Ethical leadership and employee in-role performance. The mediating roles of organisational identification, customer orientation, service climate, and ethical climate
| Date | 04 November 2019 |
| Published date | 04 November 2019 |
| Pages | 1716-1733 |
| DOI | https://doi.org/10.1108/PR-12-2018-0514 |
| Author | Narges Kia,Beni Halvorsen,Timothy Bartram |
| Subject Matter | Hr & organizational behaviour,Global hrm |
Ethical leadership and employee
in-role performance
The mediating roles of organisational
identification, customer orientation, service
climate, and ethical climate
Narges Kia
RMIT University, Melbourne, Australia
Beni Halvorsen
School of Management, College of Business,
RMIT University, Melbourne, Australia, and
Timothy Bartram
RMIT University, Melbourne, Australia
Abstract
Purpose –Against the backdropof the Royal Commission into Misconduct in the Banking, Superannuation
and FinanceServices Industry in Australia,this study on ethical leadershipis timely. The purposeof this paper
is to examine the mediating effects of organisational identification, customer orientated behaviour, service
climate and ethicalclimate on the relationship betweenethical leadership and employee in-role performance.
Design/methodology/approach –The hypotheses were tested using a two-wave survey study of 233 bank
employees in Australia.
Findings –Evidence from the study indicated that organisational identification, service climate and ethical
climate mediate the relationship between ethical leadership and employee in-role performance. Surprisingly,
the proposed mediation effect of customer orientation was not supported. However, ethical leadership was
positively associated with customer orientated behaviour among employees.
Research limitations/implications –Limitations of the study include collecting data at two time points,
thereby rendering the study cross-sectional. Employee in-role performance was a self-rated measure.
Practical implications –This study showed that ethical leadership is critical to improving employee
perceptions and experience of an organisation’s service climate, ethical climate, organisational identification,
customer orientated behaviour and employee in-role performance. The authors raise a number of HRM
implications for the development and enablement of ethical leaders in the banking context.
Originality/value –The findings presented in this paper highlight that ethical leadership is critical to
improving employee perceptions and experience of an organisation’s service climate, ethical climate,
organisational identification, customer orientated behaviour and employee in-role performance.
Keywords Quantitative, Ethical climate, Organizational identity, Customer orientation,
Employee performance, Ethical leadership, Service climate
Paper type Research paper
Ethical leadership andits impact on the behaviourof employees has emerged as an important
issue for contemporary organisations, especially within the banking and finance industry
given the global financial crisis which saw the collapse of banks in some European countries
and large government bailouts of the sector in the USA (Aktan et al. 2009; Berenbeim, 2010;
O’Connell and Bligh, 2009; Trevino and Nelson, 2016). More recently, in Australia, a Royal
Commission into Misconduct in the Banking, Superannuation and Finance Services Industry
has found evidence of widespread and systematic unethical behaviour among banking leaders
and their employees which have negatively and in many cases had a devastating impact on
banking customers. The Royal Commission into Misconduct in the Banking, Superannuation
and Financial Services Industry Interim Report (2018, p. 1) has concluded that unethical
Personnel Review
Vol. 48 No. 7, 2019
pp. 1716-1733
© Emerald PublishingLimited
0048-3486
DOI 10.1108/PR-12-2018-0514
Received 20 December 2018
Revised 8 April 2019
Accepted 19 May 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0048-3486.htm
1716
PR
48,7
behaviour among bankers was the result of “greed –the pursuit of short term profit at the
expense of basic standards of honesty. How else is charging continuing advice fees to the dead
for continuing advice to be explained?”Commissioner Kenneth Hayn e reported that “selling
became the focus of attention. Too often it became the sole focus of attention [as] banks
searched for their ‘share of the customer’s wallet’. From the executive suite to the front line,
staff were measured and rewarded by reference to profit and sales”(p. 1). In response to the
Royal Commission’s work, intense media scrutiny and the cries of customers, regulators and
political leaders, banks and other financial institutions have made a number of recent
announcements regarding wide-scale change and remedial action, including “the abandonment
of products or practices […] sales of whole divisions of the business […] and new and more
intense regulatory focus on particular activities”(Royal Commission into Misconduct in the
Banking, Superannuation and Financial Services Industry Interim Report, 2018, pp. 1-2).
Despite the “promises”of banking leadership to reform their “greedy”and “unethical
management practices”, we argue from a human resource management (HRM) perspective
that no long standing change in the behaviour among bankers can take place without the
presence of ethical leadership, and subsequent development of an ethical and customer
focussed organisational climate, underpinned by congruent HRM practice (e.g. rewarding
customer orientation and the creation of customer value). It is here, that this paper is
situated to enhance our understanding of the process through which ethical leadership
among managers may lead to employee performance through refocussing on customer
orientation, developing greater organisational identification among employees and the role
of ethical leadership in supporting the development of ethical and service climates. Ethical
leadership can be defined as “the demonstration of normatively appropriate conduct
through personal actions and interpersonal relationships, and the promotion of such
conduct to followers through two-way communication, reinforcement, and decision-making”
(Brown et al., 2005; p. 120). Trevino et al. (2000) argued that there are two pillars of ethical
leadership. The first pillar relates to being a moral person (demonstrating moral
characteristics and traits in his/her behaviour as a role model by doing the right thing and
following ethical decision rules). The second pillar relates to being a moral manager,
whereby he/she exhibits role modelling through visible action (two-way communication and
the ethical use of rewards and disciplinary practices). Management scholarship has
consistently demonstrated that ethical leadership is positively associated with morally
desirable ethical behaviour among subordinates (e.g. Huang and Paterson, 2017; Newman
et al., 2014; Wang and Sung, 2016; Bavik et al., 2018). Underpinned by this scholarship, in
this paper, we argue that critical to refocussing on customer needs is the importance of the
creating both a service and ethical climate within the banking organisation (Kozlowski and
Doherty, 1989; Liao and Chuang, 2004; Walumbwa et al., 2010; Zhang and Bartol, 2010). In
this paper, service climate is defined as “employees’shared perceptions of the policies,
practices and procedures that are rewarded, supported and expected concerning customer
service”(Schneider et al., 1998, p. 151). Ethical climate is defined as “the prevailing
perceptions of typical organizational practices and procedures that have ethical content
constitute the ethical work climate”(Victor and Cullen, 1988, p. 101). Moreover, within the
context of positive service and ethical climates, organisational identification may play an
important role in enhancing the belongingness of employees and thereby enable employees
to focus on customer needs and increase subsequent employee performance (Frisch and
Huppenbauer, 2014; Walumbwa et al., 2011). Organisational identification has been defined
as the “perception of oneness with or belongingness to the organisation”(Ashforth and
Mael, 1989, p. 21). Critical to the servicing customer needs is a re-focus on customer
orientation of front-line workers (Frisch and Huppenbauer, 2014; Qin et al., 2014; Zheng
et al., 2011). Customer orientation is defined as the importance that service workers place on
their customers’needs and expectations regarding the service offerings and the extent to
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Ethical
leadership
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