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Right From the Start: The Association Between Ethical Leadership, Trust Primacy, and Customer Loyalty

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Abstract

Extending ethical leadership theory and research beyond the walls of the organization, we propose a spillover model wherein ethical leaders impact customer loyalty (i.e., repeat purchase amount) by first establishing trusting relations with employees, who in turn emulate their leaders’ ethical behavior. In Study 1, we examined how this initial trust (i.e., trust primacy) facilitates new employees’ moral imprinting in a controlled experiment. In Study 2, with a field design, we tested our model among new employees and their respective customers over a 6-month timespan. Results indicate that perceptions of ethical leadership operate through trust primacy to affect customer repeat purchase, with accelerated growth over time. We conclude by considering theoretical and practical implications as they relate to ethical leadership and trust primacy, as well as marketing and salesforce management.

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Data availability

Data for sudy are available upon request.

Notes

  1. We recognize this growth is unlikely to continue indefinitely as customers’ budgetary and resource limits are approached, their needs are fully satisfied, and purchase levels reach a maximum economic threshold. We therefore caution readers not to infer conceptual implications beyond the scope of our theorizing or to extrapolate our results beyond the temporal range of the data (i.e., newcomers’ first six months on the job).

  2. Whereas our low ethical behavior scenario was framed around an unethical rather than an ethically neutral leader, we compared our findings to those using nonethical scenarios (i.e., Moore et al., 2019; van Gils et al., 2015; Van Quaquebeke et al., 2019). We found that our manipulation did not produce significantly lower perceptions of leader ethicality, suggesting our manipulation was statistically equivalent to how others have operationalized ethical leadership in scenario studies. Details are available upon request.

  3. This core set of items was carefully selected by the authors and senior managers from the organization, based on knowledge of the job context and consideration of psychometric recommendations regarding item inclusion (Stanton et al., 2002). Namely, we considered judgmental (e.g., clarity of expression, semantic redundancy, perceived invasiveness), internal (e.g., distributional characteristics, item-total correlations), and external (e.g., items’ relations with other variables) item qualities. To assess the reliability and validity of the shortened scale, we included this subset of items (α = 0.88) along with the full 10-item measure (α = 0.93) in a separate sample of 282 adults employed in a variety of jobs, organizations, and industries to obtain a measure of convergent validity (r = 0.96). The shortened measure’s correlation with other variables (viz., moral identity r = 0.49, abusive supervision r = − 0.40) was very similar to those of the full measure (r = 0.52, −0.43, respectively) and with those found in prior research (Brown et al., 2005; Mayer et al., 2012). Collectively, these results provide evidence of the shortened measure’s construct validity (Hinkin, 1995; Stanton et al., 2002).

  4. The MLQ 5x (Copyright 1995, 2000 by Bernard Bass and Bruce Avolio) was used in this research with permission of Mind Garden, 1690 Woodside Road, Suite 202, Redwood City, California 94061. All rights reserved.

  5. There are at least two limitations of Study 2 findings that warranted additional analysis. First, due to organizational constraints on survey length (and including transactional and transformational leadership as controls), we were limited to a 4-item measure of ethical leadership that may not fully represent moral person and moral manager aspects. Second, ethical leadership and trust were measured concurrently by the same source, introducing concerns of common method variance and inflation of results due to consistency motifs or reciprocal causation. To help address these limitations, the organization allowed us to collect additional data from a unique set of 127 new employees (same function and role). We were unable to survey enough employees reporting to the same leader to aggregate responses to the unit/leader level of analysis. We were also not provided customer purchase data due to the demands on organizational resources (i.e., retrieving, culling, and linking specific customer purchase data to the respective salesperson and dates). We were, however, able to administer the 10-item measure of ethical leadership (Brown et al., 2005; α = 0.95) at one point in time, and to assess both employee trust primacy (Mayer & Davis, 1999; α = 0.67) and moral disengagement (Moore et al., 2012; 8 items, α = 0.83) three weeks later. Moral disengagement refers to “the way that people cognitively process decisions and behavior with ethical import that allows those inclined to morally disengage to behave unethically without feeling distress” (Moore et al., 2012, p. 2). We chose to focus on this construct because research suggests a primary way ethical leaders mitigate unethical employee behavior is by preventing employees from justifying unethical behavior via moral disengagement processes (e.g., euphemistic labeling, advantageous comparison, distortion of consequences, dehumanization; Moore et al., 2019). Demonstrating links between ethical leadership, trust primacy, and employee moral disengagement is thus important in underscoring social learning and ethical imprinting processes. Using Hayes’s (2017) PROCESS macro (Model 4; 5000 bootstraps), we first examined whether ethical leadership relates to moral disengagement through trust. Results supported this prediction, as the indirect effect was significant (ab = − 0.09, CI95 = − 0.192, − 0.023). Next, we examined an alternative model wherein moral disengagement mediated the effect of ethical leadership on trust primacy. This model was not supported, as the indirect effect of ethical leadership on trust via moral disengagement was nonsignificant (ab = 0.02, CI95 = −0.004, 0.068). Overall, these results replicate Hypothesis 1 and help rule out reverse causation, while supporting ethical imprinting by demonstrating that new employees who work for a trusted ethical leader are less apt to morally disengage and, thus, less likely to engage in unethical behavior when interacting with customers.

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Authors and Affiliations

  1. Department of Management, University of Central Florida, Orlando, FL, 32816, USA

    Craig Crossley, Shannon G. Taylor & Ronald F. Piccolo

  2. University of Illinois at Chicago, Chicago, USA

    Robert C. Liden

  3. Iowa State University, Ames, USA

    David Wo

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  1. Craig Crossley
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Correspondence to Craig Crossley.

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Appendices

Appendix

Welcome Letter to New Employees by Experimental Condition

High Ethical Leader Condition

Congratulations on your new position, and welcome to the team! As an account sales representative, your goal is to grow revenue through existing clients.

I will measure your performance by your results, but I also care a great deal about how these results are obtained. I want you to focus on sales while making decisions that are fair and balanced. When you are doing so, you need to ask yourself what is the “right thing to do.” It is important to do the right thing for the business, but making decisions that violate your values are not worth it. You can always ask me questions or share insights during the course of your work.

Our sales goals, although challenging, can be met through fulfilling our ethical responsibilities to our clients. Let me be clear I will discipline employees who violate standards of fair and ethical treatment of our clients. For example, I will not tolerate shady practices or potential conflicts of interest such as receiving gifts.

Because of the rapid revenue growth in my department, this is a new sales route comprised of great customers. I’m excited to see what you can do with this opportunity. You are inheriting a great sales route—good luck!

One final point: you will be away from home quite a bit with this job, and will have the opportunity to experience new cities and friendships. It is my opinion that how you or I live our personal lives is an important consideration and should be done in a moral and ethical manner whether at home or on the road.

I look forward to working with you – and once again, welcome to the team!

Kyle Williams, Manager, Account Sales

Low Ethical Leader Condition

Congratulations on your new position, and welcome to the team! As an account sales representative, your goal is to grow revenue through existing clients.

I will measure your performance by your results, regardless of how these results are obtained. I want you to focus on sales while making decisions that help the business to succeed, regardless of what you think is the “right thing to do.” It is important to do the right thing for the business. Bringing in your own values here just complicates things. This is pretty straightforward, and “what is understood doesn’t need to be discussed.” Most people figure it out without too many questions.

Our goals are challenging. At the end of the day, I’m not concerned about fairness or ethics. To clarify, I can overlook decisions that push the boundaries as long as we meet our minimum responsibility to clients. For example, our conflict of interest policy technically refers to not receiving gifts; when providing gifts just consider whether it will help close a sale.

Because of the rapid revenue growth in my department, this is a new sales route comprised of great customers. I’m excited to see what you can do with this opportunity. You are inheriting a great sales route—good luck!

One final point: you will be away from home quite a bit with this job, and will have the opportunity to experience new cities and friendships. It is my opinion that how you or I live our personal lives is our own business, as long as it doesn’t affect our jobs. The job will be more fun if you “live a little” while you’re on the road.

I look forward to working with you – and once again, welcome to the team!

Kyle Williams, Manager, Account Sales

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Crossley, C., Taylor, S.G., Liden, R.C. et al. Right From the Start: The Association Between Ethical Leadership, Trust Primacy, and Customer Loyalty. J Bus Ethics (2023). https://doi.org/10.1007/s10551-023-05485-y

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