Ethical leadership and employee in-role performance: The mediating roles of organisational identification, customer orientation, service climate, and ethical climate

Purpose: Against the backdrop of the Royal Commission into Misconduct in the Banking, Superannuation and Finance Services Industry in Australia, this study on ethical leadership is timely. The purpose of this paper is to examine the mediating effects of organisational identification, customer orientated behaviour, service climate and ethical climate on the relationship between ethical leadership and employee in-role performance. Design/methodology/approach: The hypotheses were tested using a two-wave survey study of 233 bank employees in Australia. Findings: Evidence from the study indicated that organisational identification, service climate and ethical climate mediate the relationship between ethical leadership and employee in-role performance. Surprisingly, the proposed mediation effect of customer orientation was not supported. However, ethical leadership was positively associated with customer orientated behaviour among employees. Research limitations/implications: Limitations of the study include collecting data at two time points, thereby rendering the study cross-sectional. Employee in-role performance was a self-rated measure. Practical implications: This study showed that ethical leadership is critical to improving employee perceptions and experience of an organisation’s service climate, ethical climate, organisational identification, customer orientated behaviour and employee in-role performance. The authors raise a number of HRM implications for the development and enablement of ethical leaders in the banking context. Originality/value: The findings presented in this paper highlight that ethical leadership is critical to improving employee perceptions and experience of an organisation’s service climate, ethical climate, organisational identification, customer orientated behaviour and employee in-role performance.