BUS603: Managing People

Leaders play a critical role in shaping the work context. Although they can influence the work environment by implementing formal systems, norms, and procedures, they do it mostly through their day-to-day informal behavior. While Oc, in his review on the role of context in understanding the leadership phenomenon emphasizes the role of context in shaping leadership and its outcomes, he also claims that this relationship can be reciprocal. The influence of leadership on the work context has been shown profusely, thus indicating the capacity of the leaders in influencing the way employees perceive their working environment. The aspects of this environment on which leaders can most influence include the organizational culture.

One of the leading authorities on organizational culture is Edgar Schein, who defines the concept as "the pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems", and depending on the aspect it focuses on, the organizational culture will influence it in one way or another. One important facet to focus on is the general good functioning of the organization or its effectiveness. Therefore, if the organizational culture emphasizes this aspect, the organizational culture could be defined as the shared values and beliefs that individuals understand and consider as appropriate behavioral norms in order to achieve organizational performance and effectiveness.

According to Sashkin and Sashkin and Rosenbach, five key value dimensions foster the good functioning of organizations, and therefore make an organizational culture of effectiveness possible: change management, goal achievement, coordinated teamwork, customer orientation, and shared values and beliefs . With change management, organizational cultures are concerned about dealing with external forces and the need to adapt to change, thus making employees feel their destinies are a matter of internal control and enhancing their levels of self-confidence. By emphasizing goal achievement, organizational cultures of effectiveness also highlight the need to effectively achieve coherent and aligned goals, commonly leading to the empowerment of workers. Another important aspect emphasized in organizational cultures of effectiveness is coordinated teamwork, which highlights the importance of people working together to get the job done. Organizational cultures of effectiveness also emphasize customer orientation, which involves the need to continuously adapt to customers' needs. Finally, the element which holds all these dimensions together is the strength of shared values and beliefs. It reflects the degree to which people agree that all the aforementioned values should guide their actions. Its relevance in building an organizational culture of effectiveness is clear: "If everyone can buy into or reject them, at will, how can these values and beliefs have a consistent impact on people's behavior?"

Based on this discussion of organizational culture of effectiveness and its components, an organization with strong values and beliefs regarding the importance of adapting to change, and working to achieve specific goals and targets, in customer-oriented teams, can enhance employees' readiness to change. Choi's review of the literature posits an organizational culture as an important antecedent of positive change-readiness responses. In particular, research has stressed that employees are more likely to be ready to change when the organizational culture emphasizes several aspects such as learning, teamwork, collaboration (i.e., clan-type culture), energy, creativity, an emphasis on innovation (i.e., adhocracy-type culture), participation in decision making, or access to significant information in the workplace. It is of no surprise then that an organizational culture of effectiveness, which shares some of the cultural aspects described above, can positively influence employees' readiness to change. In effect, by emphasizing the importance of adapting to change, employees are more likely to value the need and benefits of change, and become more prepared for it. Such an organizational culture of effectiveness will result in positive attitudes and perceptions toward change, which should increase employees' confidence about their own abilities to cope with the situation, and thus increase their readiness to change. Furthermore, by focusing on goal achievement, an organizational culture of effectiveness is more likely to empower employees and allow them to participate in the design and development of change, thus favoring less resistance to change.

In addition, according to expectancy theory, people choose courses of action based upon beliefs. Therefore, if these beliefs support the achievement of (aligned) goals, individuals will accept and be more willing to work on the achievement of goals for change, and will perform better during the change processes. The emphasis of an organizational culture of effectiveness on fostering teamwork also leads to greater readiness to change in employees. When employees interpret the team spirit positively, employees' positive self-concepts are strengthened, which leads employees to be more predisposed toward change. Eby et al., for example, found that individuals oriented toward working in teams appeared to be more receptive and ready to change. Finally, an organizational culture of effectiveness emphasizes an orientation toward customers, whose desires are highly changeable. Thus, under a culture which emphasizes this aspect, employees are more likely to have more favorable attitudes toward change.

Although an organizational culture of effectiveness is defined as one important antecedent of employees' readiness to change, leaders play a critical role in its development and construction. In Schein's view, leaders influence the below-the-surface (values and beliefs), but also the surface layers of an organization's culture, including visible artifacts such as behavioral norms, policies, and standards. Therefore, the values that leaders hold are critical to configuring the emphasis of the organizational culture; if these values are ethically rooted, then an organizational culture of effectiveness is highly likely (cf., De Hoogh and Den Hartog, 2008 ; Hu and Liden, ). In fact, ethical leadership and an organizational culture of effectiveness both place a strong emphasis on certain aspects that help organizations gain in terms of effectiveness. For example, for ethical leaders, stepping outside oneself and focusing on other stakeholders' interests are important. Therefore, organizations led by ethical leaders are more likely to be aware of stakeholders' concerns, and to be more oriented to meet customers' needs.

In addition, ethical leaders empower and develop employees, and provide the information needed to complete tasks, which should make it easier for employees to learn, and apply new skills and new technologies to achieve organizational goals. Ethical leaders also incorporate employees' ideas into their decisions, involving them in goal setting. As a result, goals are better clarified and employees perceive them as their own, which should motivate greater efforts to achieve them. Interestingly, with ethical leaders, cooperativeness and a sense of trust in others is likely to emerge, which facilitates teamwork and brings people's efforts together to achieve organizational goals. Finally, since employees tend to be attracted to ethical environments, cultures shaped by ethical leadership should, consequently, be more strongly shared by employees, which should enhance organizational effectiveness.

Overall, this reasoning leads us to suggest that ethical leadership may positively influence employees' readiness to change, through shaping an organizational culture of effectiveness. Although, as argued in H1, ethical leadership is expected to directly and positively influence employees' readiness to change, based upon social exchange, social identity, and uncertainty reduction reasoning, an organizational culture of effectiveness is also likely to help in explaining this relationship. It could be the mechanism that helps to complete the social exchange, social identity, and uncertainty reduction explanations for the "ethical leadership–employees readiness to change" relationship. In effect, ethical leadership, by exhibiting integrity, fairness, and genuine concern for employees, is more likely to invoke gratitude in employees, leading to social exchange relationships in which positive employee responses such as readiness to change can easily arise. Due to the strong ethical standards that ethical leadership encompasses – which makes it easier for employees to feel they are highly valued-ethical leadership stimulates self-identification processes with the leader and organization, which lead to employees making extra efforts for the organization, including a greater readiness to change. Finally, according to uncertainty reduction theory, ethical leadership, through serving as a strong guide in terms of values, would serve to mitigate the negative emotions that any change entails and would help stimulate positive change-readiness-related responses by employees.

While social exchange theory and social identity theory help explain the positive influence of ethical leadership on employees' readiness to change via stimulating a positive response in the employees, these mechanisms lack the importance that the transmission of a set of values that shape readiness to change may also have. Uncertainty reduction theory, the remaining mechanism used in H1 to explain the ethical leadership–employee readiness to change relationship, includes, to some extent, the important role of setting values in the organization to reduce ambiguity and uncertainty, but ignores the important role of shaping values that drive employees toward making positive readiness-to-change-related responses themselves. An organizational culture of effectiveness, however, would enable this idea to be included and would therefore complete the social exchange, social identity, and uncertainty reduction explanations regarding why ethical leadership may positively relate to employees' readiness to change.

The underlying set of values of any organizational culture shapes the behavior of the employees in the same direction; employees importantly rely on the values espoused in the organizational culture to guide their behaviors. As such, under organizational culture of effectiveness conditions, and therefore under conditions where the organizational culture emphasizes a set of values that are conducive to positive responses concerning organizational change, employees' readiness to change is more likely. Thus, organizational culture of effectiveness becomes an important mechanism by which ethical leadership, of both upper– and middle–lower echelons, is likely to influence employees' readiness to change. In effect, while upper echelons exert a significant influence on the content of the organizational policies and practices, and therefore in the set of values that are required to be spread in the organization, middle–lower echelons play an important role in the extent to which employees internalize these values. Managers in middle–lower echelons create more meaningful relationships with their employees, and their support regarding the set of values taught as the correct way to think and feel in the organization (i.e., organizational culture) turns them into strong influences of the employees' acceptance of and commitment to such a set of values. Furthermore, in line with Schaubroeck et al. findings about the important role of middle–lower echelons in shaping the organizational ethical culture, it is of no surprise that these managers can play an important role in shaping an organizational culture of effectiveness.

In summary, although ethical leadership is likely to influence employees' readiness to change for social exchange, social identity, and uncertainty reduction processes, its ability to shape an organizational culture of effectiveness makes it likely that an organizational culture of effectiveness completes this relationship. An organizational culture of effectiveness would thus partially mediate the positive relationship of ethical leadership to employees' readiness to change. This mediation would be partial because the interaction with ethical leaders itself is enough to make employees want to reciprocate with valuable behavior – social exchange theory, Blau – feel identified with their organization – social identity theory, Ashforth and Mael – or experience less uncertainty under any change process – uncertainty reduction theory, Berger and Calabrese – which is consistent with attitudinal and behavioral processes leading to a higher readiness to change. Accordingly,