The effect of authentic leadership on employee trust and employee engagement

Main Article Content

Dan-Shang Wang
Chia-Chun Hsieh
Cite this article:  Wang, D., & Hsieh, C. (2013). The effect of authentic leadership on employee trust and employee engagement. Social Behavior and Personality: An international journal, 41(4), 613-624.


Abstract
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In this study we examined the effect of authentic leadership on employee engagement through employee trust. We collected data from 386 employees in the top 1,000 manufacturing companies and the top 500 service companies in Taiwan. Hierarchical multiple regression was employed to test the hypotheses. The results showed that both supervisors’ consistency between words and actions as well as their moral perceptions are positively related to employee engagement, while only supervisors’ consistency between words and actions is positively related to employee trust. Moreover, employee trust was shown to be positively related to employee engagement. Finally, employee trust was found to have a partial mediating effect between authentic leadership and employee engagement.

Today’s global environment continuously undergoes rapid changes, enterprises experience ethical meltdowns, and organizations face a multitude of challenging and turbulent problems. It is therefore increasingly evident that enterprises need a new kind of business leader in this, the 21st century (George, Sims, McLean, & Mayer, 2007). Specifically, organizations need leaders who lead with purpose, have strong values and integrity, who are able to create enduring organizations, and who motivate their employees to provide better customer service (George, 2003). In both Eastern and Western societies, integrity and authenticity are considered as two of the most important societal values (George et al., 2007; Wang, 2010). Kouzes and Posner (2002) found that the most important component of effective leadership is that leaders treat their employees authentically. This is because it promotes a humane enterprise and achieves enduring outcomes in organizations. In recent years, the focus on the topic of authentic leadership has gradually increased in both practical (George, 2003) and academic fields (e.g., Avolio, Gardner, Walumbwa, Luthans, & May, 2004; Walumbwa, Avolio, Gardner, Wernsing, & Peterson, 2008). A reason for this is that authentic leadership is acknowledged as a root construct of all positive forms of leadership; it plays a vital role in addressing organizational and societal problems (George, 2003).

In recent studies it has been suggested that authentic leadership may positively affect employee attitudes and behavior, as well as work outcomes (e.g., job satisfaction), job commitment, creativity, engagement, and organizational citizenship behavior (OCB; Rego, Sousa, Marques, & Cunha, 2012; Walumbwa et al., 2008; Walumbwa, Wang, Wang, Schaubroeck, & Avolio, 2010). Employee engagement is the individual’s involvement in, satisfaction with, and enthusiasm for work (Harter, Schmidt, & Hayes, 2002). When employees perceive that they are supported and treated sincerely, they increase their engagement at work.

Winning employees’ trust is a vital element of being an effective leader. Trust has long been recognized as being fundamental to cooperative relationships (Blau, 1964). In particular, employee trust is a critical part of the relationship between individuals and organizations. However, the main issue has previously been “trust in whom?” (Perry & Mankin, 2004). Hunt and Aldrich (1998) suggested that direct supervisors have a stronger influence than CEOs. In turn, trust in leaders has been tied to desirable outcomes such as job satisfaction, commitment, and OCB (Dirks & Ferrin, 2002). Overall, trust in supervisors can be said to be one of the important elements of employee engagement.

Good leaders do not have to be born with specific characteristics or traits. Leadership emerges from one’s life story, experiences, and so forth, which can facilitate authentic morality and integrity (George et al., 2007). Our purpose in this study was to test the relationships among authentic leadership, employee trust, and employee engagement. Through the research findings, we aimed to show that via employee trust, authentic leaders facilitate closer relationships with their employees, increase employee work engagement, and contribute to the sustainability of the organization.

Literature Review

Authentic Leadership, Employee Trust, and Employee Engagement

Authentic leadership means leader behavior that draws upon and promotes positive psychological capacities and a positive ethical climate that nourishes self-awareness, an internalized moral perspective, balanced processing of information, and relational transparency for how leaders work with employees, fostering positive self-development (Walumbwa et al., 2008). Additionally, trust is a person’s confidence in, and willingness to act on the basis of, the words, actions, and decisions of another (McAllister, 1995). Further, Schaufeli, Salanova, González-Romá, and Bakker (2002) and Schaufeli, Bakker, and Salanova (2006) argued that engagement is defined as a positive, fulfilling, work-related state of mind. They claimed it is a persistent affective-cognitive state, characterized by vigor, dedication, and absorption.

The Relationships Among Authentic Leadership, Employee Trust, and Employee Engagement

Initially, social exchange theory was focused on individual behavior, whereafter it was concentrated on the exchanges of small-group members, and extended even further to the entire social structure (Blau, 1964; Homans, 1958). This theory has later been applied to research on the manager-employee exchange relationship (e.g., Whitener, Brodt, Korsgaard, & Werner, 1998). Researchers adopting the social exchange approach have focused more on the norm of reciprocity (Cropanzano & Mitchell, 2005) and found that followers are willing to reciprocate when treated fairly and with concern by their leaders (e.g., Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009). Morrison and Robinson (1997) stated that employees believe their supervisors are obliged to tell them the truth about the company, and, if they do not, the employees feel that they are treated unfairly, which then decreases their work engagement. Thus, leaders’ openness and consistency between beliefs and actions play an important role in influencing employees’ decisions to provide voluntarily comments or suggestions intended to spark organizational improvement, which in turn help them to learn and to be engaged at work (May, Chan, Hodges, & Avolio, 2003). Leaders’ authenticity must be further accompanied by integrity, defined as having personal values grounded in morality for the leader to be respected by the employees and to be able to influence their actions (Fields, 2007). When employees perceive their supervisors as being consistent between words and actions and holding moral perceptions, they are more likely to be engaged in their work. We thus formed the following hypotheses:
Hypothesis 1a:
Supervisors’ consistency between words and actions will be positively related to employee engagement.
Hypothesis 1b:
Supervisors’ moral perceptions will be positively related to employee engagement.

Leaders must develop their self-awareness and become role models for communication in the organization because trust depends largely upon consistency of both communication and action, and is the emotional glue that binds followers and leaders together (Clutterbuck & Hirst, 2002). Supervisors must further understand their own merits and demerits, and show consistency between beliefs and actions, as this facilitates a feeling of pride in their employees due to the employees’ dependency on the supervisors’ professional competencies and affective behavior. Norman, Avolio, and Luthans (2010) found that the leader’s exhibited level of positive psychological capacities has a positive relationship with the follower’s perceived trust in the leader. It is also important that through their moral characteristics, leaders can show their warmhearted consideration for others, as when there is no empathy, trust cannot be built (George & Sims, 2007). Thus, the influential elements that develop employees’ trust for their supervisors are integrity, goodwill, and professional competency; these are necessary components that determine whether or not supervisors can be trusted (Colquitt, Scott, & LePine, 2007; Mayer, Davis, & Schoorman, 1995). Thus, when employees consider their supervisors to be consistent between their words and actions and to hold moral perceptions, the employees will trust their supervisors more. We therefore proposed the following hypotheses:
Hypothesis 2a:
Supervisors’ consistency between words and actions will be positively related to employee trust.
Hypothesis 2b:
Supervisors’ moral perceptions will be positively related to employee trust.

Social exchange relationships cannot develop in the absence of trust (Blau, 1964). Avolio et al. (2004) pointed out that employees’ trust in their leader is associated with their positive attitudes and behavior. In their meta-analysis Dirks and Ferrin (2002) also suggested that when trust in leadership is well placed, authentic leaders guide in their actions through end values. That is to say, when employees identify with their supervisors, they will trust their supervisors and be willing to engage in their work. We thus formed the following hypothesis:
Hypothesis 3: Employee trust will be positively related to employee engagement.

A primary premise of social exchange theory is that one’s expectation of unspecified obligations based on trust is formed for the other, assuring that gestures of goodwill are reciprocated at a future time (Blau, 1964). Furthermore, trust in leaders has been identified as a pivotal element in leadership effectiveness (Bass, 1990). In their meta-analysis Dirks and Ferrin (2002) revealed that trust in leaders is related to a variety of important organizational outcomes, such as high OCB, high satisfaction with leaders, and low employee turnover. Further, they found that trust in leaders plays a mediating role between the leader’s actions and attitudinal variables, such as job satisfaction, while it has no mediating effect on OCB, which is a behavioral outcome. In other words, there is a transformable effect between trust and employees’ attitudes in that if employees believe their leaders are trustworthy, their psychological well-being can be positively affected, and they will be more engaged in their work. Hence, when employees consider their supervisors to have authenticity, the desire of employees to reciprocate voluntarily increases, which in turn produces trust and dependency, and helps employees to engage more fully in their work. We thus proposed the following hypothesis:
Hypothesis 4:
Employee trust will mediate the relationship between authentic leadership and employee engagement.

Method

Participants

The participants involved in this study were employees from companies on the ‘Top 1,000 manufacturing companies and top 500 service companies in Taiwan’ list published in the 2008 Commonwealth Magazine (see Huang, 2008; Ma, 2008). Managers of 37 firms agreed to support this study. A total of 915 questionnaires were distributed, and 386 valid responses were obtained. The sample characteristics are as follows: 60.9% of participants were from service industries and 39.1% from manufacturing industries; 56.5% were male; 6.0% were aged under 24 years, 30.8% were 25-29 years old, 24.4% were 30-34 years old, 20.7% were 35-39 years old, 7.3% were 40-44 years old, 10.9% were aged over 45 years; 52.6% were married and 47.4% were not married (e.g., single, divorced, widowed); 21.2% had obtained a high school degree, 31.1% a college degree, 35% an undergraduate university degree, and 12.7% a postgraduate qualification; 64.5% were general employees, 25.1% primary supervisors, and 10.4% operators; 42.7% worked in the sales sector, 36.3% in the administrative management sector, 12.7% in the production line sector, and 8.3% worked in the R&D sector; and 5.4% had a job tenure of less than 1 year, 16.3% between 1 and 3 years, 21.0% between 3 and 5 years, 23.3% between 5 and 10 years, 14.0% between 10 and 15 years, 13.0% between 15 and 20 years, and 7.0% more than 20 years.

Measures

Responses for all scales were made on a 5-point Likert scale ranging from 1 = strongly disagree to 5 = strongly agree.

Authentic leadership. To measure authentic leadership, we used the 16-item scale developed by Walumbwa et al. (2008). We applied factor analysis followed by a varimax rotation to obtain our factor solution that consisted of two clear factors explaining 61.04% of the total variance. The first factor was called “consistency between words and actions”. The factor loadings of the 13 items ranged from 0.61 to 0.78, and the total item variance explained was 43.21%. The second factor was called “moral perceptions”. The factor loadings of the three items ranged from 0.73 to 0.82, and the total item variance explained was 17.83%. The Cronbach’s α for the above factors were 0.94 and 0.78, respectively. The total Cronbach’s α for this scale was 0.94.

Employee trust. We employed McAllister’s (1995) 11-item scale to measure employee trust. It included a 5-item “affect-based trust” subscale and a 6-item “cognition-based trust” subscale. The two constructs’ correlation in the original scale was .63, whereas in our study the correlation was .84. Here too we adopted factor analysis followed by a varimax rotation to obtain our factor solution. The analysis yielded only one factor that explained 69.12% of the total variance. The factor loadings of all the items retained ranged from 0.74 to 0.89. We called this factor “employee trust”. The total Cronbach’s α for this scale was 0.96.

Employee engagement. We adopted the 17-item scale (UWES) of Schaufeli et al. (2002) to assess employee engagement. It included a 6-item “vigor” subscale, a 5-item “dedication” subscale, and a 6-item “absorption” subscale. There were high correlations between the three constructs (r = .77~.81, p < .001). We therefore followed the recommendation of Sonnentag (2003) and Schaufeli et al. (2006) and computed an overall work engagement factor score of the UWES. We conducted confirmatory factor analysis (CFA) to examine “employee engagement”. The CFA results exhibited that the model provided an acceptable level of fit for the data (χ2 = 654, df = 119, CFI = .96, NFI = .96, GFI = .82, RMSEA = .11), and that the loadings values ranged from 0.56 to 0.85. The total Cronbach’s α for this scale was 0.95.

Control variables. Sonnentag (2003) argued that gender, age, and tenure can affect engagement. Additionally, McAllister (1995) suggested that employees’ gender, age, education level, job tenure, position level, and job type might all influence employees’ trust. Therefore, we included all of these items as control variables. Furthermore, company type and marital status were also included as control variables in this study.

Data Analysis

In this study we applied hierarchical multiple regression analysis to test the hypotheses. In order to reduce problems associated with multicollinearity, the variance inflation factor (VIF) was used to assess the degree of multicollinearity among the variables. The results showed the VIF for each of the independent variables ranged from 1.183 to 5.060. All of them were below the critical value of 10.0 (Kutner, Nachtsheim, Neter, & Li, 2005).

Results

According to the results of the correlation matrix, all variables were positively and significantly correlated with employee engagement (r = .50~.81, p < .01). In addition, authentic leadership was positively and significantly correlated with employee trust (r = .80, p < .01) and employee engagement (r = .58, p < .01), and employee trust was positively and significantly correlated with employee engagement (r = .64, p < .01).

We had previously proposed that supervisors’ consistency between words and actions and moral perceptions would be positively related to employee engagement. To investigate this, the variables were entered into a hierarchical multiple regression. We entered the control variables at stage 1 (company type, gender, and so on), and then added consistency between words and actions, and moral perceptions at stage 2. The results of the standardized coefficients (β) are presented in Table 1. Model 1 shows that age, marital status, and position level significantly influence employee engagement. In Model 2 it can be seen that both the supervisors’ consistency between words and actions (β = .369, p < .001) and moral perceptions (β = .268, p < .001) were positively related to employee engagement. Thus, Hypotheses 1a and 1b were supported. We had further proposed that supervisors’ consistency between words and actions, and moral perceptions would be positively related to employee trust. The results of the standardized coefficients (β) are also presented in Table 1. Model 3 shows that marital status, position level, job type, and job tenure had a statistically significant influence on employee trust. Model 4 exhibits that only supervisors’ consistency between words and actions (β = .808, p < .001) were positively related to employee trust. Thus, only Hypothesis 2a was supported. Finally, we investigated whether or not employee trust would be positively related to employee engagement. The results in Model 5 (Table 1) show that age, marital status, and position level had a significant effect on employee engagement. Model 6 exhibits that employee trust (β = .607, p < .001) was positively related to employee engagement. Thus, Hypothesis 3 was supported.

We had further hypothesized that employee trust would mediate the relationship between authentic leadership and employee engagement, and applied hierarchical multiple regression to test this. The results of the standardized coefficients (β) are presented in Table 1. Model 7 is identical to Model 5, and Model 9 shows that the effect of employee trust on employee engagement was statistically significant (β = .444, p < .001). In Models 8 and 9 the effect of authentic leadership on employee engagement decreased dramatically, from β = .562 to β = .206, but still had a statistically significant effect. Thus, Hypothesis 4 was partially supported in this study.

Table 1. Hierarchical Multiple Regression of the Results

Table/Figure

Note. N = 386; † p < .1, * p < .05, ** p < .01 , *** p < .001. Only statistically significant control variables are shown in the table.

Discussion

Implications

Our aim in this study was to examine the relationships among authentic leadership, employee trust, and employee engagement. However, our findings illustrated that supervisors’ authenticity is positively related to employee trust, and that within authentic leadership it is a supervisor’s consistency between words and actions that has the strongest influence, and there is no significant relationship between supervisors’ moral perceptions and employee trust. Just like the sayings of Confucius: “People will hear what one says and observe what one does”. That is to say, employees appraise the words and actions of their supervisors simultaneously. Thus, a supervisor’s consistency between words and actions increases employees’ trust and dependence more than does a supervisor’s moral perceptions.

Our findings provide practical implications for managers and organizations. First, enterprises should recognize the value of authentic leadership. However, it is not easy to foster such leaders, as they must not only hold a high level of opinion and accurate judgment, but also be imbued with the characteristics of integrity and concern for others. We therefore recommend that supervisors develop the following five categories of behavior: behavioral consistency, behavioral integrity, sharing and delegation of control, competent communication (e.g., accuracy), and demonstration of concern (Whitener et al., 1998). George et al. (2007) also suggested the following useful methods to foster authentic leadership: knowing your authentic self, practicing your values and principles, balancing your extrinsic and intrinsic motivations, and empowering people to lead. When supervisors demonstrate these behaviors the likelihood increases of employees reciprocating actions, trusting their supervisors, and engaging in their work.

Second, trust is an adhesive force that links people, processes, and the environment, and can therefore improve the rate of success, while lack of trust in supervisors and the organization has been found to influence a lack of engagement by employees in their work (Covey & Merrill, 2006). Employee work motivation primarily comes from support from and psychological trust in supervisors; when employees trust their supervisors, they will be more engaged in their work. Covey and Merrill suggested that authentic concern can stimulate trust, which then produces reciprocation. By leading their employees authentically supervisors gain approval from their employees, whose willingness to engage then increases. Further, by adopting good communication skills, supervisors can build mutual trust, which further helps increase employee engagement. Elsbach and Elofson (2000) and Norman et al. (2010) suggested that supervisors use easily understood language and communicate more transparently as this leads to positive relationships with their employees, and an increased trust in the leaders. Thus, effective leaders are also effective communicators (Clutterbuck & Hirst, 2002). Through authentic communication supervisors can build trusting relationships and show their support for their employees through encouragement.

Limitations and Suggestions for Future Research

As with most studies, this research is not without limitations. The first limitation is related to the use of self-reported survey data from the same sources, raising concerns regarding common method variance (CMV). As our research was based entirely on employee perceptions, the results could thus be artificially inflated. To minimize this risk, we applied procedural remedies in our study as recommended by Podsakoff, MacKenzie, Lee, and Podsakoff (2003). We included (a) psychological separation of measurement, (b) protection of the respondent’s anonymity and an attempt to reduce evaluation apprehension, and (c) counterbalancing question order. By applying these, we were able to reduce significantly the likelihood of CMV. The second limitation in this study is cross-sectional design, as it did not allow us to infer a causal effect between the constructs. A longitudinal research design could allow us to make a sound and robust causal conclusion.

In order to expand on the current findings, we propose the following directions for future research. In this study we illustrated employees’ perception of authentic leadership. However, the interdependent relationships between supervisors and employees were pointed out by Kelley (1992). We therefore suggest that future researchers could measure both leader and employee authenticity, testing the paired authentic fit effect on employee engagement. Furthermore, within the academic research of management, in numerous studies researchers have confirmed differences exist between the cultural values of areas and nations. Managers must adapt to the cultural differences if they are to achieve their goals effectively (Hofstede, 1980). We suggest future researchers could take culturally related variables (e.g., individualism-collectivism) into account. Finally, in this study, we treated authentic leadership as a variable at the individual level, and did not analyze it through multilevel modeling. However, authentic leadership operates at multiple levels, including individual, dyadic, group, and organizational (Yammarino, Dionne, Schriesheim, & Dansereau, 2008). Therefore, we suggest that future researchers explore models through multilevel modeling, thereby clarifying and uncovering a more realistic effect of authentic leadership on employees’ attitudes and behavior.

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Bass, B. M. (1990). Bass and Stogdill’s handbook of leadership (3rd ed.). New York: Free Press. Blau, P. M. (1964). Exchange and power in social life. New York: Wiley.

Clutterbuck, D., & Hirst, S. (2002). Leadership communication: A status report. Journal of Communication Management, 6, 351-354. http://doi.org/ds6d6w

Colquitt, J. A., Scott, B. A., & LePine, J. A. (2007). Trust, trustworthiness, and trust propensity: A meta-analytic test of their unique relationships with risk taking and job performance. Journal of Applied Psychology, 92, 909-927. http://doi.org/bxk853

Covey, S. M. R., & Merrill, R. R. (2006). The speed of trust: The one thing that changes everything. New York: Simon & Schuster.

Cropanzano, R., & Mitchell, M. S. (2005). Social exchange theory: An interdisciplinary review. Journal of Management, 31, 874-900. http://doi.org/cjtkx7

Dirks, K. T., & Ferrin, D. L. (2002). Trust in leadership: Meta-analytic findings and implications for research and practice. Journal of Applied Psychology, 87, 611-628. http://doi.org/ffsm78

Elsbach, K. D., & Elofson, G. (2000). How the packaging of decision explanations affects perceptions of trustworthiness. Academy of Management Journal, 43, 80-89. http://doi.org/fsx3bz

Fields, D. L. (2007). Determinants of follower perceptions of a leader’s authenticity and integrity. European Management Journal, 25, 195-206. http://doi.org/frvxcm

George, B. (2003). Authentic leadership: Rediscovering the secrets to creating lasting value. San Francisco, CA: Jossey-Bass.

George, B., & Sims, P. (2007). True north: Discover your authentic leadership. San Francisco, CA: Jossey-Bass.

George, B., Sims, P., McLean, A. N., & Mayer, D. (2007). Discovering your authentic leadership. Harvard Business Review, 85, 129-138.

Harter, J. K., Schmidt, F. L., & Hayes, T. L. (2002). Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology, 87, 268-279. http://doi.org/ccg5jc

Hofstede, G. H. (1980). Culture’s consequences: International differences in work-related values. Beverly Hill, CA: Sage.

Homans, G. C. (1958). Social behavior as exchange. American Journal of Sociology, 63, 597-606.

Huang, C.-H. (2008). A bumper year goes bust: Top 1,000 manufacturing enterprises. Taipei: CommonWealth Magazine.

Hunt, C. S., & Aldrich, H. E. (1998). The second ecology: Creation and evolution of organizational communities. Research in Organizational Behavior, 20, 267-301.

Kelley, R. E. (1992). The power of followership: How to create leaders people want to follow and followers who lead themselves. New York: Doubleday.

Kouzes, J., & Posner, B. (2002). The leadership challenge. San Francisco, CA: Jossey Bass.

Kutner, M. H., Nachtsheim, C. J., Neter, J., & Li, W. (2005). Applied linear statistical models (5th ed.). Boston, MA: McGraw-Hill.

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Table 1. Hierarchical Multiple Regression of the Results

Table/Figure

Note. N = 386; † p < .1, * p < .05, ** p < .01 , *** p < .001. Only statistically significant control variables are shown in the table.


Chia-Chun Hsieh, Graduate Institute of Human Resource Management, National Changhua University of Education, No. 2 Shi-Da Road, Changhua City 500, Taiwan, ROC. Email: [email protected]

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