Cauterising Trial by Fire: Observers' Interpretations of Organisational Failure

This article integrates attribution and social judgement theories to develop a stage model of observers' interpretations of the consequences of organisational failure. The contention is that observers' interpretation following such events encompasses sense-making, identifying the locus of causality, identifying the actors and their attributes, and then making an attribution leading to either competitive or contagion effects. This model weaves together these two competing effects to articulate the mechanisms through which observers construe organisational failure as a cauterising trial by fire, which either stigmatises or strengthens individuals and organisations after the event.