b'ADVANCING KNOWLEDGELEADERS HIDING IN PLAIN SIGHTARTICLE COURTESY OF SHOW ME MIZZOU Among a group of coworkers, one employee canthemselves as leaders in the work unit, and that down sometimes emerge as an informal leader, a go-tothe line these people will be promoted less often person to solve problems and answer questions. Asas well.a result, most managers assign that employee theThe research shows that this phenomenon can make most important tasks and the best opportunities forit difficult for all employees to feel included and have professional development and growth. opportunities to be developed as leaders and to However, other employees in the same unit maypotentially promoted for formal leadership positions. PREDICTING A RECESSION be just as fit to lead, and businesses benefit fromNot only is this unfair to certain employees, but PengAnn Pengallowing more employees to get involved in leader- said it can negatively impact the productivity of the ship opportunities. A study at the Trulaske Collegecompany as a whole.ofBusinesssuggestsOrganizations benefit ARTICLE COURTESY OF SHOW ME MIZZOUcreated by Professor Beneish in the late 1990s. Thethat organizations mightfrom individual initiatives, Trulaske accounting professors work together toM-Score measures the likelihood that a company hasnot be utilizing otherso you want to encour- determine how misrepresentation in financial state- manipulated its financial statements, and is basedemployees to their fullage all of your employees ments affects the economy.on eight variables, including how fast a companysleadership capabilitiesto behave like leaders, sales are growing compared to its accounts receiv- when they arent givenPeng said. This prevents In the United States, publicly traded companies areable. The M-Score is considered to be one of thethe same opportunities required to report their recent financial performance,most economically viable measures for investors tothe expectations of a whether good or bad, to the public. The accuracy offor leadership develop- leader, like identifying use to determine the likelihood that businesses havement and advancement. issues and motivating these reports is critical for investors, analysts andmanipulated their financial statements. Famously, the regulators. A study, conducted at the University ofM-Score provided one of the earliest warnings aboutAssociateProfessorthe team, from being Matthew Glendening Missouri and Indiana University, suggests that whenthe Enron accounting scandal. Chunyan (Ann) Peng andlevied on one personJohn Schaubroeckbusinesses submit misleading financial statements, itProfessor John Schau- anditgeneratesa can be an early warning sign of a looming recession. When companies misreport information, it canbroeckinTrulaskeshealthierandmore take years before they are caught, if theyre caughtManagementDepart- productive work envi-Matthew Glendening and Ken Shaw, professors ofat alland many are not, Glendening said. Ourmentstudiedhowronment.accounting at Trulaske, worked together with co-model shows that the likelihood of financial state- coworkersinternally authors Daniel Beneish and David Farber, professorsment manipulation helps predict the outlook of thePrior research suggests of accounting at Indiana University, to determine howeconomy. select leaders among their peers, known as informalpeople select leaders based on their productivityA study at the misrepresentation in financial statements affects theleaders. By surveying more than 375 employees fromand ability to accomplish their common goal, but Shaw said previous research used measures of finan- 63 stores, she and her colleagues found that notTrulaske College of economy. They developed a new model to predictPengs research shows leadership selection is much cial misreporting at the individual firm level, but noeveryone who is motivated and capable of leadingmore complicated than just who is better at their job. Business suggests U.S. recessions and slowdowns in GDP and foundone has previously aggregated the data to come upis asked to act as a leader equally. During the survey that recessions and economic slowdowns are moreTo help increase production in the office and ensurethat organizations with an economy-wide measure of financial misre- process, Peng asked the participants in the study Ken Shaw probable when there is a higher likelihood that finan- whom they looked to for leadership and motivationmany workers are exhibiting and developing lead- might not be cial statements have been manipulated. porting. on hard days. Most responded by looking to the sameership qualities, she said its important for managersutilizing other Accounting matters, and manipulated accountingThe M-Score has been around for a long time, but itcoworker, who had separated themselves as a leader. to be mindful of this group dynamic and counteract took us four co-authors working together to show itemployees to their information can negatively impact the economy,has predictive value for the status of the economy,Peng said that once the teams establish a certainthe tendency to lean on one person by intentionally Glendening said. When financial reporting is notoffering the disadvantaged members opportunitiesfull leadership adequately monitored and companies manipu- which is something everybody has a stake in, Glen- leadership structure, it tends to be relatively stableto prove their leadership skills. capabilities late financial information, it can have potentiallydening said. over time, and as that structure forms it can be diffi- If you want to encourage more healthy leadership cult to change. as they arent damaging consequences. Not only do investors useShaw said the authors ultimate goal is to provideThis is important because such a structure tendsbehavior among a workforce, you need to considergiven the same this information, but other firms do so as well. In manyresearch that is not only informative but can be useda few tactics that can make an impact on the rela-cases, firms make employment and investment deci- by regulators and managers. to establish very quickly and is often not optimal,tionship dynamics of the workforce, like assigningopportunities sions based on this information, which can be wayWe want to answer questions of interest to realPeng said. If you are not initially established as asomeone that is exhibiting fewer leadership quali- for leadership too optimistic. people in the real world, Shaw said. We try to doleader in that structure, you are at a disadvantage.ties to take charge of a particular task, Peng said.development and The study found that high levels of potential manip- something of value in our research and see if theresFor instance, someone who is extroverted is moreManagers need to make an effort, otherwise nothing likely to quickly emerge as a leader, whereas someonewill change. advancement.ulation in financial statements can improve reces- a way that we can help people. who is introverted and equally talented may not. Yet, sion prediction 5 to 8 quarters away, and can alsoAggregate Financial Misreporting and the Predict- the group dynamic we found suggests that the intro- How is leadership maintained? A longitudinal medi-predict downturns in GDP growth at a similar forecastability of U.S. Recessions and GDP Growth wasverted person, despite his/her talent and motivationation model linking informal leadership to upward horizon. published in The Accounting Review, the premierto lead, may be called upon less by their peers. voice through peer advice seeking was published To assess the prevalence of financial statementscholarly journal of the American Accounting Asso- in the Journal of Applied Psychology. manipulation in the economy, the researchers usedciation. Ultimately, the teams research shows that people in a measure widely known as the M-Score, which wasthis scenario will have fewer opportunities to prove 26 | TRULASKE COLLEGE OF BUSINESS TRULASKE MAGAZINE 2024| 27'