BUS603: Managing People

Researchers increasingly emphasize the organizational context as a major factor responsible for behavior at work. One significant organizational factor in this area is leadership, which is more effective if it is built on ethics and the welfare of followers. As such, it should come as no surprise that ethical leadership has attracted a high degree of research interest in recent years.

One of the most extended definitions of the term is that proposed by Brown et al. . They defined ethical leadership 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". According to this definition, ethical leaders would serve as role models of ethical behavior who try to promote such a behavior in their followers, by using communication and reinforcement systems with which to communicate ethical standards and reward (discipline) ethical (unethical) behavior, respectively. Furthermore, although not explicitly noted in the definition, Brown et al. conceptualization implicitly involves avoiding harm onto the employees as well as acting in their best interests.

Subsequently, De Hoogh and Den Hartog specified the concept by explaining the different behaviors an ethical leader usually undertakes. Specifically, De Hoogh and Den Hartog and Kalshoven et al. identified seven behavioral dimensions of ethical leadership: fairness, power sharing, role clarification, ethical guidance, people orientation, concern for sustainability, and integrity . First, ethical leaders are expected to be fair in their decisions, which entails being transparent, taking principled, balanced decisions, being honest, acting responsibly, and treating employees equally. Ethical leaders are also expected to share power, which refers to allowing employees to participate in decision making, and listening to their ideas and opinions. Ethical leaders also clarify roles, by making performance goals, expectations, and responsibilities clear. These leaders also show ethical guidance, as they communicate about ethics, explain ethical issues, and promote ethical conduct. In particular, ethical leaders will do their best to make followers adopt ethical norms. They are also people-oriented, by showing concern and care for people, and taking an interest in their welfare. Further, they are sensitive to environmental and sustainability issues, which they demonstrate by caring about the impact of their actions on the society. Finally, ethical leaders live with integrity, keeping their promises, acting consistently, and reflecting high word–deed alignment.

With such behavioral features, it is no surprise that by exhibiting ethical leadership, managers have great potential to get the most from their relationship with their employees. Underlying all of these characteristics, however, is ethical behavior and particularly, the leader's true motivation to be ethical, which is relevant to understanding ethical leadership and its positive outcomes. In Ng and Feldman's words, ethical leaders "uphold high ethical standards not only in their interactions with followers, but in virtually all aspects of their careers". This is critical to building a leader's sincerity and trustworthiness in the followers' eyes and, in turn, to shape a high positive response among employees, including job dedication. Thus, living an ethical life is key to understanding ethical leadership effectiveness; it is by living this way how leaders are able to assure a peaceful environment and organize behavior in their small communities.

Two theories help explain in detail how ethical leaders influence their employees. One is social exchange theory, which states that feelings of personal obligation, gratitude, and trust emerge in social exchanges. Drawing on the norm of reciprocity, this theory argues that when good treatment is received in social relationships, reciprocation will occur, possibly in the form of the exchange of goods of high value to the other party. In that connection, employees who perceive that managers are ethical and have their best interests at heart are likely to develop a greater dedication to the leader and the job and feel compelled to do something in return, such as making serious extra efforts. A second theory to explain the influence of ethical leaders getting the most from employees is social identity theory. According to this theory, if leaders are trustworthy, employees' perceptions of oneness with the organization increases. Organizational identification also emerges if employees feel they are highly valued. Thus, under situations where ethical leaders are consistent in word and deed, trustworthy, and people-oriented, employees are more likely to do their best on behalf of their organizations.

One form of doing their best for the organization is to offer a positive response when the organization is undergoing change. When, in its drive to adapt to the marketplace, the organization implements change initiatives, it develops internal processes that break down existing structures and create new ones. It is not surprising then that successful change management depends on employees' acceptance and support of change, which is a type of discretionary response very proximal to readiness to change. Readiness to change implies proactiveness and a positive attitude toward change, and mental or physical preparedness to participate in any change, by performing actions that will improve, alter, vary, or modify something. Such a positive response is more likely to be developed among employees under ethical leadership conditions that generate social exchange processes with employees, and inspire social identity in them. However, social exchange and social identity processes are not enough to bring about readiness to change in employees. Changes go from known to the unknown and challenge "the way things are done", so high levels of uncertainty come as a result of times of change. The negative emotions that change can bring to employees are numerous (e.g., anger, anxiety, chaos, depression, fear, etc)., and ethical leadership can play an important role in mitigating all these negative emotions.

In effect, according to uncertainty reduction theory, individuals attempt to reduce uncertainty before acting. Employees make sense of the surrounding environment and events to obtain this uncertainty reduction. They seek clues that enable them to reduce uncertainty, and to trust the situation. Thus, observing ethical leadership in management can be helpful to achieve such a purpose, in line with Demerouti et al. job demands and resources (JD-R) theory. This theory posits that in facing job demands (i.e., aspects requiring physical, psychological efforts) job resources (i.e., aspects that help reduce job demands, and their corresponding physiological or psychological costs) can become a way to buffer the negative effects of job demands or stressors on the employees. Hence, under contexts of uncertainty (or job demands), the interaction with ethical leaders can be seen as a job resource that can help individuals to deal with this uncertainty and become more ready for change. In effect, ethical leaders, who are typically seen as representatives of the organization, show integrity, take employees' needs into consideration, provide a sense of confidence, and represent a valid source of ethical guidance. In fact, under ethical leaders, employees will likely feel supportive, fair, and humane treatment on a continuous basis and in the long run, which should increase their security feelings. As a result, with ethical leaders, the uncertainty inherent to any organizational change might be reduced, with employees having their need for security met, and trusting their leaders, particularly their intention and behavior in the long run and the changes they initiate. Under ethical leadership conditions, employees are more likely to feel less fear, more security, more information about the situation, and a greater sense of control, which is key for them to offer their best response to any change process. Furthermore, ethical leaders empower people, so they are more likely to promote employees' involvement in the change process (i.e., voice in the change process), by reflecting confidence in employees' abilities, thus increasing their self-efficacy perceptions. Such enhancement in their self-efficacy perceptions is critical to understanding and responding to the environment in an efficient manner as well as to be ready for any change.

Overall, social exchange theory, social identity theory, and uncertainty reduction theory help to explain why ethical leadership, which encompasses positive attributes (e.g., integrity, fair and caring treatment of employees, and role clarification), enhances employees' readiness to change. Ethical leadership fosters quality social exchange relationships and perceptions of a sense of oneness with the leader and/or the unit or organization that the leader represents. This is highly likely to stimulate in employees the efforts and positive attitudes needed to be ready for any change in the organization. Ethical leadership is also a source of role clarification and empowerment, which can be useful in times of change to mitigate negative emotions and reduce uncertainty as well as to make employees feel more self-efficacious and ready to respond to any change. Thus, the stronger development of social exchange, social identity, and uncertainty reduction processes that occur as a consequence of ethical leadership should result in a stronger positive influence of ethical leadership on employees' readiness to change. Accordingly,