoretical arguments using a set of three studies employing a scenario-based approach and a total of 449 undergraduate business students.
Findings
The findings suggest that labeling people in terms of future capabilities can trigger perceptions of public scrutiny and influence their risk preferences. Specifically, the results reveal that individuals who are recipients of high-status labels tend to choose lower risk decision options compared to their peers.
Research limitations/implications
The study employed scenarios to examine the issue of employee labeling. The extent to which these scenarios have truly captured the dynamics of labeling is questionable, and future research should employ a field-based study to examine whether the reported effect can be observed in a “real” work context.
Practical implications
Organizations are concerned about their future leadership capacity and often attempt to grow leadership talent by identifying high-potential employees early on. The results of this study suggest that such practice may have an unintentional negative effect of reducing high-potentials’ tolerance toward risky decision making, thus potentially impacting these future leaders’ decision making in the realm of corporate strategy, R&D, etc.
Originality/value
The issue of how labeling individuals in terms of future capabilities can impact their risk preference has been largely ignored by organizational research. This paper suggests that the popular practice of identifying high-potential employees may have unintentional negative effects by lowering their risk tolerance.
Keywords
Acknowledgements
This study was funded in part by a grant from the HRRI. However, the interpretations, conclusions and recommendations are those of the authors and do not necessarily represent the views of the HRRI.
Citation
Kotlyar, I., Karakowsky, L., Jo Ducharme, M. and A. Boekhorst, J. (2014), "Do “rising stars” avoid risk?: status-based labels and decision making", Leadership & Organization Development Journal, Vol. 35 No. 2, pp. 121-136. https://doi.org/10.1108/LODJ-04-2012-0046
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited