Reputation for performance enhances the effectiveness of ethical leadership in the development of an emotional bond between employees and the organization | Researchers: Pedro Neves and Joana Story

The corporate scandals that have come to the general public’s attention in the past years have again highlighted the importance of the ethical conduct of those in influential positions. However, managers often believe in what is one of the main misunderstandings about ethical leadership: its incompatibility with effectiveness. A study by Nova SBE’s Professors Pedro Neves and Joana Story shows that employees’ commitment to the organization is higher and deviant behaviors are lower when direct leaders are seen as both highly ethical and with a strong reputation for performance.

Ethical leadership

Ethical leadership highlights three key elements: a) the leader is a legitimate and credible role model; b) the leader not only explicitly emphasizes the importance of ethics but also reinforces ethical behaviors (while disciplines those that do not comply with the standards); and c) the leader evaluates the ethical implications of his/her decisions. Because the leader is seen as a representative of the organization, employees generalize their views concerning his/her actions to the organization. The reasoning is that virtuous behavior - based on principles of fairness and integrity - from leaders contributes to the thriving of all members of the community, and as such would strengthen the emotional bond between employees and their organization. However, one of the key misconceptions about ethical leadership is that ethics and effectiveness are not compatible “in the rough and tumble business world”, as Michael Brown put it.

The interplay between ethics and effectiveness

Ethical leadership, as an influence process between leaders and subordinates, is influenced by the general character the latter attribute to the leader, namely personal reputation. Reputation serves an important signaling function, carrying information about an individual’s intentions. Reputation for performance (i.e., if employees see the supervisor as someone that “gets things done”) should therefore enhance the effectiveness of ethical leadership in the development of an emotional bond between employees and the organization, by a) signaling that the leader is someone that delivers but that does not follow the maxim “by all means necessary”, and b) showing that the leader is trustworthy.

Research findings: Ethics and performance demystified

The researchers found that the strength of the relationship between the supervisor’s ethical conduct and employees’ commitment to the organization is amplified for leaders that are also evaluated as high performers. It appears ethical leadership is a necessary but not sufficient condition for employees to demonstrate the strongest emotional bond with the organization (and thereby the lowest levels of deviant behavior). Personal reputation is an important asset for ethical leaders because it reduces uncertainty concerning future behavior by signaling that the individual is trustworthy and has the necessary abilities to deal with workplace demands.

The results demonstrate that organizations should also worry about the moral standards of those in direct supervision positions (as well as their personal reputation), as they are important role models due to their ability to reward or punish subordinates. Thus, organizations should make an additional effort to retain those supervisors that present both features, thereby facilitating their ability to function as effective role models, by signaling that both ethics and performance combined are key features to achieve status and success in the organization.

This article is based on the paper “Ethical leadership and reputation: Combined indirect effects on organizational deviance” authored by Pedro Neves and Joana Story, and published in 2015 in the Journal of Business Ethics, issue 127, pages 165-176.