INFLUENCE OF INTEGRITY AND SERVANT LEADERSHIP ON TRUST IN LEADERS AND ETHICAL CULTURE By RYAN ANDERSON THESIS PRESENTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF COMMERCE (INDUSTRIAL PSYCHOLOGY) IN THE FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES AT STELLENBOSCH UNIVERSITY SUPERVISOR: PROF A.S. ENGELBRECHT December 2017 Stellenbosch University https://scholar.sun.ac.za DECLARATION By submitting this thesis electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. December 2017 Copyright © 2017 Stellenbosch University All rights reserved Stellenbosch University https://scholar.sun.ac.za ABSTRACT This study stems from the need to address unethical behaviour in the workplace. Servant leadership emerged as a tool to address this issue, through the development of an ethical culture. The role of Integrity in Servant Leaders, as well as the effect that trust in leaders have on implementing ethical culture, emerged as important components of this relationship. Thus, the focus of the research is directed towards determining the role of servant leadership in creating an ethical culture in organisations. To achieve this, the concepts of integrity, servant leadership, trust in leaders and ethical culture were investigated. Literature obtained from a theoretical review of the proposed variables, lead to the conceptualization of the determinants and structural relationships that exist between the concepts. A theoretical model was subsequently developed to explain this, followed by the formulation of substantive hypotheses to empirically determine the validity of the predictions in the literature review. For the research design, the study followed a quantitative approach, whereby the hypothesised causal relationships between the latent variables were tested by means of an ex post facto correlational design and structural equation modelling (SEM), which was used as an analysis technique. The research objective of this study was to test the proposed ethical culture structural model, with the research focus on business leaders and subordinates’ perceptions of the qualities of these leaders. The Ethical Integrity Test (EIT), Servant Leadership Behavioural Scale (SLBS), Leader Trust Scale (LTS) and Ethical Climate Questionnaire (ECQ) were utilised to gather the relevant data from the population. The respective questionnaires were sent to participants via electronic mail invitations. A convenient probability sample of 279 individuals within varied industries was selected. From an analysis of the results, significant positive relationships were confirmed between Integrity and Trust in Leader, Integrity and Servant Leadership, Servant Leadership and Trust in Leader, Servant Leadership and Ethical Culture, as well as between Trust in Leader and Ethical Culture. The study makes inroads into further developing the understanding between ethics and leadership. The positive relationships found between the studied variables have widespread implications for organisational managers in their pursuit of addressing Stellenbosch University https://scholar.sun.ac.za business ethics, and it provides direction for future research on servant leadership and ethics. Stellenbosch University https://scholar.sun.ac.za Opsomming Hierdie studie het ontstaan op grond van die behoefte om onetiese gedrag in die werksplek aan te spreek. Onlangse etiese skandale het etiek na die voorpunt van besigheidstudies gedryf en het ‘n hernieude belangstelling in die rol van etiek in die moderne werksplek aangewakker. Onetiese werksgedrag bedreig die stabiliteit in die werksomgewing en forseer dus organisasies om strategieë te implementeer om onetiese gedrag te bekamp. Die literatuur dui daarop dat die ontwikkeling van ‘n etiese kultuur in organisasies ‘n effektiewe strategie sal wees. Dit het die afhanklike veranderlike van die studie gevorm, synde die skepping van 'n omgewing waarin individue spontaan eties optree in ooreenstemming met die algemeen aanvaarde waardes en norme van die organisasie. Met die bestudering van die literatuur het dienende leierskap navore getree as ‘n leierskapstyl om diè kultuur te skep. Dit is die leier se verantwoordelikheid om ‘n aktiewe rol te speel in die skepping van ‘n etiese klimaat in die werksplek. Dienende leierskap, as ‘n waarde-gebaseerde en groep-georiënteerde benadering tot leierskap, word spesifiek beskou as ‘n effektiewe benadering om ‘n etiese kultuur te ontwikel. Die rol van integriteit in dienende leierskap, sowel as vertroue in leiers het ook as belangrike elemente in die effektiewe ontwikkeling van ‘n etiese organisasiekultuur na vore getree. Gegrondves op ‘n deeglike literatuurstudie is ‘n strukturele model ontwikkel om die oorsaaklike verwantskappe tussen die latente veranderlikes te illustreer. Hipoteses is gevolglik geformuleer om die geldigheid van die gepostuleerde verwantskappe empiries te toets. In terme van die navorsingsontwerp, het die studie 'n kwantitatiewe benadering gevolg en ’n 'n ex post facto korrelasie-ontwerp gebruik. Strukturele vergelykingsmodellering (SEM) is as 'n statistiese ontledingstegniek aangewend. Die Ethical Integrity Test (EIT), Servant Leadership Behavioural Scale (SLBS), Leader Trust Scale (LTS) en Ethical Climate Questionnaire (ECQ) is as meetinstrumente gebruik om die relevante data te versamel. ‘n Elektroniese vraelys is aan 'n gerieflikheidsteekproef van 279 individue in verskillende bedrywe gestuur. Stellenbosch University https://scholar.sun.ac.za ‘n Ontleding van die resultate dui op positiewe verwantskappe tussen integriteit en vertroue in leiers, integriteit en dienende leierskap, dienende leierskap en vertroue in leiers, dienende leierskap en etiese kultuur, asook die vertroue in leiers en etiese kultuur. Die studie bied verdere insigte in die komplekse verband tussen sake-etiek en leierskap. Die positiewe verwantskappe wat tussen die veranderlikes ontdek is, behels wydverspreide implikasies wat bestuurders kan help om ‘n etiese kultuur in organisasies te ontwikkel. Die beperkings en aanbevelings van die studie verskaf ook nuttige riglyne vir toekomstige navorsing in die veld. Stellenbosch University https://scholar.sun.ac.za ACKNOWLEDGEMENTS I would like to express my sincere gratitude to the following people for their contributions and the valuable role they played in the completion of my study. First and foremost, I would like to express praise and glory to my Heavenly Father for granting me the wisdom and strength to complete this study. The opportunity to be where I am today is a true blessing and one to which I give all glory to God. To my wife and pillar of strength, Doret, thank you for always being in my corner and your invaluable encouragement and love every step of the way. Your support, patience and understanding through the many sacrificed late nights, as well as words of encouragement and prayer through the ups and downs really made the difference. I love you so much. To my parents, Annette and Bryan, thank you for your emotional and financial support throughout my studies. Thank you for always going beyond the call of duty and the inspiring example you have both set for all your children. Your respective academic and life successes has been a true motivator. LabourNet and specifically my manager, Warryn Kleu, thank you for all the accommodations and granting permission to conduct the study at the company. Similarly thank you to the research participants for taking the time to complete the survey. Your support and honest feedback was pertinent to the success of this study. To the Department of Industrial Psychology, lecturers and fellow students. Thank you for your valuable inputs, guidance and friendship throughout my studies. I would also like to extend special gratitude to Dr Bright Mahembe, for his assistance with the data analysis. Thank you very much for the special arrangements and input from your side. Lastly, l would like to thank my supervisor, Prof Amos Engelbrecht. I have learnt a lot from you over the last few years and this thesis would not have been possible without your guidance and support. My heartfelt thanks for all the assistance and late nights you put in. I hope to have the honour of working with you again in the future. Stellenbosch University https://scholar.sun.ac.za Contents Chapter One ..................................................................................................................... 1 Introduction, Background and Objectives of the study ....................................................... 1 1.1 Background of the Study ............................................................................................ 1 1.2 Justification for studying ethical culture ........................................................................ 3 1.3 Overview of previous models of Ethical culture ............................................................ 4 Job performance ................................................................................................................ 9 1.4 Motivation for the Study ..............................................................................................10 1.5 Research Initiating Question .......................................................................................13 1.6 Research Objectives ...................................................................................................13 1.7 Overview of the study .................................................................................................14 Chapter 2 .........................................................................................................................15 Literature Review on the Influence of Integrity and Servant Leadership on Trust in Leaders and Ethical Culture ..........................................................................................................15 2.1 Introduction .................................................................................................................15 2.2 Conceptualising Ethical Culture ..................................................................................15 2.3 Conceptualising Trust in Leaders ................................................................................19 2.4 Conceptualising Servant Leadership ...........................................................................22 2.5 Conceptualising Integrity of leaders ............................................................................26 2.6 The relationship between integrity and servant leadership ..........................................29 2.7 The relationship between Integrity and Trust in Leaders .............................................32 2.8 The Relationship between Servant Leadership and Trust in Leaders ..........................34 2.9 The relationship between Servant leadership and Ethical Culture ...............................35 2.10 The relationship between Trust in Leaders and Ethical Culture .................................38 2.11 Structural Model ........................................................................................................40 2.12 Chapter Summary .....................................................................................................41 Chapter 3 .........................................................................................................................42 Research Methodology ....................................................................................................42 3.1 Introduction .................................................................................................................42 3.2 Research problem .......................................................................................................42 3.3 Substantive research hypotheses ...............................................................................43 3.4 Statistical Hypotheses .................................................................................................43 3.5 Research design .........................................................................................................45 3.6 Sampling .....................................................................................................................46 Stellenbosch University https://scholar.sun.ac.za 3.6.1 Data collection procedure .....................................................................................47 3.6.2 The demographic profile of the sample .................................................................47 3.7 Missing values ............................................................................................................48 3.8 Measuring Instruments................................................................................................49 3.8.1 Integrity instrument ...............................................................................................49 3.8.2 Servant Leadership Instrument .............................................................................51 3.8.3 Trust in Leaders ...................................................................................................52 3.8.4. Ethical culture ......................................................................................................52 3.9 Statistical Analysis ......................................................................................................53 3.9.1 Item analysis ........................................................................................................53 3.9.3 Structural Equation Modelling ...............................................................................55 3.10 Assessing Model Fit ..................................................................................................57 Absolute fit ....................................................................................................................57 Comparative fit ..............................................................................................................58 3.11. Ethical Considerations .............................................................................................60 3.11 Summary ..................................................................................................................61 Chapter Four ...................................................................................................................62 Research Results ............................................................................................................62 4.1 Introduction .................................................................................................................62 4.2 Missing values ............................................................................................................62 4.3 Item analysis ...............................................................................................................63 4.3.1 Reliability analysis of the Ethical Integrity Test (EIT) .............................................63 4.3.2 Reliability analysis of the Servant Leadership Behavioural Scale (SLBS) .............68 4.3.3 Reliability analysis of Leader Trust Scale (LTS) ....................................................73 4.3.4 Reliability analysis of the Ethical Climate Questionnaire (ECQ) ............................74 4.3.5 Summary of the item analysis results ...................................................................78 4.4 Evaluating the measurement models ..........................................................................79 4.4.1 Evaluating the Measurement Model Fit of the EIT ................................................80 4.4.2 Evaluation of the Measurement model of the SLBS ..............................................83 4.4.3 Evaluation of the Measurement model of the LTS ................................................86 4.4.4 Evaluation of the Measurement model of the ECQ ...............................................87 Table 4.22 .....................................................................................................................88 4.5 Fitting the overall Measurement Model .......................................................................89 4.6 The structural model fit................................................................................................91 4.7 Relationships between the variables ...........................................................................95 4.7.1 The relationship between Integrity and Trust in Leaders .......................................96 4.7.2 The relationship between Integrity and Servant Leadership ..................................97 Stellenbosch University https://scholar.sun.ac.za 4.7.3 The relationship between Servant Leadership on Trust in Leader ........................97 4.7.4 The relationship Servant Leadership and Ethical Culture......................................97 4.7.5 The relationship between Trust in Leaders and Ethical Culture ............................97 4.8 Structural model modification indices ..........................................................................97 4.9 Summary ....................................................................................................................98 Chapter 5 .........................................................................................................................99 Discussion of results, conclusion and recommendations for future research ....................99 5.1 Introduction .................................................................................................................99 5.2 Motivation for the study ...............................................................................................99 5.3 Summary of the findings ........................................................................................... 100 5.3.1 Reliability analysis conclusion and CFA .............................................................. 100 5.4 Evaluation of the structural model ............................................................................. 101 5.4.1 Gamma matrix ....................................................................................................... 102 5.4.2 Beta matrix ......................................................................................................... 104 The relationship between Servant Leadership and Ethical Culture .............................. 104 5.5 Limitations and suggestions for future research ........................................................ 106 5.6 Implications for organisational managers .................................................................. 107 5.7 Conclusion ................................................................................................................ 108 References .................................................................................................................... 109