In his landmark 1958 book, The Psychology of Interpersonal Relations, psychologist Fritz Heider argued that people attempt to explain behavior by recourse to either internal or external attribution. The "12Manage" website describes the two processes:

External (Situational) Attribution: causality is assigned to an outside factor, agent or force. Outside factors fall outside your control. You perceive you have no choice. So your behavior is influenced, limited or even completely determined by influences outside your control. Therefore you feel not responsible. A generic example is the weather.

Internal (Dispositional) Attribution: causality is assigned to an inside factor, agent or force. Inside factors fall inside your own control. You can choose to behave in a particular way or not. So your behavior is not influenced, limited or even completely determined by influences outside your control. Therefore you feel responsible. A typical example is your own intelligence.

In the last few decades, several management scholars have applied the insights of attribution theory to managers explanations about their firm's performance. Though results of empirical are mixed, the general consensus is that external attribution is more frequently employed to explain poor or less-than-expected performance. Not surprisingly, market analysts are trained to look for this. A recent article about Wal-Mart in "The Street.com" provides a useful illustration:

Times are tough at Wal-Mart... The Bentonville, Ark., giant, which reports results before the bell Tuesday, is expected to post earnings of 68 cents a share on revenue of $87.1 billion, according to Thomson Financial. Wal-Mart has already warned, however, that its forecast of 68 cents to 71 cents would be difficult to achieve because of a tough sales environment in April. The month indeed turned out to be tough for the world's largest retailer. Same-store sales slid 3.5%, significantly worse than the 1.1% drop Wall Street projected. Goldman Sachs analyst Adrianne Shapira believes Wal-Mart likely will blame big-picture issues such as rising gas prices, the housing slowdown and lower consumer confidence for its sales woes.... Wal-Mart's problems, she maintains, are company-specific.

Commentary

Thus, as Attribution Theory would predict Wal-Mart managers point to industry, macro-environmental, and economy-level factors as explanations for poor performance. There is nothing inherently wrong or dishonest about this. Rather, it is just a recognition of a well-known human tendency to look inward for reasons explaining success and outward for reasons for explaining failure.

What is equally important as the attribution is the firm's plan of action for addressing the problematic performance. Explanations, by their very nature, are focussed upon explain what has already happened. Solutions that the same managers offer to address the deficits ought to be both proactive and prudent. That is to say, they should make clear what are the steps that are being and will be taken to correct the situation while also explicitly recognizing that there are always elements beyond management's ken and control. This is precisely what the article's author alludes to when he notes that "Wal-Mart isn't sitting back helplessly with subpar results. The company is remodeling stores in an attempt to appeal to a higher-end consumer. Additionally, it is focusing efforts on higher-margin items and departments." That quote highlights the difference between having a strategy (however effective or ineffective it may be) and waiting out a storm.

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