Ethical leadership's effects on employee morale and workplace productivity

Effects of Ethical Leadership on Morale and Productivity in the Workplace

Although WorldCom, Ahold and Enron are among the most high profile corporate scandals in recent years, unethical behaviors on the part of leaders can have a devastating effect on organizations of all types of sizes. By very sharp contrast, increasing scholarship in this area has confirmed that ethical leadership can have a number of positive outcomes, including significantly improved employee morale and productivity in the workplace as well as brand image and corporate reputation. The purpose of this paper is to describe the manner in which ethical leadership in an organization affects morale and productivity. To this end, an overview and definition of ethical and unethical leadership is followed by a discussion concerning the research to date about the effects of ethical leadership and what the implications of these findings for the future. Finally, a summary of the research and important findings concerning the effects of ethical leadership on morale and productivity in the workplace are presented in the conclusion.

Review and Discussion
What is ethical leadership?
In response to a number of high=profile ethical scandals that have taken place in virtually all types of organizational settings in recent years, there has been an increasing amount of interest and scholarship concerning the effects of ethical – and unethical – leadership on employee morale and productivity in the workplace (Xu & Yu, 2013). In this regard, Xu and Yu (2013) defined ethical leadership succinctly 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" (p. 361).
Although this definition provides some clarity to the issue, other researchers have sought to identify those personal attributes that characterize ethical leaders and have identified honesty, trustworthiness, truthfulness and integrity as being essential. Other researchers, though, have sought even more definitional clarity with respect to what makes leaders ethical. In this regard, Malik and Awais (2016) report that, “Leaders are ethical leaders if they make balanced decisions by being caring, honest and principled leaders, communicate the ethical standards to their followers and utilize methods of rewards and punishments to ensure the implication of those ethical standards” (p. 590).
This definition of ethical leadership underscores the need for consistency in the application of ethical principles in the workplace, but as the discussion the follows below makes clear, such consistency is a truly challenging enterprise for the human animal. Nevertheless, consistent ethical behavior is frequently cited as being among the most important characteristics of truly ethical organizational leaders. As Barnes and Doty (2010) put it, “Leaders become credible and authentic as ethical role models by engaging in ongoing behaviors that subordinates deem unselfish and ethically appropriate. These behaviors include being honest, showing consideration for others, and treating people fairly and with respect” (p. 591).
In addition, and perhaps even more importantly, studies have also shown that in order to be regarded as ethical, leaders must “walk the walk” besides “talking the talk” and must be upfront, consistent and forthright in their ethical behaviors rather than waiting for an opportunity to exercise ethical behaviors for all to see. As Malik and Awais (2016) conclude, “Ethical leaders are those who preach what they practice and do not rely on reactive approach for the implementation of the ethical conduct” (p. 590). This observation also means that all types of leaders serve as role models for their subordinates, and it is little wonder that unethical leaders tend to create unethical followers while ethical leaders inculcate ethical practices among their employees.
In fact, some authorities suggest that the ethical behaviors of employees are the best gauge of measuring their leaders’ ethical practices. For example, according to Barnes and Doty (2010), “Some people believe that ethical leadership is simply a leader who behaves ethically. Others believe that ethical leadership reveals itself more in the behavior of followers than in that of the leader himself” (p. 592). In sum, then, leaders serve as role models, whether they know it or not, and the types of business practices they engage in will invariably serve to influence how their followers behave in the workplace as well. This point is also made by Treviflo, Mayer and Epley (2019) who note that, “Leaders who lead ethically are role models, communicating the importance of ethical standards, holding their employees accountable to those standards, and- crucially- designing environments in which others work and live” (para. 2)..
Indeed, a growing body of empirical observations and countless social science studies have confirmed that unethical leadership can have a profoundly adverse effect on morale and productivity (Norton, 2016). These negative effects can range from modest negative behaviors such as increased absenteeism to more severe behaviors such as the outright sabotaging of a company’s operations. In reality, though, these findings are not surprising given that many if not most people can easily recognize unethical behaviors on the part of the organizational leaders, but even when such behaviors go undetected for long periods of time, the negative fallout that ensues along the way may still have an adverse effect on morale and productivity in other, less discernible ways (Xu & Yu, 2013).
Conversely, studies have consistently shown that ethical leadership in organizations promotes productivity and improves employee morale (Verschoor, 2009). For example, according to Wen and Chen (2016), “Ethical leadership reduces employees' unethical behavior and conflict in a work group. [In addition], ethical leadership influences employee initiative as well as counterproductive work behaviors” (p. 1256). These findings are unequivocal, they do underscore the need to determine the manner in which ethical leadership actually improves productivity and employee morale and these issues are discussed further below.

How ethical leadership affects employee morale and productivity.
Although all leaders use different methods to achieve this desirable outcome, the common denominator that is shared by all of them is their commitment to ethical conduct. This commitment may be manifested in various ways, but ethical leaders typically achieve improved productivity and morale by focusing on the welfare of both the organization and its employees. For instance, according to Alshammari and Almutairi (2015), “The frameworks of ethical leadership embody the need to engage the precincts of psychological empowerment with regard to influencing the organizational performance and the moral identity of employees” (p. 108).
Despite the growing body of scholarship in this area, there remains a paucity of research concerning the motivations of ethical versus unethical leaders. For instance, Xu and Yu (2013) point out that, “Researchers know very little about why some leaders engage in the spectrum of ethical leadership behaviors and others do not” (p. 362). Likewise, Xu and Yu (2013) note that there is also a dearth of timely and relevant research concerning the personal attributes of leaders that can be used to predict whether they will tend to engage in ethical or unethical behaviors in the workplace.
Notwithstanding these gaps in the research, what is known for certain at present is that all types of leaders have an impact on employee morale and productivity, and that ethical leaders tend to outperform their unethical counterparts over the long term by virtue of their contributions to making the workplace a creative environment. For instance, Duan and Liu (2016) report that, “Organizational innovation is enhanced by individual creativity which is influenced by the organizational environment. Therefore, the role of leaders is a critical factor because they have insight into creative employee work outcomes and have influence over creative environments” (p. 323).
Consequently, by helping create and sustain a workplace environment that is conducive to innovation, ethical leaders provide employees with the opportunity to enjoy a greater sense of creativity which oftentimes translates into improved morale and heightened productivity. As Duan and Liu (2016) conclude, “Ethical leaders set high ethical standards for their employees, establish integrity and fairness in the workplace and promote creative behaviors” (p. 325). In other words, when ethical behaviors begin at the top, these behaviors are communicated throughout the organization in various ways that promote productivity and improve employee morale.
This all sounds great, of course, so it is perplexing why some organizational leaders continue to engage in unethical behaviors given the numerous benefits of ethical behaviors on employee performance. Unfortunately, the human animal is a frail creature, fraught with weaknesses and relentless temptations that far too frequently override their innate ethical senses. Moreover, it is reasonable to posit that even the most ethical leaders may lapse into unethical practices from time to time, a tendency that is facilitated by humankind’s ability to rationalize even the most irrational unethical behaviors when such behaviors help them achieve a desired objective in a “ends just the means” analysis.
This tendency to engage in ethical or unethical business practices also has some important cultural implications that must be taken into account when evaluating leaders’ behaviors, and what is widely regarded as being ethical in one culture may be viewed far differently in others. In this regard, Curtis (2008) points out that, “Ethical leadership is not the universal norm. It might be considered an ideal in those cultures derived from or significantly influenced by ancient Greco-Roman civilization, but that certainly does not represent a majority of the world” (p. 3). As an example, Curtis (2008) cites the widespread – and accepted -- practice in many Middle Eastern countries to leverage leadership positions in government employment in ways that benefit an individual’s family and friends.
Likewise, other authorities note that besides cross-cultural differences, what are regarded as ethical business practices may change over time. In the not-too-distant past, unethical business practices were frequently overlooked or ignored by shareholders if leaders consistently achieved organizational goals, including most especially adding value to their holdings. This ideological view is evinced in Morrison’s textbook from nearly a half century ago, Why S.O.B. 'S Succeed, and Nice Guys Fail in a Small Business (1976) in which clearly unethical business practices such as check kiting and near-fraud are lauded as being the road to organizational success while ethical business practices are characterized as being the sole venue of “nice guys” who are doomed to failure.
Today, though, organizational leaders are being held to higher standards in the wake of the high-profile corporate scandals mentioned in the introduction and others, and the advent of social media has created an environment in which engaging in unethical business practices can become the focus of widespread condemnation (Makris & Davey, 2015). For example, according to Makris and Davey (2015):
Thanks to social media, leadership behavior, even during personal time away from the office, is constantly being monitored by a mass market of judges ready to transmit news of transgressions around the planet in a matter of seconds. As a result, the price paid for departing from expected behavior is steep for both leaders and organizations. (p. 37)
Moreover, organizational leaders are routinely confronted with ethical dilemmas and the potential for doing the wrong thing even when attempting to do the right thing always remains salient. The nebulosity concerning what is ethical and what is not can be mitigated, to some extent, by ensuring that the central values of an organization are ethical from the outset in order to serve as guide when questions about what course of conduct is most appropriate. For instance, according to Malik and Awais (2016), organizational values are “a set of beliefs that influence the way people and groups behave; they are the ‘soul’ of the organization; effective values are deep rooted; and core values help form a social psychology that can support or overcome individual psychology” (p. 592).
This observation also means, however, that to the extent that organizational values are unethical in nature will likely be the extent to which workers are more prone to engage in unethical practices themselves, all to the eventual detriment of their organizations. This is not to say, of course, that an isolated incident of unethical business practices on the part of organizational leaders will have an immediate negative impact on worker productivity and morale, but it is to say that most people do not like crooks in general, and they dislike them when they are in positions of authority in particular. Given the significant temporal and cultural differences in what are typically regarded as ethical business practices, it is remarkable that any business leaders can distinguish themselves as being truly ethical individuals, but the fact remains that some people manage to achieve this goal despite the challenges that are involved and these issues are discussed further below.

Discussion
The performance of employees that work under unethical leaders who are blatant and transparent about their actions may suffer during their tenure, but at least these employees know the score and can either elect to remain in their positions or seek more ethical leadership elsewhere. In these cases, employee morale and productivity will likely suffer so long as employees voluntarily remain in their jobs. By sharp contrast, leaders who conceal their unethical behaviors until they are finally caught can also have a devastating impact on their employees and organizations since they will feel betrayed and even foolish for having believed in and followed an unethical leader.
In either eventuality, however, the end result is virtually identical with respect to the adverse effects of unethical leadership on employee performance, varying only in time, place and intensity. For instance, although it was business as usual for years, when the executives at Enron were finally discovered to have been engaging in corporate shenanigans, the impact was not only organization wide, it had negative rippling effects throughout the national economy. In this regard, Malik and Awais (2016) emphasize that, “The financial successes as well as the reputation of the organizations are at stake due to such scandals” (p. 590).
This also means that ethical business practices are the lifeblood of any organization whether its leadership realizes it or not and those leaders who insist on engaging in unethical behaviors do so at their own peril, as well as that of their employees and entire organizations..A good exemplar of a widely regarded ethical corporation headed by an ethical leader is Starbucks and its chief executive officer, Howard Schultz. Although this company has experienced some negative publicity in recent years due to some misguided marketing initiatives, Starbucks and its CEO are consistently cited as examples of truly ethical business practices in today’s globalized marketplace. For instance, according to Makris and Davey (2015), Starbucks has been named as one of the most ethical organizations in the world, and this designation has translated into greater personal success for Schultz as well as his corporation. As Makris and Davey (2015) point out, “Starbucks CEO Howard Schultz is an excellent example of ethical leadership resulting in personal rewards as well as organizational performance. Ethical leadership is clearly a major part of the Starbucks brand and this can be seen in its success” (p. 38).
Some observers might well point to the current U.S. president as a prime example of how an unethical leader can have widespread negative impacts, but the fact remains that regardless of the size and type of organization, the type of leadership that is in place will have a profound effect on organizational performance and productivity. Given the solid body of evidence in support of these claims, however, it is vitally important for organizations to identify ethical individuals with the potential for leadership and help them grow into their full potential. Likewise, it is also important to cull unethical individuals from an organization lest their behaviors infect others. When unethical individuals occupy leadership positions, this need becomes even more acute.
Rather than forcing individual workers to turn into unwilling whistleblowers that feel compelled to report every perceived instance of unethical behaviors on the part of their leaders, organizations must ensure that the leaders they have in place possess the right qualities to serve as role models for others in ways that promote improved performance on a day-to-day basis. In this regard, Malik and Awais (2016) stress that, “An organization expects a lot from both the leader and the workers. But in many situations, the workers are heavily relying on the appropriate guidelines from their superiors in order to fulfill the organization’s expectations” (p. 291).
Conclusion
Although the research was consistent in showing that ethical leaders have a major positive impact on their organizations in terms of employee morale and productivity by serving as role models and effectively communicating organizational values, the point was also made that most humans are incapable of acting in an ethical fashion 100 percent of the time. Indeed, most if not all people tend to resort to some types and levels of unethical practices from time to time and over time, but such lapses are regarded as normal and do not necessarily adversely affect employee performance or productivity if they do not persist. On the other hand, though, the research was also consistent in showing that consistently unethical leadership can have a devastating impact on organizations in both the short and long terms, including dooming them to failure. In some cases, unethical practices on the part of leadership are discovered in sufficient time to prevent them from ruining a company’s brand entirely, but when these practices are allowed to continue, the effects can include dooming a company’s future. In the final analysis, it is reasonable to conclude that organizations that place a high priority on ethical business practices will achieve and sustain a competitive advantage over those that do not.


References
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