Ethical leadership: Good policy may prompt bad behavior

New research findings reveal how managerial approaches to integrity influence team morale and performance.

"I've seen countless papers about all the benefits of ethical leadership," says David Welsh, professor of management and entrepreneurship. Among the positive research findings, scholars have discovered that ethical leadership inspires increased job satisfaction and commitment among employees, strengthens teams, reduces turnover, fosters greater innovation, and improves financial performance.

"It's good for employees, it's good for organizations, and it's good for the leaders themselves," Welsh adds. But is it always good? Welsh wondered if that was the case, and his recent research did uncover a potential downside to ethical leadership. Working with Grace Ching Chi Ho from Southern Methodist University and John T. Bush from the University of Central Florida, Welsh and his team found that the approach taken to advance ethics in the office can hinder or enhance a leader's job performance. That's because employee reactions to the approach can prompt a positive or negative response from leaders themselves.

Carrot or stick

"There's not just one type of ethical leadership," Welsh says, explaining that promotion-focused leadership centers around recognizing employees when they display ethical choices, supporting those choices, and rewarding them. "But then there is a prevention-focused side," he adds. That includes "warning, monitoring, and punishing unethical behavior." Employees react very differently to those two approaches, he adds.

It makes sense that employees react differently to praise versus punishment, and Welsh had already proved it in prior research. A previous study conducted by Welsh found that prevention-focused approaches to creating an ethical workplace can undermine employee trust in their leader. It signals to employees that they have a problem with the boss.

"Anybody who has had a manager looking over their shoulder, warning them, or punishing people could understand this," Welsh says. "Most of us think we're doing the right thing, and we don't appreciate that sort of oversight."

There are uncomfortable questions that the preventive approach to ethics may plant in employees' minds, he adds. Why are you doing this? What have I done to deserve it? Do you think I'm behaving unethically? What's the problem here?

Welsh says that while it's a leader's job to monitor employees and punish if necessary, doing so on a day-to-day basis can hinder a strong relationship and even cause employee anger.

The alternative approach — supporting and rewarding employees for ethical behavior, engenders gratitude, not anger, Welsh notes. Instead of questions, he says this conduct is more likely to prompt thanks and cause employees to think, "Thanks for supporting me. That's for noticing the good things I'm doing."

Both employee irritation and gratitude ultimately get expressed back to the leader. That's where trouble can begin.

Chain reaction

"If you're a leader engaging in ethical leadership and your employees are reacting with either gratitude and appreciation or anger and outrage, that affects you," Welsh says. "How are you going to respond? What are going to be the implications for you later that day in terms of how you behave within the organization?"

This is what Welsh and his team tested: how leaders behave in reaction to employee behavior related to promotion- or prevention-focused ethical leadership.

The researchers recruited some 500 leaders and their subordinates for three experiments at various academic and business organizations in the U.S. The first two experiments verified that employees appreciated promotion-focused leadership, and leaders perceived employees as grateful for this approach. Likewise, employees found prevention-focused tactics irksome and anger-inducing.

The third experiment tracked 135 MBA candidates who completed two surveys daily for 15 days. Each day, the participants reported things like, "Today I rewarded subordinates for doing the right thing," indicating a promotional method of fostering ethics, versus, "Today I closely monitored subordinates to prevent ethical lapses" or "I punished subordinates for ethical transgressions." The latter statements reflect a preventative style of ethical leadership.

Later in the day, the same leaders reported on their behavior. The researchers sought to investigate two key aspects: organizational citizenship behavior and counterproductive work behavior.

"Helping out other people, going out of the way to assist: That's citizenship behavior," Welsh says. "It's not part of someone's formal task responsibilities, but it's the stuff that leaders do to go above and beyond. And then there's also the counterproductive side where the leader might be undermining people or speaking negatively about others in the workplace or just doing things that are detrimental in some way."

Working well with others

Employees at all levels of an organization exhibit both citizenship and counterproductive behaviors; therefore, the research team examined how leaders responded to all coworkers. Examining the two surveys each day — one completed midday and one completed at day's end — showed that leader behavior changed after those they supervised expressed anger. The leaders admitted to less good citizenship, more counterproductive behavior, and a reduction in overall performance. Follower gratitude flips those outcomes, and leaders exhibit more good citizenship, less counterproductive behavior, and better performance after subordinates show appreciation.

The scholars also found that leader behavior changed from day to day. "It's not that a person goes to work every day and does the same type of leadership," Welsh explains. "It's much more dynamic than that. On different days, leaders engage in different behaviors and followers respond in different ways." So do the leaders themselves.

The data showed that the variance in leader citizenship behavior shifted by as much as 45%, while counterproductive behavior shifted by 54% and productivity shifted by 60% throughout the 15-day experiment.

Welsh says the findings show, "It can be harder for leaders if they're engaging in ethical leadership and followers get angry. It can have implications for a leader's performance behaviors and how that person is going to feel and respond that day."

Fortunately, the research found a potential remedy for the downward spiral that can be created by preventative-focused leadership and subordinate anger: high-quality relationships between leaders and their followers. Strong relationships "can go a long way to help alleviate angry responses from followers in situations when ethical leadership is required to prevent follower misconduct," the research team wrote in a paper about their study.

"When a leader is warning, monitoring, or punishing an employee, relationship quality will help employees interpret that in a more positive or generous light," Welsh says. On the flip side, he notes that, "Promotion-focused leadership is always good. Even if you don't have a positive relationship, employees tend to appreciate that style of leadership."

Welsh adds that leaders aren't the only ones who should consider that a subordinate's response can affect their manager's mood and impact performance. "We always assume that leaders have this top-down power," he says. "When you're displaying anger or gratitude to your manager, what are the implications of that for the leader, for the organization, or for your relationship with your manager? I think it's important for followers to be aware of their role in this."

Welsh doesn't let organizations off the hook, either. "If top management assumes that ethical leadership is great for everyone, they may be surprised to learn of these challenges leaders are experiencing when they interact with employees," he says. Knowing what leaders are going through could be a game-changer. "Organizations can help their leaders do the right thing, even when it's hard," Welsh adds. "They can teach their leaders the importance of developing relationships with their followers as well, so that the organization's ethical leadership can be more effective."