An Examination of the Interactive Effect of Feedback Source and Sign in the Offshoring Environment

What is it about?

Public accounting firms regularly rely on offshore professionals to assist with client work. However, differences in interpersonal dynamics between offshore staff members and the supervisors they report to may yield positive and/or negative work outcomes. We examine how feedback source (offshore or onshore supervisor) and feedback sign (negative or positive) interact to affect offshore staff members' satisfaction with feedback. This is an important issue because subordinate satisfaction with performance feedback is a key determinant of future performance and turnover intentions. We find that offshore staff members are less satisfied with negative feedback from an offshore (local Indian) supervisor, a member of their in-group, than an onshore (remote U.S.) supervisor, a member of their out-group. However, their satisfaction with positive feedback does not significantly differ between feedback sources. Further analysis reveals that greater satisfaction is associated with increases in the effort the staff member plans to put forth in the future.

Featured Image

Why is it important?

Offshore professionals comprise a critical resource for public accounting firms, due to the current shortage of skilled onshore accounting professionals and pressure to keep costs low (Daugherty, Dickins, and Fennema 2012; WSJ 2017). Despite the benefits of offshoring, prior research in management finds that challenges arise when an increasingly diverse group of professionals work across geographic boundaries, shifting the traditional team dynamics (Crampton and Hinds 2005; O’Leary and Mortensen 2009). This paper makes an important contribution to the literature by studying the effects of in-group/out-group dynamics on a unique subject pool, professionals working in a dedicated offshore center in India who report to both local-Indian and remote-U.S. supervisors. The results add to the literature by providing additional understanding of positive and negative work outcomes associated with the offshoring environment. Our finding suggests that the in-group/out-group distinction of the source of feedback yields a different reaction from individuals when negative feedback (criticism) is directed towards a professional work product than it does in other decision-making contexts. In doing so, this paper provides new insights into the effects of social identity in work-related contexts. From a practice perspective, this result suggests that practical implications from studies in psychology on this topic do not apply in a professional context where feedback is based on individual task performance and the in-group/out-group distinction is formed based on contextual factors of the work environment, rather than more generic cultural factors studied in prior social identity research.