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The Moderating Effect of Human Resource Management on the Relationship Between Ethical Leader and Employee Trust

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The Moderating Effect of Human Resource Management on the Relationship Between Ethical Leader and Employee Trust MASTER THESIS HUMAN RESOURCE STUDIES The moderating effect of Human Resource Management on the relationship between ethical leader and employee trust Student name : A.K.H.O. (Karim) Ressang Student ANR : 48 65 19 Name of supervisor : dr. K. Kalshoven Name 2nd reader : dr. R.S.M. de Reuver Project period : January – August 2014 Project theme : Interplay between HRM and Leadership 1 Table of contents Page Abstract 3 1. Introduction 4 2. Theoretical framework 6 2.1 Ethical leadership and employee trust 6 2.2 Employee cognitive and affective trust 8 2.3 HRM as moderator in ethical leadership and trust relationships 9 2.4 The mediating role of cognitive based trust 10 2.5 Moderating HRM and mediating cognitive trust 11 3. Methods 11 3.1 Research set-up 11 3.2 Procedure 12 3.3 Sample characteristics 13 3.4 Measures 14 3.5 Statistical analysis 17 4. Results 19 4.1 Correlations 19 4.2 Regression analysis 22 4.2.1 Further analysis 28 5. Discussion 28 5.1 Theoretical implications 29 5.2 Limitations and strengths 31 5.3 Practical implications 32 5.4 Conclusion 33 6. Reference 34 Appendix A: Further analysis 41 A1. Examination of partial correlation 41 A2. Testing the significance of difference between correlation coefficients 42 A3. Reviewing disconfirmation H2a, H2b and H4 42 Appendix B: Factor analysis 44 2 Abstract This research examines the link between ethical leadership, human resource management (HRM) and employee cognitive and affective trust in the leader. Drawing on the definition and description of how ethical leadership effectuates (Brown, Treviño & Harrison, 2005), leader trustworthiness (Mayer, Davis and Schoorman, 1995) and the idea of situational conditions inhibiting the influence of ethical leaders (Kerr & Jermier, 1978), in combination with research findings on cognitive trust and affective trust, this research expected that employee trust in the leader would be affected by developments in the domain of HRM. In total six hypothesis were tested with questionnaire data from 140 respondents. The results show spurious relationships between cognitive and affective trust and between HRM and both forms of trust. The results also show that ethical leadership is positively related to employee cognitive and affective trust and that HRM does not play a significant role in the relationship between ethical leader and employee trust in the leader. Theoretical and practical implications of the results are discussed. Keywords: ethical leadership, human resource management, employee cognitive and affective trust in the leader. 3 1. Introduction Ethical leadership is “one of the hot topics” in organizational practice (Eisenbeiss, 2012, p.791) now that ethical scandals have highlighted the topic of ethical management (Traviño, Weaver & Reynolds, 2006) and have raised important questions about the role of leadership in shaping ethical conduct (Brown, Treviño & Harrison, 2005). Ethical leaders are thought to be uniquely important for organizations because they are expected to influence employees to behave in an ethical and positive manner (Kalshoven, Den Hartog, & de Hoogh, 2011; Brown & Traviño, 2006). Research on ethical leadership demonstrates the organizational importance of ethical leadership and positively associates it with various desired employee behaviors, such as: job performance (e.g. Piccolo, Greenbaum, Den Hartog & Folger, 2010; Walumbwa, Mayer, Wang, Wang, Workman, & Christensen, 2011), organizational citizenship behaviors (e.g. Newman, Kiazad, Miao, & Cooper, 2013; Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009; Avey, Palanski & Walumbwa, 2011; Kacmer, Bachrach, Harris, & Zivnuska, 2011; Ruiz-Palomino, Ruiz-Amaya, & Knörr, 2011; Kalshoven, et al., 2011) and innovative behaviors (e.g. Yidong & Xinxin, 2012). Research also indicate that ethical leaders treat employees in a fair and respectful way and receive positive evaluations from employees (Brown, et al. 2005). Ethical leaders are expected to create trustful work environments (De Hoog & Den Hartog, 2008; Weaver, Treviño & Agle, 2005). In particular, the research of Newman, et al., (2013) demonstrate that the relationship between employee perception of ethical leadership and employee organizational citizenship behavior, is explained by the effects of employee trust in the leader. The ‘Substitutes for Leadership Theory’, postulates that leader effectiveness on subordinate outcomes varies with different situational factors (Kerr & Jermier, 1978). A situational factor may inhibit the influence of ethical leaders and thus also the build-up of employee trust. Human Resources Management (HRM), defined as “the process of managing work and people in organizations” (Boxall, Ang, & Bartram, 2011, p. 1504), can be regarded as such a situational factor. This is reflected in the research of Kalshoven and Boon (2012). In their investigation of follower helping behavior as an outcome of a HRM- moderated relationship between employee well-being and ethical leadership, Kalshoven and Boon (2012) find significant evidence that “the relationship between ethical leadership and helping occurs through well-being only when HRM was low, but not when HRM was high” (p. 60). In other words, both HRM and ethical leadership raises well-being, but not simultaneously. High HRM apparently constrains the impact of ethical leadership on well- being. 4 The combining of the research findings of Newman, et al., (2013) with the research findings of Kalshoven and Boon (2012) provides the basis for further exploration in this research. Using the idea of situational factors suppressing the influence of leadership on employee outcomes, as forwarded by the ‘Substitutes for Leadership Theory’ (Avolio, Walumbwa, & Weber, 2009; Posakoff, MacKenzie, & Bommer, 1996), this research models the element of employee trust in the leader as the result of the attributes of the ethical leader and posits that employee trust, as part of the ethical leader-employee relationship, is affected by developments in the domain of HRM. In other words, it is argued that ethical leadership positively relates to employee trust in the leader when HRM is low rather than high. When both ethical leadership and HRM are high, it is argued that employee’s perception of HRM will substitute employee perception of ethical leadership on trust. This research is guided by the following research question: To what extent is the relationship between ethical leader and employee trust in the leader, moderated by HRM? The research model integrates current insights of HRM-effects on the relationship between ethical leader and employee behavior with current knowledge about the effects of trust that underlies the ethical leader-employee relationship. The examination adds to the HRM and ethical leadership literature in general and more specifically to the still “sparse literature investigating HR activities and trust” (Whitener, 1997, p. 393). The practical relevance, of examining the effects of HRM on the relationship between ethical leader and employee trust, lies in the contribution to a more detailed mapping of the possible HRM effect on the psychological mechanisms that underlie employee behavior in organizational setting. Workers with low levels of trust may not be productive or behave in an appropriate way (Gillespie & Dietz, 2009; Cook & Wall, 1980). Knowledge of the effects of HRM on employee trust in the relationship with the ethical leader can be of use in the development of alternative HRM practices that facilitate ethical leadership in an optimal and complementary way and, thereby, enhance organizational desired employee behavior. The answer to the research question is sought at employee-level for two reasons. First, employee work behavior originates from affective, cognitive and/or behavioral reactions that are elicited by individually processed employee perceptions of ethical leadership and HRM (Wright & Nishii, 2007; Den Hartog, Boselie, & Paauwe, 2004). Second, scholars have stressed the need for research focusing on employee-centered outcomes (i.e. Nishii, Lepak, & 5 Schneider, 2008) and on explanatory mechanisms linking ethical leadership to follower behaviors (i.e. Mayer, Aquino, Greenbaum & Kuenzi, 2012). The layout of the remainder of this paper consists of five more parts. In the next part, a description is given of both the variables in question and their model-based relationship, together they constitutes the theoretical framework of this research. In the subsequent third part, an outline of the method used in this paper’s research is given by means of short explanations of the research set-up, procedure, sample characteristics, measures instruments and statistical analysis. The outcome of correlation and regression analyses are presented in part four. In the final part, the outcomes are discussed in view of their theoretical implications, the limitations and strengths of this research, followed by its practical implications and conclusion. In part six, a reference is given to literature used in this research. In appendix A: Further analysis, details, results and explanation are provided of additional analysis on the four main variables. In appendix B: Factor analysis, the outcomes are provided of this research’s factor analysis. 2. Theoretical framework 2.1 Ethical leadership and employee trust The antecedents of ethical leadership may, arguably, be traced back to scholarly discussions on the existence of some moral foundation in the intent and actions of leaders’ usage of their social power (e.g. Gini, 1997; Kanungo, 2001) and
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