Promoting ethical follower behaviour through leadership of ethics: The development of the ethical leadership inventory (ELI)

Spangenberg, H.; Theron, C. C. Article Promoting ethical follower behaviour through leadership of ethics: The development of the ethical leadership inventory (ELI) South African Journal of Business Management Provided in Cooperation with: University of Stellenbosch Business School (USB), Bellville, South Africa Suggested Citation: Spangenberg, H.; Theron, C. C. (2005) : Promoting ethical follower behaviour through leadership of ethics: The development of the ethical leadership inventory (ELI), South African Journal of Business Management, ISSN 2078-5976, African Online Scientific Information Systems (AOSIS), Cape Town, Vol. 36, Iss. 2, pp. 1-18, https://doi.org/10.4102/sajbm.v36i2.623 This Version is available at: https://hdl.handle.net/10419/218324 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ S.Afr.J.Bus.Manage.2005,36(2) 1 Promoting ethical follower behaviour through leadership of ethics: The development of the ethical leadership inventory (ELI) H. Spangenberg* Centre for Leadership Studies, Graduate School of Business, University of Stellenbosch, Stellenbosch 7600, Republic of South Africa [email protected] C.C. Theron Department of Industrial Psychology, University of Stellenbosch, Stellenbosch 7600, Republic of South Africa Received December 2004 The Centre of Leadership Studies developed a model that defines and describes leadership behaviour required for creating an ethical and high performing organisation. Purposefully building an ethical organisational environment is a prerequisite for ethical organisational behaviour. To be an ethical high performance leader, a person must be both an effective leader and a leader of ethics. The purpose of this study is to develop a 360° instrument that can be used to assess the quality of ethical leadership of middle, senior and executive managers in public, private and not-for-profit organisations. The results reported here provide reasonable support for the use of the ELI. The possibility of causal influences existing amongst specific first-order leadership dimensions, however, needs to be investigated. *To whom all correspondence should be addressed. Introduction The organisational misbehaviour as reported in daily newspapers and academic journals in the USA towards the end of the 1980’s, lead to the observation that people have lost faith in the values of their economic society and that they needed a spiritual rebirth in business leadership. The question arose whether industry needed a new religion, or at least a better one than it has had (Ohmann, 1989). Reflecting on this premise, Kanungo and Medonca (1996) argue that a business corporation in itself is incapable of doing good or evil in society. Such outcomes are due entirely to the unethical behaviour of individuals, whether it is employees or managers. Although all employees are responsible for achieving organisational objectives in an ethical manner, the accountability for providing proper direction and high performance standards lies with organisational leaders. In the South African context, where reports on corruption and corruption-related incidents in public, business, sports, and other organisations regularly form part of the major evening news bulletins of SABC, the official broadcaster, the same reasoning applies. The duty and responsibility for providing ethical high performance leadership rests with executive and senior managers of South African business, public service, non-governmental, sports and other leisure organisations. The King Report on Corporate Governance in South Africa (King Committee on Corporate Governance, 2002:101) defines organisational ethics as ‘the principles, norms and standards that it promotes for the guidance and conduct of its activities, in accordance with established values’. The King Report further contends that adherence to established principles of ethical conduct provides a strong measure of organisational integrity and states that ‘a company’s ethical principles represent a major motivator of stakeholder involvement with it and, as such, should permeate its culture, motivating its strategy, business goals, policies and activities’ (p.102). With regard to the implementation of corporate ethics, Andrews (1989:99) describes three challenges that organisations face, namely ‘the development of the executive as a moral person; the influence of the corporation as a moral environment; and the actions needed to map a high road to economic and ethical performance – and to mount guardrails to keep corporate wayfarers on track’. Bass and Steidlmeier (1999) propose three pillars of ethical leadership that support the importance of the ethical development of the organisational leader and further build out Andrews’s challenges. The pillars are the moral character of the leader and his/her concerns for self and others, ethical values being embedded in the leader’s visioning, and the morality of the choices and actions of leaders and their followers. Jose and Thibodeaux (1999), quoting research, describe a number of specific roles for the ethical leader: 1. With regard to visioning, they suggest that leaders set the moral standards for the organisation and focus on the integrity of the common purpose (Hosmer, 1987). 2 S.Afr.J.Bus.Manage.2005,36(2) 2. Leaders explicitly clarify the ethical dimensions of management decisions, and formulate and justify ethical principles that govern decision-making (Enderle, 1987). 3. Leaders signal their commitment to ethical principles through their influence on corporate culture. • They do this by defining organisational ethics and values, and by acting as role models in establishing a positive ethical climate. Employees normally receive their ethical guidance from observing the behaviours of their superiors (Jose & Thibodeaux, 1999; O`Boyle & Dawson, 1992). • Leaders build culture by what they monitor and control, how they react to critical events and what criteria they use for recruiting, selecting, rewarding and dismissing organisational members (Schein, 1992). • In addition to a strong impact on the ethical behaviour of employees, ethical leaders facilitate trust (Brien, 1998). 4. The CEO faces the challenge of creating a high degree of congruence between the organisations’s guiding beliefs and employees` every-day beliefs (Jose & Thibodeaux, 1999). In order to describe leadership required for creating an ethical and high performing organisation and to put it in proper organisational context, a theoretical model was developed. The model comprises four phases. It is proposed that the ethical orientation of leaders (Phase 1); exemplified by building an ethical organisation, i.e. applying transformational influencing processes, building of ethical structures, creating an ethical culture and climate, and developing productive stakeholder relations (Phase 2); mediated by external factors (Phase 3); will create an ethical organisational environment and positive outcomes for the organisation, its employees and other stakeholders (Phase 4). Phase 2 of the model, namely ‘Building an ethical organisation’ served as theoretical basis for the development of the leadership of ethics assessment instrument. The first component of building an ethical organisation is applying transformational influencing strategies. This broad construct can be equated with the core leadership processes of analysing the organisation’s external and internal environments, developing and communicating the vision, preparing the people and the organisation for implementing the vision and, finally, implementing the vision and strategy (Conger & Kanungo, 1998; House, 1995; Kanungo & Medonca, 1996; Spangenberg & Theron, 2002). The other three elements of Phase 2, namely creating ethical structures (Brickley, Smith & Zimmerman, 1994; James, 2000; Lindsay, Lindsay & Irvine, 1996; Trevino & Nelson, 1995); creating an ethical culture and climate (Cullen, Victor & Bronson, 1993; Deshpande, 1996; Trevino & Butterfield, 1998; Upchurch & Ruhland, 1996; Vaicys, Barnett & Brown, 1996; Vardi, 2001; Victor & Cullen, 1987; 1990); and building productive stakeholder relationships Hummels, 1998; Husted, 1998; Maignan & Ferrell, 2000; Strong, Ringer & Taylor, 2001) are also key responsibilities of the leader of ethics. During the development of the model it was realised that ethical leadership comprises an important but separate dimension of leadership. While the aims of a traditional organisational vision is directed mainly at overall organisational and people performance and effectiveness, an ethical vision is aiming at achieving ethical organizational behaviour. An ethical vision may include imperatives such as, for example, giving people a sense of moral purpose, reconciling business efficiency with social responsibility, fostering the uniqueness and integrity of the individual and group, and treating all internal and external stakeholders with respect, honesty and integrity. In order to create an ethical high performance organisation, it is suggested that the creation and application of an ethical vision could either form part of the overall organisational visioning process, or run parallel but in concert with the larger visioning process. Ethical leadership can thus be operationalised and measured in terms of the same process model on which the Leadership Behaviour Inventory (LBI) is based (Spangenberg & Theron, 2002). In terms of this model, leadership of ethics comprises the creation and sharing of an ethical vision (based on a careful diagnosis of the external and internal environments in which all relevant parties participate); preparing the leader, followers, and the organisation – particularly its structures and culture - for implementing the vision; and the actual implementation process itself. This observable, behaviourally-based leadership process lends itself readily to behaviour assessment by means of 360° methodology. An issue that needs to be clarified is the question whether the person who does well in a leadership assessment questionnaire [that normally would include some ethical leadership dimensions (for example the LBI1)] can be considered a leader of ethics? One could probably answer such a question by arguing that such a person could be considered an honest leader with integrity who creates trust in the work unit and in him/herself. However, to be an ethical high performance leader, a person must be both an effective leader (as per LBI or MLQ2, for example) and a leader of ethics. In essence, the LBI predicts that an individual will display leadership effectiveness (measured by a large variety of dimensions) and ethical behaviour (measured by a few important ethical dimensions). However, to enact leadership of ethics, a person must purposefully and consciously demonstrate and cultivate ethical behaviour in his/her work unit. The leader must, therefore, purposefully facilitate the development of an ethical organisational culture by instilling and cultivating 1The Leadership Behaviour Inventory (LBI), measures a four-phase process of leadership (Spangenberg & Theron, 2002), including transformational leadership dimensions and a number of dimensions that have a distinct ethical content, e.g. enabling the leader (two dimensions) enabling followers, interpersonal relations, concern for others, and character-related dimensions such as honesty and integrity, and decisiveness and hardiness. 2Multi-factor Leadership Questionnaire (Bass & Avolio, 1997). S.Afr.J.Bus.Manage.2005,36(2) 3 ethical beliefs and values (Trevino, Hartman & Brown, 2000). To conclude this argument, the King Report (2002:106) states that ‘the moral objectives of the company, exemplified by the board collectively and the directors individually, needs to be made visible to both internal and external stakeholders and seen to be integral with other corporate objectives’. Since leadership of ethics is a crucial force in creating an ethical organisation, it was decided to first develop an ethical leadership inventory, to be followed by the development of an ethics audit for organisations at a later stage. By assessing the quality of the leadership of ethics of members of a management team on a 360° basis, insight will be increased considerably into their own ethical leadership behaviour as well as understanding of the entire domain of leadership of ethics and the impact thereof on their units. Greater self-awareness and increased understanding of ethics in organisational dynamics will provide a positive climate for major individual and team learning initiatives. The purpose of this study is, therefore, to develop a 360° instrument that can be used to assess the quality of leadership of ethics of middle, senior and executive managers in public, private and not-for-profit organisations. In terms of the foregoing argument it probably would have been appropriate to refer to such an instrument as the Leadership of Ethics Inventory. Informal consultation with leaders participating in the study, however, indicated that market acceptance of the instrument would most likely be better if the more conventional title Ethical Leadership Inventory (ELI) would be adopted. Development of the questionnaire Strategy for developing the questionnaire 1. Generation of items. The main source of items was the literature on the development of ethics in organisations. A second source of items was the Leadership Behaviour Inventory (LBI). A significant number of items from the LBI research copy, consisting of 237 items, had ethical content and with minor adaptations could be included in the ELI research copy. Research indicates that LBI items measure observable leadership actions and behaviour with a high degree of reliability and validity (Spangenberg & Theron, 2002). 2. Using the structure of the Leadership Behaviour Inventory (LBI) as a basis for classifying newly developed items. The rationale was that the LBI comprises four actionable phases that are required for implementing a vision, irrespective of whether it is a performance or ethics-related vision. 3. Using a Delphi technique in field research. This means that at critical stages in the development process, a panel of experts verify the process and propose improvements as required. Positive experience on three occasions in the past of using the Delphi technique as an aid in questionnaire development has suggested that this iterative, consensus seeking technique should be employed again (Spangenberg & Theron, 1997; 2002; Theron & Spangenberg, 2004). Field research for developing the questionnaire Two rounds of field research by means of the Delphi technique were conducted. During the first round the draft questionnaire was sent to a panel of 13 industrial psychologists, known as experts in the field of leadership assessment and/or development. They were asked to work through the questionnaire as follows: verify relevance of dimensions and propose new dimensions if required; rate the appropriateness of each item on a three-point scale, and propose new items as required. The first draft questionnaire consisted of 24 dimensions, measured by means of 276 items. In order to provide a better understanding to raters, dimension definitions were included and items were categorised according to dimensions. On return of questionnaires a two-stream approach was followed to improve or cull items. Firstly, in line with the Delphi technique, comments on specific dimensions and items were studied. Comments from raters were indeed extremely useful in improving items. Secondly, descriptive statistics were conducted on item ratings and the culling of items was based mainly on arithmetical decision rules. The improved and shortened draft questionnaire still consisted of 24 dimensions, but the number of items was reduced to 189. It was decided to conduct a second round of field research by means of the Delphi technique in which organisational leaders would act as raters. It was realised that in order to facilitate sound corporate governance that simultaneously increases ethical, high organisational performance and decreases organisational malpractices, the support and continued involvement of a significant body of high-level organisational leaders would be required. Franklin Sonn, former South African ambassador to the USA and prominent businessman, in a personal discussion (May 2003), put it bluntly that an ethical leadership instrument developed by an institution of learning, without consent and support of the leadership community, will not have the desired effect. The second round Delphi was conducted along the same lines as the first one, with 16 executive managers acting as raters. The group included CEO’s from some of South Africa’s largest and most respected companies. Ratings and rater comments were very useful in reducing dimensions by collapsing them into other dimensions or by culling them. Ratings and rater comments were again useful in culling items that received unsatisfactory ratings, and to further improve items that were retained. The draft questionnaire was reduced to 19 dimensions, measured by 103 items. The dimensions measured by the ELI, with their definitions, are presented in Table 1. 4 S.Afr.J.Bus.Manage.2005,36(2) Table 1: First-order latent leadership dimensions measured by the ELI 1. Creating and sharing an ethical vision Understanding the ethical dynamics in the external and internal environments (Environ) Diagnoses ethical dynamics in the external and internal environments in order to develop an ethical vision. Developing a challenging vision (Evision) Develops a collective ethical vision that inspires people and gives them a sense of purpose, is customer-focused and advances diversity of people. Building trust in the leader and the unit (Butrust) The leader creates trust in him/herself and builds confidence in the unit. Articulating an ethical vision and enlisting followers (Artivis) Articulates an ethical vision for the future that provides direction. Inspires confidence in the vision and obtains follower commitment to the vision. Conceptualising ethical strategy (CoStrat) Defines strategic ethical issues clearly. Builds strategies and plans based on thorough problem analysis and broad-based factfinding. Considers consequences of decisions. 2. Enabling the leader and the unit to implement the ethical vision Enabling the leader (Enablel) Identifies challenging opportunities for self-development and is committed to continuous learning. Appreciates feedback and has good insight into own his/her own ethical identity, capabilities and behaviour. Is committed to continuous learning. Empowering followers (Enablef) Encourages followers to accept responsibility for their own ethical learning and growth. Creates conditions which allow them the opportunity to take meaningful decisions. Formulating and implementing ethical structures and systems (Strusys) Adapts structures, processes and procedures to support implementation of ethical strategy in a changing environment. Implements ethical structures and systems, for example a code of ethics, an ombudsman, ethics committee, and ethics training programme. Building an ethical culture and climate (Ethcult) Builds a culture that reflects shared beliefs, values and norms; shared perceptions of ethically correct behaviour;and guidance for handling difficult ethical issues. 3. Implementing the ethical vision 3.1. Leading with courage, integrity and sensitivity Acting honestly and with integrity Honestly manages the organisational unit and consistently lives out the values embedded in the vision (Hointeg) Considers ethical implications of decisions, assures agreed upon values are adhered to and deals honestly with all stakeholders. Decisiveness and hardiness (Actdeci) Acts decisively and makes tough ethical decisions. Performs effectively under stress and reacts positively to change and uncertainty. Demonstrating interpersonal sensitivity (Demsens) Considers the needs, feelings and dignity of others. Works towards productive interpersonal relations.. 3.2. Encouraging ethical behaviour Challenging current reality and stimulating learning (Challen) Challenges current thinking about ethics, reconsiders and improves current practices on an ethical basis. Promotes continuous ethical learning. Inspiring people towards ethical behaviour (Inspire) Raises the aspirations of followers and builds confidence in them to perform effectively and ethically. Articulates ethical issues clearly. 3.3. Stimulating ethics across boundaries Facilitating interdepartmental co-ordination (Intcoor) Facilitates cross-functional collaboration and teamwork. Helps people to see the ethical big picture. Influencing external stakeholders (Infstak) Maintains productive relationships with external stakeholders and builds the ethical image of the organisation. 3.4. Leading ethical initiatives and rewarding ethical contributions Planning and implementing ethical initiatives (Planimp) Ensures that ethical expectations of the unit and its members are clarified, and that ethical initiatives are designed and aligned with ethical and business strategies. Reviewing ethical initiatives and behaviour (Reviewe) Reviews the outcomes of unit, team and employee ethical initiatives. Provides specific feedback to followers in order to help them assess their own contribution to these initiatives. Rewarding ethical contributions and behaviour (Rewarde) Gives recognition for accomplishing ethical initiatives as well as for exemplary work-related attitudes and behaviour; celebrates ethical success. S.Afr.J.Bus.Manage.2005,36(2) 5 Field testing of the questionnaire In order to ensure that the sample reflects diversity of culture and organisational type, a wide range of organisations were approached for participation in fieldwork. Organisational co-ordinators facilitated the nomination of candidates (participants) and respondents. Firstly, they identified colleagues who managed work units, which were defined as consisting of three or more members, with no upper limit. Co-ordinators were specifically asked to include unit managers from all cultures, male and female, in order to obtain a representative sample. Candidates completed a Candidate Questionnaire and were promised to receive personal feedback on request. Secondly, the candidate, in conjunction with the organisational co-ordinator, ideally identified two peers and two subordinates or followers as respondents. The superior of the candidate served as fifth respondent. Respondents completed a Respondent Questionnaire for the candidate. Again, co-ordinators were specifically asked to include a representative sample of respondents. In order to conduct test bias studies on the questionnaire, both candidates and respondents were asked to provide essential biographical information. Sample The data used for the purpose of this study was obtained by means of a series of non-probability samples of unit leaders selected from a non-probability sample of organizations. A total of sixty unit leaders were selected and rated 360° by their superiors, peers and subordinates. The samples of respondents that rated each selected unit leader again were selected through non-probability sampling procedures. Selected unit leaders also rated themselves, which resulted in a total of 315 completed ELI questionnaires at the time of the analysis. Although the objective initially was to obtain ratings from two subordinates, two peers and a single superior, the need for a large as possible sample size, in conjunction with the difficulties encountered when trying to apply a questionnaire of this length and nature to respondents on this high a job level, necessitated a deviation from this ideal in a number of cases. The sample of organizations and the number of unit leaders sampled from each organization is depicted in Table 2. Table 2: distribution of unit leaders across sampled organisations Company Frequency Percent Valid Percent Cumulative Percent Anglo Gold 3 5,0 5,0 5,0 Distell 4 6,7 6,7 11,7 Medi- Clinic 4 6,7 6,7 18,3 Peninsula Technikon 7 11,7 11,7 30,0 Power Group 7 11,7 11,7 41,7 Rand Water 10 16,7 16,7 58,3 SA Reserve Bank 10 16,7 16,7 75,0 SAPS 14 23,3 23,3 98,3 Telkom S A 1 1,7 1,7 100,0 Total 60 100,0 100,0 The distribution of unit leaders in terms of position level is portrayed in Table 3. The breakdown of the sample of unit leaders in terms of race is given in Table 4. A pleasing feature of the race composition of the sample is that almost 50% of the unit leaders belong to previously disadvantaged groups. Unit leaders from previously disadvantaged groups do, however, tend to occupy the relatively lower position levels (cross tabulation not shown). A stronger representation of unit leaders in the top management category (that is unit leaders responsible for larger, composite units) would have been preferable. In the final analysis it is these higher echelon leaders that should be held accountable for the ethical behaviour of all their followers. It is their ethical vision that should be cascading down through the organizational hierarchy, carried by the walk and talk of lower level unit leaders. The descriptive statistics characterizing the age distribution of the sample of unit managers are shown in Table 5. Results indicate an approximately symmetric, mesokurtic age distribution. Due to the sampling methodology and the sample size, the sample can clearly not claim to constitute a representative section of the population of South African unit leaders who could be held accountable for the ethical behaviour of the members of their units. This precludes the possibility of reaching any definitive conclusion on the competence of South African unit leaders on the leadership competencies serving the formulation and realization of an ethical unit vision. This also rules out the possibility of reaching any definitive conclusion on the ability of the ELI to successfully measure the leadership of ethics construct in accordance with the instrument architecture in the target population. Nonetheless, if the measurement model implied by the instrument design would fit the sample data well, it would constitute relevant, albeit limited evidence that the ELI can be used to assess ethical leadership competencies for development in the target population. Missing values Missing values presented a problem that had to be addressed before analysis could proceed. The same arguments as those presented in Theron and Spangenberg (2004) were considered with regards to the missing values problem. Pair-wise deleting of cases presented itself as a possible solution in this case since it would not result in a correlation matrix with extreme variation in N-values (a maximum of 307 and a minimum of 221 in this particular case). The PRELIS program (Jöreskog & Sörbom, 1996a) was used to impute missing values. The PRELIS run proved to be reasonably effective in countering the missing value problem in comparison to the results that would have been achieved under list wise deletion, but less useful in comparison to the results that would have been obtained under pair-wise deletion. By default, cases with missing values after imputation were eliminated. After imputation, 264 cases with observations on all 103 items remained in the validation sample. 6 S.Afr.J.Bus.Manage.2005,36(2) Table 3: Distribution of unit leader position level Table 4: Distribution of unit leader race Race Frequency Percent Valid Percent Cumulative Percent Valid Asian 3 5,0 5,9 5,9 Black 13 21,7 25,5 31,4 Coloured 8 13,3 15,7 47,1 White 27 45,0 52,9 100,0 Total 51 85,0 100,0 Missing System 9 15,0 Total 60 100,0 Table 5: Descriptive statistics characterizing the unit leader age distribution Descriptive statistics Value N Vali d 52 N Missing 8 Mean 43,25 Median 43,00 Modea 41 Std, Deviation 7,987 Variance 63,799 Skewness ,061 Std, Error of Skewness ,330 Kurtosis -,138 Std, Error of Kurtosis ,650 Minimum 25 Maximum 62 a Multiple modes exist. The smallest value is shown The relative narrow band in which the effective sample sizes vary under pair-wise deletion, combined with the fact that the median effective sample size is 275 and the modal effective sample size 278, swayed the decision towards the use of pair-wise deletion of missing values. The effective sample size that has been obtained through imputation by matching falls below the twenty-fifth percentile (P25 = 267). Item analysis The architecture of the ELI reflects the intention to construct essentially one-dimensional sets of items to reflect variance in each of the nineteen latent variables collectively comprising the ethical leadership domain. The items are meant to function as homogenous stimulus sets to which raters respond with behaviour that is primarily a relatively uncontaminated expression of a specific underlying ethical leadership latent variable. Each of the nineteen ELI subscales were consequently item analysed through the SPSS Reliability Procedure (SPSS 11.0 for Windows, 2004) to identify and eliminate items not contributing to an internally consistent description of the unit performance facet in question. The summary results of the item analyses are shown in Table 6. Two items were flagged as problematic. Item 3 of the Building trust in the leader and the unit subscale and item 48 of the Acting honestly and with integrity subscale were identified as items that lower the homogeneity of the scales. The magnitude of the corrected item-total correlations (0,2091 and 0,3598) and the increase in alpha affected by the removal of the items (0,1391 and 0,0309) justified the deletion of these items. Four further items (items 1, 4, 13 and 54) were flagged as suspect. The magnitude of the corrected item-total correlation (0, 4639; 0,4628; 0,4990; and 0,4510``) as well as the rather modest increase in alpha affected by the removal of the items (0,0056; 0,0055; 0,0001 and 0,006), however, argued against deleting these items. Eighteen of the subscales returned Cronbach alpha values greater than 0,80, with only the Inspiring followers towards ethical behaviour subscale falling marginally below this cutoff value (0,79). The relatively high item homogeneity found for each sub-scale, as indicated by the Cronbach alpha values in Table 6, is regarded as satisfactory. Dimensionality analysis Unrestricted principal component analyses with Varimax rotation were subsequently performed on each of the nineteen ELI subscales, each representing a facet of the multi-dimensional ethical leadership construct, to further evaluate the success with which each item accomplishes its intended function. The objective of these analyses furthermore was to confirm the uni-dimensionality of each sub-scale and to remove items with inadequate factor loadings (and rerun the item analysis) and/or split heterogeneous sub-scales into two or more homogenous subsets of items if necessary. In the latter case concomitant adjustments to the underlying ELI measurement model would have to be made and the item analysis repeated on the newly created subscales. Hulin, Drasgrow and Parsons Position level Frequency Percent Valid Percent Cumulative Percent Valid Top management 9 15,0 18,8 18,8 Senior management/ senior professional 23 38,3 47,9 66,7 Middle management/ professional 16 26,7 33,3 100,0 Total 48 80,0 100,0 Missing System 12 20,0 Total 60 100,0 S.Afr.J.Bus.Manage.2005,36(2) 7 (1983), however, caution that factor analysis as performed here on a matrix of product moment correlations might not be the most appropriate procedure for establishing the unidimensionality of a scale due to the danger of extracting artefact factors reflecting differences in item difficulty value or variance only. Descriptive statistics were therefore also calculated for the items of each subscale to examine the possibility of multiple factors appearing as an artefact of differential item characteristics like skewness (Schepers, 1992). The analyses were performed utilising SPSS 11.0 for Windows (2004). The eigenvalue-greater-than-unity rule of thumb was used to determine the number of factors to extract. All nineteen subscales passed the unidimensionality test. Factor loadings generally were satisfactory, varying between 0,565 and 0,870 with a median loading of 0,779. Seventy five percent of the loadings exceeded 0,747. All four items flagged as suspect during the item analyses returned loading in excess of 0,60, which on the one hand confirms their border-line status but simultaneously seems to justify the decision to retain these items. It should, nonetheless, be noted that for all subscales the single principle component solution failed to satisfactorily reproduce the observed correlation matrices. The results of the principle component analyses are summarized in Table 7. The majority of items followed a significantly (p<0.05) negatively skewed and leptokurtic distribution. Due to the absence of negative items and the consistency in distributional form across items this did, however, not result in the emergence of artefact factors. The results of the foregoing analyses seem to suggest that the ELI items generally do systematically reflect their designated latent ethical leadership dimension with reasonable success. Although no conclusive evidence in this regard was derived from the current data set, it is nonetheless assumed that the scales do reflect the intended latent variables. Results on the fit of the first-order measurement model reported below tend increase the confidence in this position. Expanding the measurement model into a fully fledged theory driven structural model and confronting these with the current data set via a series of confirmatory model fitting analyses utilizing Lisrel would, however, be needed to give significant credibility to this claim. The moderately high component loadings, the moderate percentage of the variance in the data explained by the single components, and the general inability of the single component solutions to reproduce the observed correlation matrices do, however, suggest that the ELI items generally also reflect a fair amount of non-relevant information. Variable type Structural equation modeling on the ELI in which each individual item serves as a manifest or indicator variable of the various latent leadership facets would have resulted in an extremely cumbersome and extensive exercise simply due to the number of items involved. The ordinal nature of the data would have required the calculation of the asymptotic covariance or asymptotic variance matrices which tend to demand large amounts of memory and processing time when the number of variables are large (Jöreskog & Sörbom, 1996a; 1996b). Consequently, two manifest variables were created from each sub-scale by calculating the unweighted average of the odd numbered items and the even numbered items of each scale. Apart from simplifying the logistics of fitting the model, the creation of two linear composite indicator variables for each latent variable has the added advantage of creating more reliable indicator variables (Nunnally, 1978). Marsh, Hau, Balla and Grayson (1998), on the other hand, report that solutions in confirmatory factor analysis tend to improve with increasing number of indicators per factor. The complexity of the comprehensive Lisrel model that would have resulted from treating the individual items as indicator variables swayed the decision towards parcelling. The composite indicator variables were treated as continuous variables. The analysis of the covariance matrix instead of the polychoric correlation matrix was therefore regarded as permissible (Jöreskog & Sörbom, 1996a; 1996b; Mels, 2003). Univariate and multivariate normality The default method of estimation when fitting measurement models to continuous data (maximum likelihood), assumes multivariate normality. This is also true for generalized least squares (GLS) and full information maximum likelihood (FIML) as possible alternative estimation methods for structural equation modeling with continuous data (Mels, 2003). The inappropriate analysis of continuous non-normal variables in structural equation models can result in incorrect standard errors and chi-square estimates (Du Toit & Du Toit, 2001; Mels, 2003). The univariate and multivariate normality of the composite indicator variables were consequently evaluated via PRELIS (Jöreskog & Sörbom, 1996a). The null hypothesis of univariate normality had to be rejected in the case of all thirty-eight composite indicator variables, corroborating the skewness findings reported earlier. The results of the test for multivariate normality are given in Table 8. The assumption of multivariate normality clearly is not tenable. Two possible solutions to the lack of normality in the data were investigated. The first was to normalize the composite indicator variables. Although the PRELIS normalization had the effect of improving the symmetry and kurtosis of the indicator variable distributions, the null hypothesis of multivariate normality still had to be rejected. The dilemma is that normalizing occurs for each variable separately (Mels, 2003). Since the normalization option failed to achieve multivariate normality, the use of an alternative method of estimation more suited to data not following a multivariate normal distribution was considered instead. This approach has the advantage over the use of normal scores that the solution need not be interpreted in terms of transformed values. Weighted least squares (WLS), diagonally weighted least squares (DWLS) and robust maximum likelihood (RML) are suggested to fit structural equation models to non-normal data (Du Toit & Du Toit, 2001; Jöreskog, Sörbom, Du Toit, & Du Toit, 2000; Mels, 2003). Mels (2003) recommends the use of robust maximum likelihood estimation if the assumption of a multivariate normal distribution does not hold. 8 S.Afr.J.Bus.Manage.2005,36(2) Table 6: Reliability of ELI sub-scale measures Subscale Sample size (n) Alpha Mean Variance Number of items in final subscale Number of items deleted Environ 249 0,82 20,17 12,63 5 0 Evision 231 0,89 28,08 30,77 7 0 Butrust 269 0,85 21,15 13,57 5 1 Artivis 253 0,83 20,43 12,98 5 0 Costrat 259 0,81 20,91 12,58 5 0 Enablel 262 0,82 21,17 12,16 5 0 Enablef 207 0,82 23,44 20,55 6 0 Strusys 229 0,89 28,73 25,43 7 0 Ethcult 266 0,81 17,07 8,99 4 0 Hointeg 262 0,84 21,12 12,32 5 1 Actdeci 271 0,83 21,26 11,84 5 0 Demsens 247 0,85 24,27 18,31 6 0 Challen 248 0,85 20,17 13,82 5 0 Inspire 261 0,79 20,66 12,38 5 0 Intcoor 252 0,85 20,22 14,15 5 0 Infstak 262 0,81 20,97 11,92 5 0 Planimp 241 0,85 20,12 14,76 5 0 Reviewe 244 0,83 19,75 15,23 5 0 Rewarde 223 0,82 20,13 13,25 5 0 Table 7: Principle component analyses of ELI sub-scale measures Subscale Determinant KMO % Variance explained Max λ Min λ % Residual r > 0,05 Environ 0,18 0,81 58,44 0,829 0,636 80 Evision 0,02 0,89 61,87 0,844 0,708 71 Butrust 0,13 0,83 62,46 0,847 0,740 70 Artivis 0,11 0,81 61,79 0,870 0.629 70 Costrat 0,18 0,81 58,76 0,816 0,735 80 Enablel 0,19 0,84 58,89 0,832 0,710 90 Enablef 0,08 0,88 60,29 0,826 0,730 80 Strusys 0,05 0,90 64,67 0,842 0,747 66 Ethcult 0,03 0,89 60,48 0,822 0,744 61 Hointeg 0,25 0,78 64,49 0,847 0,749 100 Actdeci 0,17 0,85 60,08 0,827 0,712 100 Demsens 0,18 0,83 59,71 0,805 0,755 100 Challen 0,09 0,86 58,30 0,805 0,646 73 Inspire 0,23 0,83 56,13 0,831 0,693 90 Intcoor 0,15 0,86 61,90 0,837 0,748 100 Infstak 0,16 0,78 58,62 0,827 0,649 80 Planimp 0,10 0,78 63,52 0,852 0,747 70 Reviewe 0,18 0,82 59,01 0,810 0,725 80 Rewarde 0,19 0,83 57,95 0,821 0,618 90 Table 8: Test of multivariate normality for continuous variables Skewness Kurtosis Skewness and Kurtosis Value Z-Score P-Value Value Z-Score P-Value Chi-Square P-Value 57, 624 77,496 0,000 2014,618 23,885 0,000 6576,108 0,000 Evaluation of the primary measurement model The ELI was developed to measure the multifaceted leadership of ethics construct to which a specific constitutive meaning has been attached as shown in Table 1. Operational denotations were explicitly and intentionally produced to reflect specific facets of this construct. Specific ELI items were written to function as homogenous stimulus sets to which raters would respond with behaviour which would be relatively uncontaminated behavioural expressions of specific latent leadership dimensions. The question that needs to be answered is to what extent this premeditated operational design did succeed in providing a comprehensive and uncontaminated empirical grasp on the construct as defined. Given the intention of the ELI to measure specific, previously defined leadership competencies by means of a specific operational architecture, a hypothesis testing, restricted, confirmatory approach was followed. In terms of this approach, specific structural assumptions are made with regards to the number of latent variables underlying the ELI, the relations among the latent variables, and the specific pattern of loadings of indicator variables on these latent variables (Ferrando & Lorenzo-Seva, 2000; Jöreskog & Sörbom, 1993). To the extent to which a measurement model reflecting these S.Afr.J.Bus.Manage.2005,36(2) 15 Power assessment The statistical power associated with the tests of exact and close fit was estimated (Diamantopoulos & Siguaw, 2000). To determine the power of these two hypothesis tests, a value of RMSEA = 0,05 was assumed under the exact fit alternative hypothesis, while a value of RMSEA = 0,08 was assumed under the close fit alternative hypothesis. Power tables compiled by MacCallum, Browne and Sugawara (1996) only make provision for v≤100 and N≤500. A SPSS translation of the SAS syntax4 provided by MacCallum et al. (1996) was consequently used to derive power estimates for the tests of exact and close fit, given the effect sizes assumed above, a significance level (α) of 0,05 and a sample size of 315. The degrees of freedom (ν) in the model is (½[(p+q][p+q+1]-t)=741 - 247=494. Power values of 1,00 were obtained for both the tests of exact and close fit. Rejecting the null hypothesis of exact fit under the true condition of close fit thus is a certainty. Results indicate that even if the actual model fit would be as close as RMSEA=0,03, the probability of rejecting the null hypothesis of exact fit would still be as high as 0,989068. The probability of rejecting the null hypothesis of close fit if the true model fit was mediocre is also unity. Even if the actual model fit would be a close as RMSEA=0,06, the probability of rejecting the null hypothesis of close fit would still be as high as 0,938511. These power estimates, taken in conjunction with the decisions to reject the null hypotheses of exact and close fit, suggest that the conclusion of poor model fit could be contentious in that the tests of exact and close fit were highly sensitive to even trivial misspecifications in the model. Summary and managerial implications Ethical organizational unit behaviour is desired first and foremost because organizational behaviour conforming to ethical best practice is in and by it self highly valued. Moreover, organizational behaviour conforming to ethical best practice is highly valued, in part, because it is associated with outcomes or consequences beneficial to and valued by the individual leader, stakeholders, and the physical, social and economic environments in which the organizational unit operates. Consequently, such organizational unit behaviour can pay substantial dividends both in terms of preventing negative systemic responses and promoting positive systemic reactions. Seen from both these perspectives, a need therefore exists to increase the ethical behaviour standard demonstrated by the members of an organizational unit.5 4The help of Klay Martens of SPSS South Africa is gratefully acknowledged in finding an itterative procedure to determine the critical chi-square that would cut off an area alpha in the upper tail of the non-central chi-square distribution with d degrees of freedom and non-centrality parameter ncp. 5This raises the important question whether ethical unit behaviour should be reflected in the constitutive interpretation of unit performance, and consequently whether operational measures of unit performance like the Performance Index (Spangenberg & Theron, 2004) should accommodate it as a separate dimension of unit performance? The ethical behaviour standard demonstrated by the members of any given organizational unit is, however, not a chance event but rather is systematically determined by an intricate nomological network of latent variables. The ability to rationally and intentionally improve the ethical behaviour of the members of an organizational unit consequently depends on the extent to which the identity of the latent variables comprising this nomological network are known as well as the manner in which they combine to shape the ethical behaviour of unit members. Leadership characteristics and behaviour most probably play a vital role in such an explanatory model. It does not seem unreasonable to hold unit leaders responsible for the ethical quality of the behaviour of the members of the unit. The effect of leadership on the ethical behaviour standard demonstrated by the members of an organizational unit, however, most probably would not be direct, but rather would be mediated through a layer of leadership outcome latent variables. Ethical climate (Engelbrecht et al., 2004) and ethical culture are latent variables that quite possibly could mediate the effect of leadership on ethical member behaviour. Specific leadership behaviours (leadership competencies) are required to build an appropriate unit ethical climate and ethical culture and ultimately to achieve ethical unit behaviour. Would a unit leader, acting in accordance with effective leadership prescribed by the LBI, while simultaneously complying with sound ethical standards, but without explicitly promoting an ethical vision, contribute towards building ethical unit climate and culture? Probably yes, because of the desire of followers to emulate their (transformational) leaders (Bass, 1985; Bass & Avolio, 1993). This study would, however, want to argue that the building of ethical unit climate and ethical unit culture requires more than leaders who behave ethically. To purposefully build appropriate unit ethical climate and ethical culture and ultimately to achieve ethical unit behaviour additionally requires leaders of ethics. To achieve effective leadership of ethics, unit leaders have to register and be concerned about significant discrepancies between the ethical behaviour currently being displayed in the unit and an ethical behavioural norm reflecting prevailing ethical standards. Effective unit leaders of ethics have to have a clear ethical unit behaviour vision, which anticipates a reality dramatically different from traditional and conventional behavioural practices. Moreover, to achieve effective leadership of ethics, unit leaders have to be motivated to achieve the ethical vision. This results in the important and fascinating question of which attainments and dispositions move the leader of ethics to be disturbed by such ethical discrepancies and not to passively accept (like most others) the ethical shortcomings of unit members, but rather to be passionately committed to and active work towards the realization of a radically different ethical vision? The leader behaviours required to realize the ethical vision are essentially the same than those involved in the realization of any other vision. The fundamental position underlying the ELI is that the leadership competencies required to lead followers to ethical excellence in terms of the ethical vision are essentially the same as those involved in achieving unit performance excellence. 16 S.Afr.J.Bus.Manage.2005,36(2) The ELI, like the LBI, thus interprets leadership, as a complex, continuous process expressing itself in an extensive array of inter-dependent behavioural actions. The process essentially entails three sequentially linked phases (a) the development and selling of an appropriate yet challenging ethical vision for the unit, based on an assessment of the internal and external environment of the unit, (b) the preparation of the unit for the implementation of the ethical vision, and finally (c) the bold yet honest implementation of the vision by continually monitoring, revitalizing, fine-tuning and orchestrating a multitude of prerequisites for realizing the ethical unit vision. It should, however, be stressed that leadership is thereby not reduced to a finite, linearly strictly forward-moving process. Actually, the possibility raised earlier of identifying causal influences amongst first-order leadership dimensions, confesses that the existence of a complex (Cilliers, 1998), richly connected leadership structure is accepted as a basic premise. From the perspective of the leadership model underlying the ELI, a total of 19 distinct latent leadership dimensions can be distinguished within the foregoing broad procedural structure, constituting the abstract themes common to bundles of leadership behavioural actions. Leading organizational units to build unit ethical climate and ethical culture and ultimately to achieve ethical unit behaviour thus represents a formidable task. Unit leaders very seldom would be proficient in all 19 of the aforementioned latent leadership dimensions. To improve leader effectiveness, and ultimately the ethical quality of unit member behaviour through leadership assessment and development, requires the identification of those latent leadership dimensions on which a leader performs relatively less well. The Ethical Leadership Inventory was developed specifically for the South African context to serve this purpose. The results reported here provide reasonable support for the use of the 101-item ELI. 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