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EING ETHICAL IS MAKING ETHICAL
HOWDOESETHICALLEADERSHIPINFLUENCETHERELATIONSHIPBETWEENREGULATORY FOCUSANDUNETHICALBEHAVIOR?
Master Thesis, MSc Human Resource Management University of Groningen, Faculty of Economics and Business
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B
EING ETHICAL IS MAKING ETHICAL
HOWDOESETHICALLEADERSHIPINFLUENCETHERELATIONSHIPBETWEENREGULATORY FOCUSANDUNETHICALBEHVIOR?
ABSTRACT
In the light many scandals, companies try to act more ethical in order to save money. The goal of this study is to investigate the relationship between Regulatory Focus and unethical behavior. From existing literature a positive relation between Promotion Focus and unethical behavior was expected and a negative relation between Prevention Focus and unethical behavior. Using 98 completed surveys gathered through Mechanical Turk, I found a negative relationship between Promotion Focus and unethical behavior and a positive relationship between Prevention Focus and unethical behavior, which contradicted expectations. Second, the concept of ethical leadership is applied to see how this relationship between regulatory focus is changed by its context. Finally, research showed that ethical leadership moderates the relationship between Promotion Focus and unethical behavior which confirmed expectations.
3 INTRODUCTION
Companies try to maximize their profits in order to increase shareholders value.
Unethical behavior seriously undermines this goal by costing large amounts of money (Weber, Kurke & Pentico, 2003). Therefore, companies need to be more ethical in order to save money. Organizations are increasingly aware of the importance of ethics (Gino & Margolis, 2011) and organizations develop rules, regulations and policies to increase them. There are still many cases of fraud within companies (Gino & Margolis, 2011). Companies’ actions seem to be insufficient to counteract unethical behavior. Consider the following examples: 1) according to the center for retail research, 35 percent of shoplifting is conducted by own staff, totaling an annual cost of $37.1 billion dollar globally1; 2) the Enron scandal, where individuals conducted fraud on a large scale that led to its bankruptcy, generated a loss of over $70 billion dollar for its investors2; 3) fraudulent expense reports or injury claims and falsified overtime cost US companies an
estimated fifty billion dollar and more than twenty-five billion pounds in Europe (Weber, Kurke & Pentico, 2003). All of these cases demonstrate that organizational deviance is a costly
endeavor. Hence, it is important to investigate why such behavior occurs; by becoming aware of its antecedents, the degree of deviance within organizations may be limited. The main aim of this paper is to investigate how organizations can prevent unethical behavior in the workplace.
Therefore, we first need to understand what unethical behavior is. The Webster dictionary defines deviance as: ‘deviating especially from an accepted norm’. Robinson and Bennet (1995), in their definition of workplace deviance, describe it as ‘voluntary and intentional behavior that
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violates significant organizational norms and, in so doing, threatens the well-being of the organization and/or its members (Robinson & Bennet, 1995: 556). The norm can be defined as the informal rules that groups adopt to regulate and regularize group members' behavior (Feldman, 1984: 47). According to Feldman, people deviate because they lack motivation to conform to the norm. Kaplan (1975) rather argues that people are motivated to violate norms in order to pursue a gain.
Gino and Margolis (2011) showed in a lab study that difference in motivation leads to more or less unethical behavior. However, Gino and Margolis (2011) did not look at the contextual factors. In this paper I Focus on the understanding this specific difference in
motivation and investigate it in context as suggested by Gino and Margolis (2011). Therefore, I take a motivational perspective to identify underlying factors that may lead to unethical
behaviors. By understanding what motivates people to ‘do what they do’, companies will be able to improve the Prevention of employees from showing undesired behavior.
I use the same motivational theory Gino and Margolis (2011) used, as more recent
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Regulatory Focus is related to unethical behavior. Gino and Margolis (2011) showed that people in a Promotion state were more likely to act unethical, as opposed to people in Prevention state who were less likely to act unethical. Neubert, Kacmar, Carlson, Chonko, Roberts (2008) showed that Regulatory Focus mediates the relationship between leadership and follower unethical behavior.
This investigation studies Regulatory Focus in relationship with unethical behavior. The context is very important because it can have severe influence on this relationship as shown by Bryman, Stephens, and Campo (1996). In this research I will use leadership as a moderator of the relationship between Regulatory Focus and follower unethical behavior. Many organizations have put ethical leader behavior high on the priority list of organizations (Kalshoven, Den Hartog & de Hoogh, 2011) because of the many cases of unethical behavior within organizations. Ethical leadership has become increasingly important for organizations to counteract misconduct (Kalshoven et al., 2011). I therefore investigate ethical leadership in the context of Regulatory Focus. And contribute to the proposition made by Brown and Treviño (2006: 607) ethical leadership is positively related to follower ethical decision-making.
I argue that ethical leadership influences the relationship between Regulatory Focus and unethical behavior. In such a way that unethical behavior will decrease when ethical leadership increases.
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more important. Taking into account the contextual factor; ethical leadership will expand our knowledge on how to counteract unethical behavior within organizations.
THEORETHICAL FRAMEWORK
REGULATORY FOCUS THEORY AND UNETHICAL BEHAVIOR
Regulatory Focus (Higgins, 1997) is a principle that distinguishes two motivational strategies for goal attainment: a Promotion Focus and a Prevention Focus. People with a Promotion Focus are Focused on gains, hopes and aspirations (Higgins, Roney, Crowe, and
Hymes, 1994), becoming the person they would ideally like to be, and is all about approaching
positive outcomes (Higgins, 1997). People with a Prevention Focus, on the other hand, are Focused on losses, duties and obligations, becoming the person they ought to be (Higgins et al., 1994), and are all about avoiding negative outcomes (Higgins, 1997).
Individuals develop either a Promotion or a Prevention Focus in their early childhood (Higgins, 2000; Higgins et al., 1994; Higgins 1997). When parents raise their children to reach their ideal-self and Focus on nourishment needs, a Promotion Focus will be engendered. When parents raise their child to reach their ought-self and Focus on security needs, their child will develop a Prevention Focus.
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ethical boundaries and show more unethical behavior. They show that people with a Promotion Focus seek more risks and are also more dishonest. Depending on the perceived risk of being caught, individuals may make different decisions about acting ethically (Gino & Margolis, 2011). To explain this, they argue that people are more gain-oriented, thus making them more risk taking in their behavior e.g. cheating. Together with the risk seeking propensity I argue that Promotion Focus will be positively related to unethical behavior in the workplace. I expect that people violate the organizational norms more in order to gain a positive outcome for the self.
Hypothesis 1a: A Promotion Focus is positively associated with unethical behavior.
People in a Prevention Focus are more threat oriented and vigilant and this leads to less unethical behavior, because the perceived risk of getting caught is higher. People in a Prevention Focus want to prevent an undesired outcome such as being caught. I therefore argue that a Promotion Focus will lead to more unethical behavior in order to achieve a person’s goals. I expect that people in a Prevention Focus will use less unethical actions in order to achieve their goals because their goals are the Prevention of undesired outcomes e.g., financial punishment, dismissal or reprimand. People in a Prevention Focus are vigilant and Focused on the risks involved in acting unethical and therefore too afraid of the consequences to display unethical behavior.
Hypothesis 1b: A Prevention Focus is negatively associated with unethical behavior.
ETHICAL LEADERSHIP AND UNETHICAL BEHAVIOR
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followers’ behavior (Yukl, Kim & Falbe, 1996; Chemers, 2000). Weber, Kurke and Pentico (2003) showed that in an ethical work climate people act more ethical. This implies that the context is important in promoting ethical behaviour and preventing unethical behaviour. They show that in two comparable companies the amount of theft was significantly lower when there was an ethical work climate because leadership characteristics can change the behavior of their followers (Knippenberg & Wisse, 2010; Neubert, et al., 2008). Ethical leaders support and encourage followers’ ethical decision making (Brown & Treviño 2006).
Ethical leadership has become increasingly important for organizations to counteract misconduct (Kalshoven et al., 2011). Rules and regulations alone are not enough to motivate people to not be unethical in their behavior. Ethical leadership is directed at the leader-follower relation on the basis of ethicality. Brown, Treviño and Harisson (2005: 120) define ethical leadership as ‘the demonstration of normative appropriate conduct through personal actions and interpersonal relationships and the Promotion of such conduct to followers through two-way communication, reinforcement and decision making’. Ethical leaders aim to influence their follower’s behaviour so as to make it more ethical, and less unethical. Ethical leadership consists of seven properties: fairness, integrity, ethical guidance, people orientation, power sharing, role clarification and concern for sustainability (Kalshoven et al., 2011).
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Moral identity has been described as one kind of self-Regulatory mechanism that motivates moral action (Acquino & Reed, 2002). Moral identity is associated with commitment to moral ideas or principles (Zhu, 2008).In a 2008 research Zhu (2008) showed that ethical leaders increase their followers’ moral identity, therefore decrease in unethical behavior.
Furthermore for a leader to be seen as ethical and thereby influencing followers’ behavior two things are important, first, not only to talk about these seven properties but also living them (Treviño, Hartman, & Brown 2000). It is not enough to talk about ethics or morality but leaders also have to do what they say, e.g. not only talk the talk but also walk the walk. Hence the importance of acting ethical is stressed. Second, ethical leadership promotes ethicality by reinforcement Treviño and Harisson (2005), this means rewarding employees e.g. financially or compliments, for showing desirable behavior (Kalshoven et al., 2011; Brown & Treviño, 2006). When following an ethical leader, showing less unethical behavior is more rewarding for a follower than acting unethical. When ethical leadership is high there will be not more to gain in behaving unethical than behaving ethical.
A Promotion Focus is related to power which makes decision making more based on leader beliefs whereas the powerless are more influenced by external cues (Rus, van
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desired behavior and punish people for showing unethical behavior. People in a Promotion Focus can therefore show less unethical behavior because they Focus on rewards and showing ethical or desired behaviour is rewarded by an ethical leader.
I expect that ethical leadership can also attenuate the relation between Promotion Focus and unethical behavior.
Hypothesis 2: Ethical leadership will moderate the relationship between a Promotion Focus and unethical behavior such that the effect becomes weaker when ethical leadership is high rather than low.
11 METHODOLOGY
Sample and Procedure
Data was gathered using Mechanical Turk, an American online data collection service which offers a financial incentive to complete online-surveys. Several studies have shown that this data is cheap and reliable (Soroky & Forsyth, 2008; Buhrmester, Kwang & Gosling, 2011). A compensation of $0.20 was offered per completed survey, which took approximately 7 minutes. The total response on the online survey was 297.There were four control questions in the survey which each had one correct answer (e.g., I will choose the middle option, namely number zero). 199 participants failed to provide correct answers for all these control questions, and were subsequently excluded. A total of 98 completed responses remained. The large number of rejections (199) can be explained by the fact that people fill in useless answers to receive a (small) financial incentive as quick as possible. Sixty-five percent of the respondents were male and the mean respondents age was 30 years and 6 months (SD = 7.3). Twenty five percent of the respondents worked from nine to eighteen months under their current supervisor. Thirty-six percent of the respondents worked from eighteen months to three years under their current supervisor, the rest of the respondents (39 percent) worked more than three years under their current supervisor.
Measures
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Regulatory Focus. To measure Regulatory Focus I applied the measurement instrument developed by Lockwood, Jordan and Kunda (2002). This measurement instrument (see
Appendix A) distinguishes two constructs, Promotion Focus and Prevention Focus, using an 18 item scale. Nine items are directed at Prevention Focus, for example; “My major goal right now is to avoid becoming a failure “. And nine items are directed at Promotion Focus for example; “In general, I am Focused on achieving positive outcomes in my life “.The Cronbach’s Alpha for the construct of Regulatory Promotion Focus is 0.83 The Cronbach’s Alpha for the construct of Regulatory Prevention Focus is 0.91.
Ethical Leadership. To measure ethical leadership I used the “ethical leadership at work questionnaire” (Kalshoven et al., 2011). This questionnaire consists of seven dimensions; fairness, integrity, ethical guidance, people orientation, power sharing, role clarification and concern for sustainability who were measured by thirty-eight items (see Appendix B). An example for the dimension fairness; “My direct supervisor holds me accountable for problems over which I have no control”. All items where rated on a seven point scale. (Strongly disagree (-3) – strongly agree ((-3)). The Cronbach’s Alpha for this construct is 0.91.
13 Data Analyses
Five different regression analyses were conducted to examine the hypotheses. Before I conducted the linear regression analyses all variables where standardized, except for age, gender and unethical behavior. In the first model I looked at the effect of age and gender on unethical behavior. Betz, O'Connell and Shepard (1989) showed that gender has an effect on proclivity for unethical behavior. Ruegger and King (1992) supported this finding and also showed that age had an effect on unethical behavior. Therefore, we control for age and gender similar to Wu, McMullen, Neubert and Yi, (2008). In the second model, Promotion and Prevention Focus where included. The Third, the moderator ethical leadership was added. I tested the two moderating hypothesis with two separate regression analysis: one with Unethical behavior as dependent variable and Promotion Focus, ethical leadership and Promotion Focus x ethical leadership as independent variable. Finally, another regression analysis with Unethical behavior as
independent variable and Prevention Focus, ethical leadership and Prevention Focus x ethical leadership as independent variable.
RESULTS
Descriptives
Table 1 presents the means, standard deviations and bivariate correlations of the studied constructs. The correlation between the constructs is in most cases insignificant (Table 1).
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correlation between Promotion Focus and unethical behavior and a positive correlation between Prevention Focus and unethical behaviour.
Ethical leadership and prevention focus are also significant correlated. When looking at the relations under study there is a negative correlation between promotion focus and unethical behavior and a positive correlation between prevention focus and unethical behaviour.
- - - Insert Table 1 about here
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Hypotheses Testing
For the testing of the hypotheses I conducted a linear regression analysis, the results can be found in Table 2. In the first regression the relationship between Promotion Focus and unethical behavior was tested. Second, the relationship between Prevention Focus and unethical behavior is examined. Contrary to what was expected in Hypothesis 1a the relationship between Promotion Focus and unethical behavior was negative (B = -0.215, S.E. = 0.099, p = .033) significant. Therefore hypothesis 1a is rejected. The relationship between Prevention Focus and unethical behavior is positive (B = 0.218, S.E. = 0.103, p = .036) significant also the opposite from what was expected in hypothesis 1b. Therefore hypothesis 1b is rejected.
- - - Insert Table 2 about here
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To see how ethical leadership moderates the relationship between Prevention Focus and ethical leadership the interaction effect ‘Ethical leadership x Prevention Focus’ and the
interaction effect ‘Ethical leadership x Promotion Focus’ were calculated and included into an hierarchical regression.
Following Aiken and West (1991), the results are plotted in the two graphs (Figure 1 & Figure 2). The results show the relationship between Prevention Focus and unethical behavior moderated by ethical leadership which is in line with prior expectations
- - - Insert Figure 1
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Figure 2 shows that ethical leadership does moderate the relationship between Promotion Focus and unethical behavior. But I expected that the moderation would be in a different way; where unethical behavior was decreased in a high Promotion, high ethical leadership state. Ethical leadership weakens the relationship in a low Promotion state. Thus hypothesis 2 is supported, ethical leadership does moderate the relationship between Promotion Focus and unethical behavior but in another way as I expected.
DISCUSSION
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been done before. This research deepens the insight in the different ways of influencing followers to show less unethical behavior.
Findings and implications
Hypothesis 1a and 1b predicted a positive correlation between Promotion Focus and deviant behavior and a negative correlation between Prevention Focus and unethical behavior as shown by Gino and Margolis (2011). The results show a significant relation in but in opposite direction. The results reveal that Prevention Focus relates to higher unethical behavior and Promotion Focus relates to lower unethical behavior which was not as expected. First the negative relation between Promotion Focus and unethical behavior can be explained by two different theories; one explanation is that Promotion Focus is related to less unethical behavior. People with a Promotion Focus are directed at creating positive outcomes, the operationalization of unethical behavior in this study did not create positive outcomes. Therefore acting unethical is not interesting for people with a high Promotion Focus. Thereby, this relationship is, to my knowledge never been tested in a field study. A second explanation is the positive relation between Promotion Focus and power (Keltner, Gruenfeld, Anderson, 2003; Rus, van
Knippenberg, & Wisse, 2010), the powerful act according to a so called self-serving bias, people with high power rate themselves morally higher than other people (Lammers, Stapel &
Galinsky,2010). This is because people in a high Promotion state Focus on hopes, ideals and positive outcomes and less on negative events (Higgins et al. 1994). Therefore, people with a high Promotion Focus report less unethical behavior.
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Focus are less focused on gains and are not regulated by the gain seeking propensity as people with a high Promotion Focus. Therefore, unethical behavior without a positive outcome for the self, as measured in this study, is more interesting for people in high prevention focus. A second explanation is that Prevention Focus is related to low power, (Keltner, Gruenfeld, Anderson, 2003; Rus, van Knippenberg, & Wisse, 2010) the powerless act more vigilant and rate themselves ethically lower than other people. People with a Prevention Focus, focus more on negative events (Higgins et al. 1994) therefore they report more unethical behavior.
Hypothesis 2 was supported by the data; ethical leadership moderated the relationship between Promotion Focus and unethical behavior. However, this moderation was different than was expected beforehand. But the outcome was in line with the outcome of hypothesis 1a. The results for a moderation effect for people in a Prevention state were not significant, as expected.
Implications from this research are that ethical leadership is an important contextual factor within organizations. Unethical behavior is lower for people in a high and low-Promotion. Limitations
First little information is available about the respondents and it is uncertain if all
respondents work for a leader. Second, the questionnaire of unethical behavior was more about unethical behavior then about deviance in order to gain. The theoretical framework proposed a hypothesis on the basis that people deviate from an existing norm in order to gain. In hindsight the questionnaire used to measure unethical behavior did not measure this, instead it measured minor deviances with no or little gain.
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Third, the order of the questions the questionnaire where fixed i.e. the order of the questions didn’t change between the respondents. This could elicit a systematic measurement error, a form of common method bias (Doty & Glick 1998; Podsakoff, MacKenzie, Lee, &
Podsakoff, 2003). This means that the way of measuring influences the results on a systematic
way. This means for this questionnaire that the participants were first asked to rate their superior on ethical leadership and then about their own unethical behavior. People can exaggerate the difference between themselves and the other; called the contrast effect (Hovland, Harvey & Sherif, 1952). Defined by Dawes, Singer and Lemons (1972) as: an individual's tendency to exaggerate the discrepancy between his own attitudes and the attitudes represented by opinion statements endorsed by people with opposing views.
Future Research Directions
Although much research has been done about Regulatory Focus, there is still little research about Regulatory Focus and unethical behavior in different contexts. This investigation Focusses on ethical leadership, but there are many more area’s to be investigated.
For example the followers Cognitive Moral (Kohlberg, 1969) development can influence the effect of ethical leadership on the follower’s behavior. Kohlberg (1969) developed a theory that people have three stages of cognitive moral development (CMD) with each two levels. When people increase in CMD they will show higher moral behavior. Another research question could be; how does ethical leadership and cognitive moral development influence the relationship
between Regulatory Focus and deviant behavior and Prevention Focus and moral behavior?
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on deviant behavior and the follower the leader on ethical leadership and himself on Regulatory Focus.
Conclusion
In the light many scandals, the importance of ethical leadership grows. Employees have a need for a role model from which they can learn to behave ethical. This research has investigated the relationship between Regulatory Focus and unethical behavior. A web-based (N93)
questionnaire provided data. Results where surprising but could be explained.
Furthermore the moderating effect of ethical leadership was tested, results showed a moderating effect. Ethical leadership does matter, people in a low Promotion state show significant less deviant behavior when they have an ethical leader. Companies can save costs by investing in ethical leadership. I can conclude that being ethical, as a leader, contributes in decreasing unethical behavior within organization.
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26 APPENDIX
Table 1
Means (M), standard deviations(SD) and correlations of the research variables
*
Correlations are reported * p < 0.05
** p < 0.01 *** p < 0.001
ª Gender codes as 1= male, 0 = female
27 Table 2
Model 1 Model 2 Model 3 Model 4 Model 5
Variables B S.E. B S.E B S.E. B S.E. B S.E.
Age -,15 ,014 -,10 ,014 -,011 0,014 -0,008 0,013 -,010 ,014 Genderª -,292 ,292 -,297 ,207 -,298 0,207 -,236 0,199 -,276 ,215 Prom. Foc. -,215** ,099 -,221** ,099 -,240** ,096 -,215** ,103 Prev. Foc. ,218** ,103 0,161 0,114 ,215 ,111 ,163 ,115 Moderator Eth. Lead. -,125 0,110 -0,185* 0,107 -,131 0,113 Interaction Prom. Foc.*E.L. 0,286*** ,095 Prev. Foc.*E.L. 0,020 ,084 R Square 0,027 0,124 0,136 0,215 0,137
28 Figure 1
29 Appendix A
Lockwood, P., Jordan, C. H., & Kunda, Z. (2002). Motivation by positive or negative role models: Regulatory Focus determines who will best inspire us. Journal Of Personality And Social Psychology, 83(4), 854-864.
1. In general, I am focused on preventing negative events in my life. 2. I am anxious that I will fall short of my responsibilities and obligations. 3. I frequently imagine how I will achieve my hopes and aspirations. 4. I often think about the person I am afraid I might become in the future. 5. I often think about the person I would ideally like to be in the future. 6. I typically focus on the success I hope to achieve in the future. 7. I often worry that I will fail to accomplish my goals.
8. I often think about how I will achieve academic success.
9. I often imagine myself experiencing bad things that I fear might happen to me. 10. I frequently think about how I can prevent failures in my life.
11. I am more oriented toward preventing losses than I am toward achieving gains. 12. My major goal in school right now is to achieve my academic ambitions. 13. My major goal in school right now is to avoid becoming a failure.
14. I see myself as someone who is primarily striving to reach my “ideal self”—to fulfill my hopes, wishes, and aspirations.
15. I see myself as someone who is primarily striving to become the self I “ought” to be—to fulfill my duties, responsibilities, and obligations.
16. In general, I am focused on achieving positive outcomes in my life.
30 Appendix B
Ethical Leadership at Work Questionnaire Items Dutch-English
Kalshoven, K., Den Hartog, D.N., & De Hoogh, A.H.B. (2011). Ethical leadership at work questionnaire (ELW): Development and validation of a multidimensional measure. The
Leadership Quarterly.
Fairness
1.Holds me accountable for problems over which I have no control 2.Pursues his or her own success at the expense of others
3.Holds me responsible for work that I have no control over 4.Holds me responsible for things that are not my fault 5.Is Focussed mainly on reaching his/her own goals 6.Manipulates subordinates
Integrity
1.Does what he/she promised
2.Can be relied on to honor his/her commitments 3.Can be trusted to do the things he/she says 4.Keeps his/her word
People-orientation
1.Is interested in how I feel and how I am doing 2.Takes time for personal contact
3.Is genuinely concerned about my personal development 4.takes time to talk about work-related emotions
5.Pays attention to my personal needs
31 Role clarification
1.Clarifies who is responsible for what.
2.Explains what is expected of each group member
3.Indicates what the performance expectations of each group member are 4.Clarifies priorities
5.Explains what is expected of me and my colleagues Ethical guidance
1.Ensures that employees follow codes of integrity 2.Clearly explains integrity related codes of conduct 3.Clarifies integrity guidelines
4.Explains what is expected from employees in terms of behaving with integrity
5.Clarifies the likely consequences of possible unethical behavior by myself and my colleagues 6.Stimulates the discussion of integrity issues among employees
7.Compliments employees who behave according to the integrity guidelines Concern for sustainability
1.Would like to work in an environmentally friendly manner 2.Shows concerns for environmental issues
3.Stimulates recycling of items and materials in our department Power sharing
1.Allows subordinates to influence critical decision.
2.Will reconsider decisions on the basis of recommendations by those who report to him/her. 3.Delegates challenging responsibilities to subordinates.
32 Appendix C
Interpersonal and Organizational Deviance Scale Items Measure
Bennett, R., & Robinson, S., & (2000). Development of a measure of workplace deviance. Journal of Applied Psychology, 85(3) 349-360.
Organizational Deviance
1.Taken property from work without permission
2.Spent too much time fantasizing or daydreaming instead of working
3.Falsified a receipt to get reimbursed for more money than you spent on business expenses 4.Taken an additional or longer break than is acceptable at your workplace
5.Come in late to work without permission 6.Littered your work environment
7.Neglected to follow your boss's instructions
8.Intentionally worked slower than you could have worked
9.Discussed confidential company information with an unauthorized person 10.Used an illegal drug or consumed alcohol on the job
