The Long-Term Effects of Ethical Leadership on Employee Retention

Introduction

The global business landscape is complex and multifaceted amidst increasing challenges, such as fierce competition. The changing business landscape has not only compelled various institutions to reconsider their business and corporate strategies but also pushed them to consider their leadership approaches. Consequently, ethical leadership emerges as one of the best approaches in addressing nuanced issues like technological disruption, economic turmoil, leadership voids, and competition forces. One of the critical challenges facing the present-day business organization is employee retention. Managing and maintaining employees is becoming challenging due to shortages of skilled labor forces in the global markets (Northouse, 2022). However, several studies correlate ethical leadership with enhanced employee retention, thus necessitating the adoption of this leadership framework to improve organizational human resource management frameworks. Studies such as Qing et al. (2020), Abdullah et al. (2022), Brown et al. (2005), and Ko et al. (2018) assert that an ethical leadership approach enhances employee retention, as it fosters the cultivation of morally upright culture (as cited in Guo, 2022). It implies that several firms require ethical leadership to address factors exacerbating turnover, such as job dissatisfaction, low remunerations and rewards, and limited career growth and development opportunities. The present study explores the profound long-term effects of ethical leadership on employee retention within diverse business organizations. Although organizational leadership is challenging due to the dynamicity of various business institutions, adopting ethical leadership contributes to robust organizational leadership that enhances employee retention.   

Ethical Leadership

Ethical leaders foster the development of traits and characters that adhere to and conform to specific principles and values. According to Guo (2022), ethical leadership provides a solid and robust foundation acknowledged for its common good within the leadership landscape. He asserts that ethical leaders align their leadership styles with honesty, integrity, fairness, trust, transparency, and respect. According to Fu et al. (2020), ethical leadership is concerned with enhancing organizational decision-making, as ethical leaders often strive to generate conscious decisions. Furthermore, the researchers assert that ethical leadership has five core values: respecting others, serving others, building community, manifesting honesty, and showing justice (Figure 1). The study underscores the significance of ethical leadership in developing traits that foster ethical development among followers. For instance, it promotes the cultivation of conscious efforts among followers to help make ethical decisions. Likewise, Fu et al. (2020) observe that ethical leadership entails cultivating conscious efforts, which is lacking among other leaders. According to them, a lack of conscious efforts for ethical leadership poses massive risks to leaders, encouraging destructive and disruptive instincts. For instance, lack of ethical principles. Hence, bad habits among leaders encourage the manifestation of bad and unethical behaviors, leading to the terminal collapse of ethics within the organization. Beshr et al. (2022) observe that core principles of ethical leadership include fairness, accountability, trust, honesty, equality, and respect. Fairness encourages ethical leadership development by cultivating a culture of just treatment. For instance, it limits favoritism treatments, allowing equality and inclusivity within the business organizations. 

Accountability is also an important attribute of ethical leaders, as it makes them accountable for their various decisions. It limits making organizational decisions without considering the negative and positive impacts of such decisions, enhancing the quality of decision-making. According to Fu et al. (2020), accountability encourages the development of an all-rounded leader who commits to being accountable for their decisions. The framework encourages effective decision-making and addressing mistakes that might emerge amidst making organizational decisions. It also encourages making decisions based on the prevailing organizational principles, including ethical principles. Ethical leaders also commit to developing an environment where followers trust their leaders. The framework helps them have trustworthy teams, contributing to the effective execution of organizational tasks (Fu et al., 2020). Equally, ethical leaders trust their teams’ capabilities to execute assigned tasks effectively and efficiently. Fu et al. (2020) opine that trust defines how ethical leaders relate and work with their followers. Consequently, trust encourages employee performance, as it provides autonomy. Ethical leaders appreciate honesty among followers as they create or develop a workplace where leaders and followers interact and discuss issues transparently. Honesty encourages the development of trust between leaders and followers (Fu et al., 2020). Lack of integrity between leaders and followers erodes trust. Ethical leaders also encourage equality within the work environment, as it is a form of employees’ survival and happiness. For instance, workplace equity ensures that all employees receive equal treatment, limiting discrimination and unfair treatment. It is an important component of the current and future work environments as leaders struggle to implement robust human resource management practices. Ethical leaders acknowledge the significance of respect, as it ensures that they incorporate followers’ ideas and thoughts in organizational decision-making. As a result, ethical leadership contributes to the development of an effective work environment to improve employee retention. 

Figure 1: Components of ethical leaders.

Employee Retention

Ethical leadership frameworks enhance employee retention. Northouse (2022) asserts that organizational leadership is critical in developing work environments and retaining employees. He observes that traits like integrity and honesty improve employee retention. Guo (2022) also observes that honesty and fairness enhance employee retention. Ethical leadership aligns with these traits. Ethical leaders align their leadership approaches with fairness, integrity, role clarification, and power sharing to influence their followers (Guo, 2022). These frameworks improve the organizational work conditions, as they are people-oriented, improving employee retention. Ethical leaders also use ethical guidance to influence their followers’ attitudes, guiding employees to realize their career goals and objectives (Fu et al., 2020).For instance, ethical guidance entails inspiring, guiding, and encouraging employees to adopt or emulate ethical frameworks and actions to improve professional growth and development. Ethical guidance ensures that employee aligns their professionalism with ethical behaviors, such as integrity and honesty. According to Isiramen (2021), employee satisfaction defines an organization’s retention level. They opine that ethical leadership encourages employee satisfaction, as ethical leaders provide flexible work where employees thrive professionally. They also help employee execute their tasks by inspiring, motivating, and making employees accountable for assigned tasks (Isiramen, 2021). The framework increases happiness among employees because ethics engage in each task an employee is involved in, cultivating a result-oriented culture. Besides, ethical leadership is concerned with developing robust and positive public relations with followers. For instance, ethical leaders treat all employees with respect and demonstrate respect in implementing the organization’s goals and objectives (Fu et al., 2020). They ensure that employees feel respected, encouraging them to help organizational leadership achieve their goals and objectives. They become part of the ethical leadership processes, as leaders also value their contributions to organizational success.

Trust in Leadership

Ethical leadership encourages trust in organizational leadership, employing open and transparent communication to influence employee support for various organizational endeavors. Guo (2022) notes that communication behaviors among organizational leaders support a culture of trust among organizational stakeholders. He observes that ethical leadership acknowledges the significance of open and transparent communication to communicate various organizational goals and objectives to employees or followers. They also use effective communication to guide and teach followers to achieve the desired organizational goals and objectives. Effective communication frameworks cultivate a culture of support and relationship between leaders and employees. Ethical leadership encourages communication to help followers easily and effectively achieve their objectives. For instance, ethical leadership integrates advanced and disruptive technologies within their work environment to help their followers execute their tasks. Guo (2022) states that adopting advanced and modern technology builds strong relationships. For instance, consider a firm like Amazon that uses advanced technologies, such as robotics, within its warehouses. Its employees acknowledge the importance of technology in fastening and enhancing their performance and productivity. Hence, companies are embracing technology to solve various problems, such as relieving employees from bulky tasks and improving employee trust and satisfaction. Equally, ethical leaders engage employees through various technological frameworks to address employees’ challenges (Guo, 2022). For instance, they use social media platforms to enhance their capabilities to address issues emerging among employees. Ethical leadership fosters employee satisfaction by encouraging open communication across various channels and building trust between organizational leadership and followers. Consequently, employees’ trust in leadership reduces the chances of attrition and retrenchment.

Organizational Culture

Ethical leadership creates an organizational culture based on core values aligned with employee retention. Saleh et al. (2022) note that ethics provides values like honesty and fairness, encouraging fair and honest treatment within the work environment. For instance, the fairness, integrity, and honesty culture assures employees that their leaders commit to developing an organization that considers their well-being. Ethical leaders also cultivate a culture of compassion. For example, a compassionate culture ensures that all employees have the right and freedom to discuss everything that influences their well-being (Saleh et al., 2022). It encourages employee retention as they feel their leaders value them, including their well-being. Ethical leaders also encourage ethical decision-making, entailing ethical principles in making vital organizational decisions. They create a culture of inclusivity, ensuring that all employees’ voices count when making organizational decisions. Engaging employees in making critical decisions creates a sense of belonging and enhances employee retention. For instance, ethical leaders hardly micromanage their followers, as their leadership culture encourages inclusivity and diversity. They provide employees equal opportunity to grow and develop within the organization through internal promotion (Saleh et al., 2022). They spend most of their time engaging employees in achieving organizational goals. According to Saleh et al. (2022), ethical leaders encourage proactively cultivating ethical culture among employees. For instance, ethical leadership entails integrating ethical frameworks in solving organizational conflicts, including employee conflicts. Effective conflict management frameworks foster addressing issues facing employees, such as remuneration issues and strengthen employee retention.

Employee Engagement

Ethical leadership strengthens employee engagement, as ethical leaders influence employees’ cognitive, physical, and psychological abilities to execute organizational performance. Singh and Tarkar (2023) state that work engagement entails building robust relationships between employees and leaders. Ethical leaders demonstrate enthusiasm in creating relationships with their followers, providing them with the necessary resources to enhance their ability to complete organizational tasks effectively and comprehensively. They also guide employees on how to execute tasks based on specified frameworks. Ethical leadership also entails the distribution of powers and rights among employees equally, strengthening employee engagement.According to Saleh et al. (2022a), equal distribution of powers among employees and leaders impacts employee engagement positively. An Isiramen (2021) study also observed a positive correlation between power distribution and employee engagement. He examined the impact of power distributions between teachers and school leadership, observing positive correlations. According to Isiramen (2021), power distribution encourages employee engagement as they participate in various organizational operations. For instance, power sharing between employees and leadership ensures that employees participate in organizational decision-making. The findings from this study align with ethical leadership, as it entails participatory decision-making. Ethical leadership provides employees with an opportunity and power to engage in decision-making. They use this framework to gain followers, strengthening employee engagement and retention (Isiramen, 2021). However, although ethical leadership allows employees to contribute to organizational decision-making, the final decisions rely on top-crème leadership. Delegating authority to various employees still allows ethical leaders to positively engage and interact with their followers.

Perceived Fairness

Perceived leadership fairness enhances employee retention. Ethical leadership prioritizes fairness, a core aspect ethical leaders use to influence their followers. According to Ashfaq et al. (2021), ethical leadership integrates fairness in their leadership to ensure they listen to employees’ ideologies and perspectives fairly. They also integrate honesty while handling employees’ issues. For instance, they use the ethical principles of fairness while resolving organizational conflicts, helping them make fair judgments regarding the prevailing conflict. The framework ensures that ethical leaders seldom engage or perpetuate unfair treatment within the organization. It implies that fairness discourages discrimination or unfair treatment that might encourage employee turnover. Marquardt et al. (2022) argue that fairness principles encouraging organizational justice contribute to developing robust relationships between leaders and employees. They assert that core ethical leadership principles like honesty, fairness, and trustworthiness cultivate a culture of justice within the organization. Fairness enhances employees’ trust in the organizational leadership, helping the organization achieve its core goals and objectives. Fairness also limits uncertainties among employees, as ethical leaders develop a fair work environment, acknowledging the contributions of every employee. Unfair treatment discourages the development of strong bonds between leaders and employees (Marquardt et al., 2022). It escalates employee stress, as some employees might feel segregated from the organization. However, ethical leadership involves treating followers equally and providing them with vast prerogatives for organizational decision-making. It contributes to developing a sense of belonging among employees, enhancing retention and engagement. Therefore, ethical leadership principles, such as fairness, enhance employee retention.

Job Satisfaction

Ethical leadership correlates to job satisfaction positively. According to Singh and Tarkar (2023), ethical leadership leverages the significance of ethical principles to motivate their followers. For instance, ethical leadership tends to employ fairness in their leadership approaches, which enhances employees’ emotional and mental states, including motivating them intrinsically. They use this principle to give employees equal opportunities to achieve organizational goals. According to Singh and Tarkar (2023), job satisfaction entails providing employees with a pleasant and stable mental and emotional state. They assert that employees feel satisfied with their jobs when they value their professions and careers. Ethical leadership understands the need for a stable, pleasant mental and emotional state. For instance, they develop a positive work environment occasioned by honesty, fairness, and equality. They provide their followers pleasure in their work environment as they engage in organizational decision-making. Serang et al. (2024) argue that effective leadership influences employees’ retention. They argue ethical leadership approaches entail understanding employees’ feelings, such as emotional and mental feelings. Ethical leaders inspire their followers to undertake various challenging tasks. Ethical leaders also provide directions to employees and address challenges facing their followers. Therefore, ethical leaders leverage ethical leadership frameworks to cultivate a culture of acceptance among their followers, enhancing employee retention. Guo (2022) established positive correlations between job satisfaction and ethical leadership. They argue that ethical leadership fosters employee productivity and job satisfaction by creating fair and inclusive environments. Their findings acknowledge the significance of effective leadership in enhancing employee job satisfaction.

Turnover Intentions

Ethical leadership limits turnover intentions among employees, encouraging employee retention. Saleh et al. (2022) assert that ethical leadership entails transforming followers’ behaviors to enhance interpersonal relations. They argue that ethical leaders trigger employees’ need to help the organization achieve its goals and objectives by fostering ethical cultures within the work environments. Saleh et al. (2022) also note that ethical leaders encourage openness and transparency within their leadership frameworks, allowing employees to air issues affecting their performance. For instance, ethical leaders adopt effective communication frameworks, including social media, to enhance employees’ readiness to report performance and well-being challenges. The framework also cultivates strong relationships between employees and leaders. Marquardt et al. (2022) note that ethical leadership demonstrates a remarkable commitment to helping followers achieve organizational goals and objectives. They correlate leadership commitment and job satisfaction as employees embrace effective leadership commitments. Employees like associating with leaders who are committed to helping them achieve their career and professional goals. Ethical leaders guide their followers, providing them with directions to help them realize various goals and objectives. Serang et al. (2024) correlate leadership commitment to enhance employee job satisfaction. They assert ethical leadership and commit to offering solutions to their followers. Ethical leaders foster enhanced engagement with followers to provide them with directions necessary to achieve organizational goals. These commitments reduce turnover intentions among employees, as they feel embraced and integrated within the organization. They also feel a sense of belonging because their leaders commit to helping them realize various goals.

Conclusion

The present study demonstrates that ethical leadership frameworks enhance employee retention. It underscores that ethical leadership profoundly affects employee retention within diverse business organizations. Although organizational leadership is challenging due to the dynamicity of various business institutions, adopting ethical leadership contributes to robust organizational leadership, including enhancing employee retention. Ethical leadership fosters transforming the entire organization to create a work environment that encourages employees to engage with the business organization. They leverage various ethical principles, such as fairness, integrity, honesty, and empathy, to influence followers’ emotional and mental states. Their influence escalates to inspirational spirits among employees, enhancing employee retention. In ethical management, leadership entails helping followers realize their goals. Effective leadership fosters helping followers by inspiring and encouraging employees to undertake challenging tasks. They also harness employees’ capabilities to achieve organizational goals. The present study contributes to the existing body of knowledge by asserting that ethical leadership strengthens employee retention. The present work environment struggles with various challenges, especially human resource management. However, effective leadership frameworks, such as ethical leadership, contribute to addressing these issues effectively. The present organizational leadership must leverage ethical leadership frameworks to address the emerging human resource management issues. It appreciates the importance of ethical leadership in enhancing employee retention based on five core variables: job satisfaction, turnover intention, employee engagement, perceived fairness, employee retention, and trust in leadership. All these variables demonstrate positive correlations between ethical leadership and employee retention, underscoring the significance of this leadership approach in addressing human resource management issues.

References

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