Article Critique Assignment Homework

2021, Vol. 64, No. 2, 458–481.

458

https://doi.org/10.5465/amj.2018.0706

LEADING BY DOING: DOES LEADING BY EXAMPLE IMPACT PRODUCTIVITY AND SERVICE QUALITY?

LIAT ELDOR University of Pennsylvania

Tel Aviv University

This paper presents a research model for the creation of organizational value through leading by example. I argue that leading by example serves as a unique value-creation driver by enhancing engagement, productivity, and service quality at the business level. Using a strategy-based resource management framework, I also argue that there are synergies between leading by example and the manifestation of organizational core values. My theory is grounded in the strategy-based notion that combining organizational resources—leading by example (practical element) and organizational core values (con- ceptual element)—optimizes employee engagement, which in turn enhances productivity and service quality. I examine my model empirically using two-time-point panel data derived from three different sources (employees, financial data, and secret shoppers) in a sample of 233 retail stores. The findings provide evidence that leading by example im- proves productivity and service quality (after taking into account the potential influence of charismatic leadership). The indirect effect of leading by example on productivity and service quality (through engagement) is even stronger when manifestation of organiza- tional core values is high. Contributions to theory, research, and practice are presented.

I believe in the power of personal example. You can rant and rave and threaten, but the most effective way to get results is to show someone what you want done.

—Frank Pacetta, Executive Manager, Xerox Corporation

“Leading by example” (hereafter, “LBE”) is the extent to which a leader is engaged in live demon- strations of the expected performance (Barsade & Mesiek, 2004). By engaging in workday employee actions, the leader shows employees what is ex- pected of them, as opposed to telling themwhat to do (House, 1977). Although the leadership literature has pointed to the benefits of LBE (e.g., Luthans & Avolio, 2003; Yukl, 2006), there is a dearth of studies examining whether LBE actually matters; specifi- cally, whether it actually improves business out- comes (Yaffe&Kark, 2011).One reasonLBEhas been understudied might be that researchers have tradi- tionally considered that a leader’s role is to provide instructions rather than to step into subordinates’

tasks (Barsade & Mesiek, 2004). Moreover, given its popularity among organizational consultants, who often urge managers to “lead by doing,” LBE has become more a catchphrase than an academically valid leadership approach (Bolino & Turnley, 2003). In this paper, I argue that LBE is distinct fromother

leadership approaches in which the leader articu- lates the desired expectations but does not illustrate them in a practicalway.Aprime example, and one of the most widely researched leadership practices, is “charismatic leadership,” whereby the leader influ- ences employee behavior through rhetorical skill and an attractive vision for the future (Howell & Shamir, 2005). Although charismatic leadership and other approaches to leadership may influence em- ployees, they do not emphasize the doing element, which is inherent in LBE. To develop a theory about the value creation of

LBE at the business level, I integrate leadership lit- erature (House, 1977) and social learning theory (Bandura, 1977) with the strategy-based resource management model (Sirmon, Hitt, & Ireland, 2007). There are two fundamental tenets of the resource management model that serve as the foundation for the model I explore in this study. First, resource management is the process of structuring organiza- tional resources to build or cultivate existing capa- bilities, and leveraging those capabilities to create

I would like to thank the editor, Anthony Nyberg, and three anonymous reviewers for their thoughtful and de- velopmental comments, which helped considerably to improve the quality of this paper. I would also like to thank Peter Cappelli, Sigal Barsade, Nancy Rothbard, and AndrewCarton for their invaluable advice and guidance in the development of this work.

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value for owners and customers (Sirmon et al., 2007). I argue that LBE can serve as a strategic or- ganizational resource to generate value for a variety of organizational stakeholders (i.e., employees, shareholders, and clients) by enhancing produc- tivity and service quality at the store level. The practical nature of LBE implies that it may be more influential in improving these outcomes than lead- ership models based on verbal means, which is characteristic of charismatic leadership (Howell & Shamir, 2005). Second, the resource management model asserts

that certain organizational actions can magnify the effects resources have on organizational capabilities by clarifying the link between these resources and the organization’s ultimate purpose (Sirmon, Hitt, Ireland, & Gilbert, 2011). Building on Sirmon et al.’s (2011) model, I argue that the effect of LBE on pro- ductivity and service quality can be enhanced by integrating it with the manifestation of core values (i.e., the act of communicating an organization’s primeprinciples to itsworkforce), thus clarifying the link between the leader’s practical actions to the or- ganization’s ultimate goal. Articulating how things should be done (i.e., LBE) and communicating why things should be done (i.e., core valuemanifestation) reflects the fact that the individual’s mind is struc- tured into two systems: encoding concrete observa- tions about reality while seeking logic and meaning

about how to relate to this information (Kroll & Merves, 1986). To explore how LBE affects business-level per-

formance, I propose two pathways: one direct, the other indirect. As shown in Figure 1, in the direct pathwayLBEaffects productivity and service quality beyond the beneficial effect of charismatic leader- ship. Within the indirect route, the combined effect of LBE with core value manifestation enhances em- ployee engagement, which in turn indirectly am- plifies the same business-level performance (via engagement). I examine my model empirically with data on store-level performance across 233 locations of a retail chain, using two-time-point panel data measures from three sources of data—employees, financial results, and secret shoppers. By examining the value creation of LBE at the

business level, I contribute to the leadership litera- ture in three ways. First, although the leadership literature has generated much knowledge in the past 40 years (van Knippenberg & Sitkin, 2013), a critical aspect of leadership—what I call “leading by doing”—has been neglected. Rather, the leadership literature to date has conceptualized leadership al- most exclusively from a verbal perspective. I argue that this conceptualization of leadership is narrower than the way leadership can be understood. By ex- ploringLBE, I thereforeoffer amore complete viewof the leadership construct. Second, studying LBE can

FIGURE 1 Theoretical Model of Value Creation of LBE at the Business Level

Core Value Manifestation Leading by Example Charismatic Leadership

Hypothesis 3 Hypothesis 2 Hypothesis 1

Hypothesis 4

Productivity Obtained from accounting data

Service Quality Evaluated by secret shoppers

Business-Level Performance

Employee Engagement

Note: Variables and relationships indicated by solid lines are the focus of our arguments in the hypotheses. Variables and relationships indicted by dashed lines are for comparison. LBE 5 leading by example.

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help scholars revisit assumptions related to one of the foremost roles of leadership: influencing em- ployees (Bennis & Nanus, 1985). By doing so, I an- swer calls to explore additional leader practices to better understandhow leaders canhave an impact on employees (Antonakis, Avolio, & Sivasubramaniam, 2003; van Knippenberg & Sitkin, 2013). Third, whereas research on the effects of leadership has largely been conducted at the employee level of analysis (Waldman, Javidan, & Varella, 2004), very little research examines leadership at a higher level of analysis (i.e., business, organization). For reasons associated with ecological fallacies and multilevel considerations (Chan, 1998; Kozlowski & Klein, 2000), evidence at the individual level does not obviously exist at the higher level of analysis (Klein & Kozlowski, 2000). Moreover, while a handful of studies have explored empirically the effect of leadership (e.g., charismatic leadership) on finance- oriented results (e.g., productivity), they have generally failed to find support for it, due to small sample sizes (Waldman, Ramirez, House, & Puranam, 2001), or be- cause they examined a direct effect only (Waldman et al., 2004), or oversimplified by not controlling for prior performance (Ensley, Pearce, & Hmieleski, 2006). Thus, exploring the direct and indirect effects of LBE at the business level of analysis addresses empirical gaps in the leadership research in general.

LBE

I define “leading by example” as the extent to which a leader demonstrates ideal workday behav- iors by engaging in employee activities (Barsade & Mesiek, 2004). Examples include a store manager who serves clients on the organization’s front line to demonstrate how sales and service should be exe- cuted, or an executive director who works the front desk night shift once a week to illustrate how clients should be treated (e.g., Fair Haven Community Health Center; see Barsade & Mesiek, 2004). Such demonstrations show employees how their leaders expect them to execute work performance, sell a product, serve the company’s clients, and manage issues during service interactions (Zohar & Tenne- Gazit, 2008). Frank Pacetta (1994: 52) captured this notion in describing his leadership style when he served as a manager for Xerox Corporation:

At the end of our first meeting, I turned to my man- agers and said, “I hope everybody has a full day planned. I know I do.” I told them that when the meeting adjourned, all of us were going to hit the street. All of us—myself included.

Thus, LBE cannot be done successfully just from the leader’s office (e.g., operating anewcustomer service system from one’s computer or telling employees how important service quality is) but in person at the employees’workplace (e.g.,working at the front desk or serving customers on the front line). Leadership scholars have addressed the notion of

LBE theoretically. House (1977) initially introduced LBE as a suggested leadership practice. According to House, leaders can have profound effects on their employees if they “express, by their actions, a set of values and beliefs towhich theywant their followers to subscribe. That is, the leader role-models a value system for his/her followers” (House, 1977: 194). Later, Bass (1985: 77) argued that a leader is inspi- rational to an employee to “the extent the leader provides examples and patterns for its followers.” Conger and Kanungo (1987) depicted effective leaders as engaging “in exemplary acts that followers perceive as involving great personal risk, cost, and energy” (641) and who are “worthy of imitation” (642), while Podsakoff, MacKenzie, Moorman, and Fetter (1990: 112) presented effective leadership as “setting an example for employees to follow,” something Kouzes and Posner (1987) referred to as “modeling the way.” Thus, leaders may speak com- pellingly about vision and goals, but, if they are not providing a live demonstration of these goals, em- ployees will not be fully engaged or identify with them (Kouzes & Posner, 1987). LBE can therefore serve as a mirror that signals to employees that these modeled practices and actions are encouraged, ex- pected, appreciated, and rewarded (MacKenzie, Podsakoff, &Rich, 2001; Zohar&Tenne-Gazit, 2008). LBE is distinct from charismatic leadership, a style

in which the leader verbalizes the appropriate action but does not perform it. “Charismatic leadership” re- flects the ability of a leader to articulate an attractive vision for the future—in otherwords, the promise of a better tomorrow (Mumford, Antes, Caughron, & Friedrich, 2008)—by using rhetoric and passionate argument (Awamleh & Gardner, 1999; Groves, 2005; Kirkpatrick & Locke, 1996). Key behaviors of charis- matic leaders include presenting a sense of mission and expressing an inspirational vision (Antonakis, Bastardoz, Jacquart, & Shamir, 2016; Deluga, 1995). Other conceptualizations of charismatic leadership focus primarily on the way a vision is articulated, such as using a dramatic communication style, cre- atingmemorable messages, displaying emotions, and using powerful imagery (Howell & Shamir, 2005; Shamir, Zakay, Breinin, & Popper, 1998). Thus, whereas charismatic leadership focuses on verbally

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articulating a future-oriented message, and using rhetoric as a leadership lever (Shamir&Howell, 1999; Waldman et al., 2001), the focus of LBE is on being a livemodel of the present expected performance. While senior leaders may not be able to personally

cultivate direct ties with each employee through ex- plicit demonstrations on a sustained basis, LBE can trickle down througha cascadingprocess (Schaubroeck et al., 2012; Waldman & Yammarino, 1999) and social and organizational mechanisms such as small talk, so- cial media, and other networking and communication channels (Barsade&Mesiek,2004;Toubiana&Zietsma, 2017; Wallace, 2004). For example, the founder and former CEO of JetBlue, David Neeleman, frequently loaded bags or personally served clients himself, to convey that all employees are expected to pitch in wherenecessary.VideosofNeelemanlive-modelingthe expected service practices disseminated via the com- pany’s website and conferences inspired JetBlue pilots to start assisting aircraft staff and clients during their downtimebetween flights (seeBolino&Turnley, 2003). Ehrhart and Naumann’s (2004) findings support the potentially pervasive effect of LBE by indicating that, when a leader has a role-modeling effect on a group of employees, their actions will have an expansive im- pact on the overall unit-level employees and their performance. Indeed, role modeling has been pro- posed by leadership scholars as driving a cascading process in relation to which employees who do not directly observe it can still be affected by its “cinder” through social contagion and organizational mecha- nisms (Hunt, 1991; Yammarino, 1994).

THEORETICAL FRAMEWORK AND HYPOTHESES

The Direct Effect of LBE on Productivity and Service Quality

As noted above, the resource management model (Sirmon et al., 2011) argues that the ultimate purpose of organizational resources is to create and sustain value for the organization and its stakeholders. Prior research points to managerial skills and manage- ment actions as explicit organizational resources and unique value-creating assets (Ndofor, Sirmon, & He, 2011; Sirmon & Hitt, 2003; Sirmon et al., 2011). I argue that LBE is one such strategic resource. At the broad level of value creation, LBE helps leaders gain greater knowledge about ongoingbusiness and client needs. It may cultivate more awareness of the effi- ciency of work production and procedures and de- velops higher sensitivity to service quality dynamics

(Barsade & Mesiek, 2004; Trueman, 1991). Indeed, discussing his leading-by-doing leadership style, John deButts, AT&T’s former chairman, expressed the advantage of “having a good day-to-day feel for the way the business is going” (Barsade & Mesiek, 2004: 111). To understand the psychological effect behind LBE,

Bandura’s (1977) social learning theory is a key foun- dation. According to this theory, leaders are an impor- tant and valuable source of modeling for employees in terms of learning new capabilities, ideal behaviors, and expected norms, given their high position and influen- tial status in the organizational hierarchy (Bandura, 1977, 1986). This occurs through social and psycho- logical processes (i.e., imitation, social learning, con- tagion, and modeling; Bandura, 1977) through which the leader generates a cognitive structure among em- ployees on how performance should be executed and how to act in their working routine (Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009; Sy, Côté, & Saavedra, 2005). Specifically, I argue that LBE will enhance produc-

tivity through imitation and social learning. Social learning theory (Bandura, 1977) states that individuals will strive to emulate the behaviors of their role models to ensure that their actions are in line with desired per- formance. Employees witnessing work performed by their leader in the natural work environment realize how effectively it can be executed, mirroring leader behaviors and adjusting their own performance ac- cordingly (Bandura, 1991; Weiss, 1977). When man- agers exhibit leadership by performing employee activities, these ideal behaviors and actions become substantial learning tools regarding expected norms and undesired actions for employees operating in similar situations (Bandura, 1986;Mayer et al., 2009). Employees thus infer appropriate behaviors and per- formance expectations (Rich, 1997). By observing how their leader performs and the outcomes the leader achieves, employees receive a clearer signal about what is expected of them and how they can better meet those required outputs (Bandura, 1991), thus increasing productivity. In addition to creating value by enhancing pro-

ductivity, I argue that LBE creates value for organi- zations by improving the quality of service rendered to customers. When employees are exposed to their leader’s service interactions on the organizational front line, a contagion effect takes place (Barsade, 2002). This starts with exposure to a behavioral stimulus of a leader, which influences employees’ cognition in such a way that their behaviors and reactions start to resemble those of their leader

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(Hatfield, Cacioppo, & Rapson, 1994; Sy et al., 2005). Prior research already indicates that, through the ef- fect of contagion, employees adopt service-oriented attitudes and behaviors, and even facial expressions, of their leaders. By internalizing the leader’s ideal service approach, employees exhibit positive attitu- dinal manifestations to clients and serve them more effectively and attentively (e.g., Barsade & O’Neill, 2014; Barsade,Ward, Turner, & Sonnenfeld, 2000; Sy et al., 2005). According to Bandura (1991) and Bass (1985), leader modeling is more influential for en- hancing behaviors that are less supported by formal job descriptions, such as service quality, by encour- aging employees to act according to organizational interests while putting aside their own self-interests. Seeing their leader engaging with clients on the ser- vice front line stimulates employees to pursue the service objectives and prioritize client interests over their own self-interest (Piccolo & Colquitt, 2006). Moreover, I expect the effect of LBE on productivity

andservicequality tobestronger thanthatofcharismatic leadership, given the tangible and practice-oriented na- ture of LBE. Charismatic leaders, who focus on deliver- ing their future-oriented message through rhetoric, are inclined to distance themselves from their employees (Antonakis et al., 2016; Shamir, House, &Arthur, 1993). They use status and authority to influence employees andtoconnect themtoasetvision (Awamleh&Gardner, 1999; Howell & Shamir, 2005; Shamir, 1995). LBE, in contrast, centers on tangible demonstrations of the ex- pected behavior—on being a livemodel rather than just speaking about it theoretically. This difference is par- ticularly salient in service-related outcomes (i.e., sales productivity) and service interactions (i.e., service qual- ity). Prior research finds that effective leaders in service settings often encourage frontline employees to learn through trial and error and to adapt their behaviors ac- cordingly (Bowen & Ford, 2002). This approach ismore likely to bear fruit if leaders lead by doing, offering tan- gible demonstrations and providing live examples of ideal behavior as opposed to verbalizing desired actions in theory (Antonakis et al., 2016; Strange & Mumford, 2002). Thus, I posit:

Hypothesis 1. LBE enhances productivity and service quality at the store level, beyond the beneficial effect of charismatic leadership.

The Indirect Effect of LBE on Productivity and Service Quality

According to the resource management model (Sirmon et al., 2011), value creation for the organi- zation’s stakeholders is a comprehensive process

indirectly achieved by structuring organizational resources, developing organizational capabilities, and leveraging those capabilities to maximize the value that is created. Building on these insights (Sirmon et al., 2011), I disentangle the direct effect of LBE on productivity and service quality by taking a process-oriented view and proposing engagement as an important organizational capability that organi- zations can develop through LBE. I also propose that engagement can be magnified by integrating LBE with themanifestation of organizational core values, thereby enhancing the value creation of the entire process (i.e., enhanced productivity and service quality).

The effect of LBE on employee engagement. Kahn (1990) originally defined engagement as “the harnessing of organization member selves to their work roles, by which they employ and express themselves physically, cognitively, and emotionally during roleperformance” (694). InKahn’s (1990,1992) view, engagement is best illustrated as a motivational concept through which employees simultaneously and holistically become physically involved in role activities, emotionally identified, and cognitively fo- cusedon the serviceof theirorganization. Engagement is therefore an ideal employee–organization relation- ship (Kahn, 1990, 1992) through which employees invest their “hands, head, and heart” (Ashforth & Humphrey, 1995: 110) into their organization’s ob- jectives. Despite the scholarly calls, little research has explored engagement at the higher level of analysis (e.g., organization, work unit), in general, and at the business level, in particular (Barrick, Thurgood, Smith, & Courtright, 2015). Kahn (1990) argued that, when employee values,

goals, and skills are more aligned with those of their organization, they are more willing to engage them- selves with their work. Drawing on Bass’s (1985) argument that role-modeling leaders are in a better position to collectively motivate employees through affecting employees’ perceptions of their compe- tence and fit with the organization, I expect that LBE will have a positive effect on employee engagement. Exploratory group interviews that I conducted with employees from several representative stores (by geographic locations and size) in the data set support the proposed direction. In response to questions such as “How do you feel when you see your store manager actively participate in service front line?” and “How do you feel when you see your store manager leading by doing?” employees’ answers included, for example, “being proud to be part of that store,” “willingness to do above and beyond in my

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job,” “happy to come to work at that store,” and “willingness to givemywhole soul to performwell.” Specifically, LBE cultivates employees’ sense of

engagement by making them realize that their role matters to the organization’s success (Rosso, Dekas, & Wrzesniewski, 2010). Seeing their leader demon- strate workday employee activities enables em- ployees to realize how their service role contributes to the organization’s objectives and how the organi- zation’s vision is accomplished through their own work (Smircich &Morgan, 1982). According to Kahn (1990), the magnitude of engagement is determined by the degree of employees’ perceived fit between their skills and the organization’s values and goals. Seeing their leader perform employee job activities gives employees knowledge (e.g., expected norms, desired behaviors, and service strategies), which, according to Kahn (1990) and Rich, LePine, and Crawford (2010), enhances employees’ sense of en- gagement by making them feel more competent and that their skills are more aligned with the objectives and values of their organization. Kahn (1990) also argued that, when employees are valued for their work activities, and not simply as the occupant of a role, they are likely to become more engaged. Real- izing that the leader is willing to invest time and ef- fort to demonstrate employee activities generates a greater sense of engagement because it conveys to employees that their work contributions are signifi- cant and valuable (May, Gilson, & Harter, 2004; Rich et al., 2010). Seeing that the leader iswilling to invest resources (physical and psychological) in demon- strating employee work activities and serve as a live model, employees will be more likely to invest their own full resources (i.e., be engaged) in their work roles as well (Kahn, 1990). Thus, I posit:

Hypothesis 2. LBE increases employee engagement at the store level.

The interactive effect of LBE and core value manifestation on engagement. The resource man- agement model states that certain organizational actions canplay a crucial role in leveraging resources basedupon howeffectively they link those resources to the organization’s ultimate goals (Ndofor et al., 2011, 2015; Sirmon&Hitt, 2009; Sirmon et al., 2011). Possessing resources alone does not guarantee the optimization of value creation; rather, optimal value of organizational resources is realized when re- sources are managed effectively (Sirmon & Hitt, 2003; Sirmon et al., 2007). This is because the way resources are managed results in different capabil- ities and outcomes across organizations possessing

similar resources andoperating in similar conditions (Sirmon et al., 2007, 2011). Building on these insights, I point to the potential

synergy between LBE and organizational core values. Organizational core values convey the im- portance of LBE by answering why the leader’s tan- gible examples on the service front line are crucial for business success, thus clarifying the link between the leader’s practical actions and the organization’s ultimate purpose. This notion is drawn on a corpo- rate culture construct, which argues that substantial beliefsandultimategoalsofanorganizationcanactasa coordination mechanism (Cremer, 1993; Kreps, 2004; Thakor, 2016). For example, “superior service quality” is an organizational core value that represents a guid- ing principle for the organization’s ultimate goal of “being a market leader” (Fleishman & Peters, 1962; Lord & Brown, 2001; Rokeach, 1973; Russell, 2001; Schwartz, 1992). Management scholars have long ar- gued that communicating the organizational core values through formal channels is a necessary means by which to direct the organization’s members toward achieving its ultimate goals (Fleishman& Peters, 1962; Schein, 2010). Here, I focus on this key aspect of core values—that is, the way values are communicated. Whereas prior research has largely focused on the content of core values, less attention has been given to thewaycorevaluesaremanifested (O’Reilly,Chatman, & Caldwell, 1991). Core values can be communicated through various ways, such as supervisor conversa- tions, leader speeches, team meetings, videos, and or- ganizational conferences. Here, I focus on another potentialmechanismof corevaluemanifestation in the workplace: official, written statements (e.g., posters, marketing materials, and working reports). Formal, written manifestation is one of the primary ways or- ganizations communicate core values (Gioia & Chittipeddi, 1991; van Rekom, van Riel, & Wierenga, 2006) and serves as a cognitive learning source for employees through which they can realize and align with an organization’s business objectives and service vision (Schein, 2010; Rivera, 2012, 2015). I propose that the combined effect of LBE and the

manifestation of core values optimizes the value created by an engaged workforce. Kahn (1990) ar- gued that employee engagement is more strongly cultivated when employees are provided with a “clear delineation of procedures and goals” (705). Even though an organization’s members are likely to feel some sense of engagement merely by the per- ception of their leader as an exemplar, this sense of engagement will be strengthened through the mani- festation of core values, because this will provide

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employees with a better understanding of why their leaders’ practical acts are important for the organi- zation’s success. When core value manifestation is higher, employees can better connect the leader’s tangible examples of frontline service to the organi- zation’s success, thereby having greater clarity around how their own work and service roles con- tribute to the organization’s goals and success. According to Kahn (1990), the magnitude of en- gagement is determined by the degree of physical andpsychological resources employees can invest in their work roles, and employees’ perceived fit be- tween their workplace and the organization’s values and objectives. Combining practical and written guidance (i.e., LBE and core value manifestation) generates an enhanced capacity of resources and a stronger sense of fit among employees (May et al., 2004), whichmotivates employees tomore willingly engage with their work roles (Kahn, 1990)—even more than by the influence of LBE alone. Thus, I posit:

Hypothesis 3. There is an interactive effect of LBE and core valuemanifestation on employee engagement at the store level. Specifically, when core value mani- festation is higher, the positive effect of LBE on em- ployee engagement is enhanced.

Integrated model. As discussed above, the re- source management model (Sirmon et al., 2011) of- fers an intriguing lens through which we can take a process-oriented perspective that focuses on the in- direct effect of LBE on productivity and service quality through engagement as an organizational capability. Drawing on Kahn’s (1992) engagement theory, it is reasonable to expect that an engaged workforce affects both productivity and service quality. An engaged workforce should demonstrate increased productivity because such a workforce tends to work harder, allocate more physical energy, be more vigilant cognitively, and be more focused professionally (Barrick et al., 2015; Harter, Schmidt, & Hayes, 2002; Rich et al., 2010). Kahn (1992) and Salanova, Agut, and Peiró (2005) also argued that an engaged workforce would have a more comprehen- sive picture of its role, which would indicate a greater willingness to go beyond the formal duties in ways that aremore helpful, attentive, and responsive to an organizational service mission. Based on Hy- potheses 1 and 2, I argue that LBE will indirectly affect productivity and service quality through the mechanism of engagement. Based on Hypothesis 3, I argue that this indirect effect of LBE on productivity and service quality (through engagement) will be

stronger when core value manifestation in the workplace is higher. Based on the foregoing hy- potheses, I propose an integrated hypothesis as follows:

Hypothesis 4. The positive indirect effect of LBE on productivity and service quality (through employee engagement) is stronger when core value manifesta- tion is higher.

METHOD

Sample and Procedure

I examined my model using data obtained from a major chain of retail stores in Israel. The stores sell a range of wellness products such as health care, cos- metics, cleaning, pharmaceuticals, and perfumes. All 260 retail stores are situated in prime locations such as central malls, downtown areas, and central locations in major cities and neighborhoods, and are spread across 21 national geographical regions. All retail stores carrymore than 10,000 items, and have a similar visual design and organizational structure, with a store leader and non-managerial full-time service employees. The store manager has overall responsibility for the retail store, including its profit and loss performance. Whereas the chain continu- ously provides the store leaders with strategic data and financial reports, leaders have considerable au- tonomy to bring their individuality and leadership style intomanagement and sales practices in order to cultivate employee motivation and enhance service performance.As theHRpolicy of the retail chain is to promote from within for managerial positions, a store manager has a comprehensive professional understanding of the employee activities and tech- nical skills required, having served as an employee prior to being promoted. Given that the official working hours of a storemanager are from 9 a.m. to 6 p.m., employees have a similar opportunity to ob- serve their leader in action, despite working in two daily shifts (i.e., 6 a.m. to 2 p.m. and 1:30 p.m. to 9:30 p.m.). The average retail store has been in operation for 14.8 years (SD 5 9.50) with an average of 50.44 (SD 5 18.83) full-time employees. A significant feature ofmydata is that they enabled

me to obtain objective measures of financial and service performance at the retail store level and track those performance measures for three years. I ob- tained my three-year panel data from three sources: employees, accounting-based measures of business performance, and secret shoppers. Employees were surveyed about leadership behavior (i.e., LBE and

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charismatic leadership) of store managers, the man- ifestation level of core values, and employee level of engagement. Employee responses were collected through an annual survey conducted in the same months over the course of three years. All of the employees were invited to participate in the study voluntarily, with complete assurance that no one, including their store leader, would see their indi- vidual responses. To increase the participation rate, the survey was advertised throughout the retail stores in multiple ways: by emails from the head- quarters and in team and retail store meetings a few weeks before the survey was presented. Given the fact that the survey included sensitive questions re- garding leadership behavior (e.g., LBE) of store managers and employee level of engagement, in- creasing employee confidentiality was crucial to increase the response rate and reliability of the an- swers. Thus, employees were asked to complete a web-based survey, either during paid work hours or in leisure time at home, to ensure the anonymity of their responses. A web-based survey method di- minished concerns about the reliability of answers, since employees could complete the survey pri- vately without fear that their store leader or peers would view their responses (Thomas, 2004). To re- duce potential for social desirability, identifying details such as age, tenure, and gender were not requested and were instead taken from administra- tive records. Of the participants, 50.1% of the em- ployees were men and 56.6% of the retail store leaders were women. The average age was 31.54 years (SD 5 2.69) for employees and 44.56 years (SD 5 8.25) for leaders. The average tenure at the retail stores was 3.19 years (SD 5 1.05) for em- ployees. For retail store leaders, overall tenure in the retail chain was 16.01 years (SD 5 7.30) and 7.75 years (SD 5 4.90) as retail store leaders. Three months after the employee survey stage was

completed, I obtained from the retail chain’s headquar- ters the business-level outcomes (i.e., productivity and service quality) for all 260 stores. This lagged research design (i.e., a three-month time period) facilitates the separation between independent variables (LBE and charismatic leadership) and mediator (employee en- gagement) from the business-level performance (i.e., productivity and service quality) for each year. Or- ganizational characteristics such as the number of em- ployees, the date of the retail store’s opening, leaders’ tenure (in general and as store managers in particular), andagewereobtainedfromthearchivesatheadquarters. The final sample consisted of 233 retail stores (a

response rate of 88.50%) and 8,137 employees (a

75.34% response rate). I eliminated 18 stores from the data, as I did not have their complete responses across the three years. I also omitted an additional six retail stores from the data because their leaders were replaced during the period examined and three retail stores whose leader had assumed their position less than six months before the first wave of employee surveys.

Measures

All the measures, except productivity and service quality, used a 5-point Likert scale.

LBE.LBEwasassessedusing the5-itemexemplary behavior subscale taken from the overall leadership behavior measure that was developed and validated by Podsakoff et al. (1990). In prior research, the scale has demonstrated factorial, discriminant, and predictive validity (e.g., Podsakoff, MacKenzie, & Bommer, 1996; Podsakoff, MacKenzie, Lee, & Podsakoff, 2003; Schriesheim, Castro, & Yammarino, 2000; Schriesheim, Castro, Zhou, & DeChurch, 2006).With reference to a 5- point scale (15 not at all to 55 all the time), employees were asked to rate the extent to which their retail store leader exhibited certain behaviors during the workday routine and service activities of employees. Sample itemswere “Myretail store leader leads by ‘doing’ rather thanbysimply ‘telling’,”“Myretail store leader is agood rolemodel forme to follow,” and “My retail store leader leadsbyexample.” I averaged ratingsover all employees within the same store to obtain an aggregate rating of store-level LBE for each retail store leader; ICC1 5 .13, rWG(J)5 .90, Cronbach’s a 5 .93. Charismatic leadership. Charismatic leadership

was measured by seven items based on the multi- factor leadership questionnaire (Bass, 1985), which were refined in a revision of the original question- naire (Bass & Avolio, 1990). Referring to a 5-point Likert scale (1 5 very rarely to 5 5 very often), em- ployees were asked to rate the frequency their store leader exhibited charisma-oriented behaviors. Sam- ple items included “My store leader communicates a clear vision of the future” and “My store leader provides a vision of what lies ahead.” Ratings were averaged over all employees within the same store to obtain an aggregate rating for charismatic leadership; ICC1 5 .12, rWG(J) 5 .87, Cronbach’s a 5 .95.

Employee engagement. Employees at each retail storewere asked to assess their level of engagement. I used Rich et al.’s (2010) 6-item scale of engagement ranging from 1 (almost never) to 5 (very often). A sample item was “I am enthusiastic in my job.” Rat- ings were averaged over all employees within each

466 Academy of Management Journal April

store to obtain an aggregate rating of engagement score for each store; ICC1 5 .10, rWG(J) 5 .86, Cron- bach’s a 5 .87.

Core value manifestation. “Core value manifes- tation” reflects employees’ perceptions of the degree to which written statements in the workplace com- municate the organization’s core values. I followed Cable and Edwards (2004) and Enz’s (1988) method- ology by asking employees to rate the degree of manifestation of the core values of their retail chain (i.e., integrity, service quality, excellence, market leadership, and familial-like ties), rather than asking aboutmanifestationof corevalues in theworkplace in general. Through reference to a 5-point scale, ranging from 1 (not at all) to 5 (all the time), employees were asked to rate the extent to which the particular core values of the retail chain (i.e., integrity, service qual- ity, excellence, market leadership, and familial-like ties) were communicated through five different types of written material: (1) marketing materials, (2) sales promotions, (3) internal memos and documents, (4) store emails, and (5) posters. A sample item was “To what extent are the organizational core values (in- tegrity, servicequality, excellence,market leadership, and familial-like ties) being manifested through mar- keting materials in your store?” The chain’s headquarters provides a large degree

of autonomy to store leaders regarding managerial and marketing practices. As such, manifestation practices of core values vary across locations in the same organization. I observed that variation within my sample. Interviews with 10 store managers con- firmed that they all exhibited a wide variety of ap- proaches, from conservatively presenting the five core values only on marketing materials and sales promotions (following a mandatory instruction by the retail chain) to creatively and proactivelywriting themon storewalls, internalmemos, emails, posters, and even salary reports. Ratings were aggregated over all employeeswithin each retail store to obtain a rating for core value manifestation at the store-level of analysis; ICC1 5 .11, rWG(J) 5 .96, Cronbach’s a 5 .83.

Productivity. The productivity of each store was assessed by store revenue divided by employees’ overall work hours. I calculated the average pro- ductivity for six months starting after the three- month lag from the completion of the employee survey.

Service quality. Service quality was assessed for all retail stores by “secret shoppers” from an outside assessment agency. Secret shopper evaluation is becoming a popularmethod employed in a variety of

service organizations and retail operations, as it is consideredmore valid than customer surveys (Pinar, Eser, & Strasser, 2010). The following five aspects were evaluated monthly in each retail store: (1) ser- vice provider appearance, (2) willingness to provide prompt service, (3) provision of professional infor- mation, (4) degree of courtesy, and (5) degree of personal attention. Each aspect was rated on a scale ranging from 1 (poor) to 10 (excellent). The scores were then averaged into a single monthly score for each retail store. I calculated the average service quality for six months starting after the three-month lag from the completion of the employee survey.

Control variables. An important concern with field studies of this type is the potential for omitted variables to create spurious associations between the independent and the dependent variables. One ad- vantage of my panel data was the level of detail from different organizational, managerial, and employee levels, which allowed me to control for many po- tential omitted variables. Control variables such as store tenure (i.e., time period of operation), size (i.e., number of employees), and prior year’s pro- ductivity and service quality affected the produc- tivity and service quality of the years examined (e.g., Bowen & Schneider, 2014; Jiang, Chuang, & Chiao, 2015), and I therefore included them. At the managerial level, both leader tenure and age have been indicated in prior research as affecting em- ployee attitudes and performance (Kark, Shamir, & Chen, 2003; Shamir et al., 1993; Shamir & Lapidot, 2003). I therefore included as a control the age and the tenure of the leader in the retail store in general and in particular as a leader. Lastly, following previous engagement research recommendations, I also con- trolled for employee tenure and age (e.g., Schaufeli & Bakker, 2004; Schaufeli, Bakker, & Salanova, 2006). Descriptive statistics and correlations are presented in Table 1.

Data Analysis

In this study, the unit of analysis was the retail store, and the unit of observation was the retail store year. I assessed all the examined variables in my panel data every year over three years. I therefore used a pooled year and retail store fixed-effects re- gression analysis, which is recommended in panel data structure (Wooldridge, 2001). A fixed-effects model allowed me to account for time-invariant un- observed characteristics at the store level that could be driving both the explanations of LBE and store- level engagement, productivity, and service quality,

2021 Eldor 467

thus leading to biased estimates (Wooldridge, 2006). Moreover, this fixed-effects method reinforced the causal inferences of the effects of LBE on engage- ment, productivity, and service quality by ruling out the possibility that store leaders who adopted this practice (LBE) had stable unobserved preferences for its utilization. Results from the Breusch and Pagan multiplier test and the Hausman test confirmed the appropriateness of the fixed-effects analysis rather than ordinary least squares or hierarchical linear modeling regressions. I also controlled for year fixed effects, to take into account economic and customer trends. Given that fixed-effects analysis allows for the correlation between aj and all xij, whereas a random effects method does not, under most condi- tions, a fixed-effects method is considered to be a more methodologically compelling and powerful method (Wooldridge, 2006). For Hypotheses 1 and 2, I conducted a year and

retail store fixed-effects regression analysis inwhich, in the baseline model (Models 1, 4, and 7), I inserted the control variables,while, in the followingmodel, I included both the control variables and the inde- pendent variable I was examining (Models 2, 5, and 8). For the moderating hypothesis (Hypothesis 3), I conducted a year and retail store fixed-effects mod- erating regression analysis (Model 9). I further ana- lyzed two slopes of core value manifestation—one for each type of level, high (11 SD) and low (21 SD)—on the effect of LBE on employee engagement (Figure 2). Using an R package, I tested the indirect integrated effect hypothesis (Hypotheses 4) by cal- culating simulation-based 95% confidence intervals (CIs) for average indirect causal effects (Imai, Keele, & Yamamoto, 2010).

RESULTS

Preliminary Checks

I sought to reduce commonmethod bias and assess the foundation of the study’s model through various ways. First, I relied on different sources of data (employees, accounting-based measures, and secret shoppers) and collection methods (survey and ar- chive). Second, I conducted several confirmatory factor analyses to assess the factor structure of the study measures (i.e., LBE, charismatic leadership, core value manifestation, and engagement). The hy- pothesized four-factor model, in which each mea- sure loaded on a separate latent factor, fit the data well (x2/df5 25.11; CFI5 .95; TLI5 .94, RMSEA 5 .07; RMR 5 .03) compared to the three-factor model

combining LBE and charismatic leadership as one factor (x2/df5 35.93; CFI5 .90; TLI5 .88, RMSEA5 .08; RMR 5 .08), supporting the solid foundation of the study’s model. Third, to rule out the possibility that common source and method bias account for these results, an alternative unifactor model in- cludedone latentmodel composed of those variables (LBE, charismatic leadership, core value manifesta- tion, and engagement). The fit of this model was relatively poor (x2/df5 124.37; CFI5 .72; TLI5 .69, RMSEA 5 .16; RMR 5 .07). Fourth, I evaluated the discriminant validity of LBE from charismatic lead- ership by conducting confirmatory factor analysis containing just these two latent factors (i.e., LBE and charismatic leadership). The fit of this model was good (x2/df5 66.77; CFI5 .95; TLI5 .93, RMSEA5 .11; RMR 5 .03) compared to one whole factor in- cluding all the model items (x2/df 5 279.04; CFI 5 .77; TLI5 .71, RMSEA5 .25; RMR5 .11), indicating LBE is distinct from charismatic leadership.

Hypothesis Tests

Hypothesis 1 predicted that LBE would enhance financial and business-oriented performance (i.e., productivity and service quality) beyond the beneficial effect of charismatic leadership. Results for Hypothesis 1 are shown in Models 1 and 2 (for productivity) and in Models 5 and 6 (for service quality) in Table 2. The first model contained only the control variables (see Models 1 and 4), whereas the second included the LBE variable as well (see Models 2 and 5). As predicted, LBE had a significant, positive effect at the business level on productivity (estimate5 44.20, SE5 20.040, p5 .008; see Model 2, column 2) aswell as on service quality (estimate5 0.062, SE 5 0.032, p 5 .006; see Model 5, column 2) while the effect of charismatic leadership was also included in the regression model, and the effects of year and retail store collectively were fixed. All the results in Models 2 and 5 (columns 1 and 2) were significantly different from the baseline models (i.e., Models 1 and 4, respectively), which contained only the control variables. Thus, Hypothesis 1 was supported. Hypothesis 2predicted that employee engagement

would be positively affected by LBE. The results for Hypothesis 2 are shown inModels 7 and 8 inTable 3. As predicted, LBE had a significant, positive effect on employee engagement (estimate 5 0.326, SE 5 0.064, p # .001; see Model 8, column 2) while the effects of year and retail store collectivelywere fixed. All the results in Model 8 (columns 1 and 2) were

468 Academy of Management Journal April

T A B L E 1

D es cr ip ti ve

S ta ti st ic s an

d C or re la ti on

s M at ri x

V ar ia bl e

M ea

n S D

1 2

3 4

5 6

7 8

9 10

11 12

13 14

1. S to re te n u re

14 .8 0

9. 50

—

2. S to re si ze

50 .4 9

18 .8 3

.3 4* *

—

3. If ou ts ou rc ed

w or ke rs ar e em

p lo ye d

0. 92

0. 27

.0 2

.0 3

—

4. L ea d er ge n er al te n u re

16 .0 1

7. 30

.4 3* *

.4 6*

2 .0 2

—

5. T en u re as a le ad er

7. 75

4. 90

.4 1* *

.4 3*

.1 1

.5 6* *

—

6. L ea d er ag e

44 .5 6

8. 25

.3 8* *

.4 2*

.0 7

.6 7* *

.5 9* *

—

7. E m p lo ye e te n u re

3. 19

1. 05

.7 0* *

.3 3*

.0 9

.3 2* *

.3 8* *

.3 5* **

—

8. E m p lo ye e ag e

31 .5 4

2. 69

.4 4* *

.1 3*

.1 0*

.1 9* *

.2 8* *

.3 2* **

.5 2* *

—

9. L B E

3. 42

0. 59

2 .0 4

2 .0 3

.0 4

2 .0 3

2 .0 2

2 .1 2†

2 .0 4

2 .0 2

—

10 .

C h ar is m at ic le ad er sh ip

3. 31

0. 67

2 .1 1*

2 .1 0* *

2 .0 3

2 .1 1* *

2 .1 2*

2 .1 0*

2 .0 8

.0 04

.5 6* **

—

11 .

C or e va lu es m an if es ta ti on

3. 88

0. 34

2 .0 3

2 .0 6*

.0 5†

2 .0 6*

2 .0 2

2 .0 8†

2 .1 4†

2 .0 6†

.2 2* *

.1 5* *

—

12 .

E n ga ge m en t

3. 25

0. 68

2 .0 9* *

2 .1 0*

.0 3

2 .0 9*

2 .0 4

2 .0 9* *

2 .0 3

2 .0 8†

.2 6* **

.3 5* **

.1 9* *

—

13 .

P ro d u ct iv it y

61 3. 17 6

29 3. 89 2

.2 2* *

.3 2* **

.3 2*

.1 9* *

.2 0* *

.2 1* *

.2 4* *

.0 6*

.0 7* *

.0 3

.0 9*

.0 8*

—

14 .

S er vi ce

qu al it y

8. 54

1. 03

2 .1 0* *

2 .0 6*

2 .0 5†

2 .0 5*

2 .0 7*

2 .0 3

2 .0 5

2 .0 4

.2 0* **

.1 9* *

.0 6†

.2 5* *

.1 4* *

—

N ot es :S to re te n u re

5 th e n u m be r ye ar s a st or e op er at es ;s to re si ze

5 th e n u m be r of em

p lo ye es ;L B E 5 le ad in g by

ex am

p le .

† p , .1

* p , .0 5

** p , .0 1

** * p , .0 01

2021 Eldor 469

significantly different from the initial corresponding results inModel 7, which contained only the control variables. Thus, Hypothesis 2 was supported. Hypothesis 3 predicted that there would be an

interactive effect between LBE and core value man- ifestation on employee engagement, such that the effect of LBE on employee engagement would be enhanced when the manifestation of core values is higher (rather than lower). Results for the analysis are shown in Table 3. As presented in Model 9, the interactive effect of LBE and core value manifesta- tion on employee engagement was significant (estimate5 0.158, SE5 0.081, p5 .045; seeModel 9, column 2) while the effects of year and retail store collectively were fixed. I graphically depicted the regression lines that represent the effect of LBE on employee engagement at the lower (21 SD) and higher (11 SD) levels of core valuemanifestation. As shown, Figure 2 provides consistent support for Hypothesis 3 by depicting the stimulating effect of integrating LBE with core value manifestation on employee engagement. The engagement of the retail store’s workforce was enhanced when a stronger combination of LBE and written manifestation of organizational core values was exhibited. Thus, Hypothesis 3 was supported. Hypothesis 4 proposed an integrated model. Spe-

cifically, it predicted that LBE would indirectly

affect business-level outcomes (productivity and service quality) through engagement at the store level and that this effect is enhanced by the degree of the manifestation of core values. To assess these in- direct effects, I used abootstrappingmethod to create CIs that examine the significance of these indirect effects at one standard deviation below themean and one standard deviation above the mean of the mod- erator (i.e., core value manifestation). I started by examining the first business-oriented performance measure: productivity. As seen in Table 4 (Model 10), the results for the indirect effect of LBE on pro- ductivity (through engagement) indicate that the magnitude of the indirect effect was 39.870 for lower manifestation of organizational core values and 49.116 for higher manifestation of organiza- tional core values. Calculating 10,000 sample draws, the 95%CI for this indirect effect was 25.250 to 59.347 at the lower level and 31.807 to 70.295 at the higher level. These results indicate that the in- direct effect of LBE on productivity (through en- gagement) was consistently significant (i.e., the 95% CI did not include 0) at both the lower and higher levels. Drawing on Model 10’s results in Table 4, I therefore conclude that the indirect effect of LBE on store productivity (through engagement) was positive and significant, yet the strongest effect was demonstrated when the manifestation of

FIGURE 2 The Interactive Effect of LBE and Core Value Manifestation on Store-Level Employee Engagement

Low Core Value Manifestation High Core Value Manifestation

3.8

3.6

3.4

3.2

3

2.8 Low High

LBE

E m

p lo

ye e

E n

ga ge

m en

t

Note: LBE5 leading by example.

470 Academy of Management Journal April

T A B L E 2

F ix ed

-E ff ec

ts P an

el R eg

re ss io n s of

th e E ff ec

to fL

B E on

P ro d u ct iv it y an

d S er vi ce

Q u al it y at

th e S to re

L ev

el of

A n al ys is

D ep

en d en

tV ar ia bl e

P ro d u ct iv it y

S er vi ce

Q u al it y

M od

el 1

M od

el 2

M od

el 3

M od

el 4

M od

el 5

M od

el 6

1 2

1 2

1 2

1 2

1 2

1 2

E ff ec t

L B E

44 .0 70 **

44 .2 00 **

25 .7 30 ** *

23 .0 50 **

0. 05

0* **

0. 06

2* *

0. 03

1* 0. 02

6* (1 9. 91 0)

(2 0. 04 0)

(6 .5 55 )

(1 1. 51 0)

(0 .0 18 )

(0 .0 32 )

(0 .0 17 )

(0 .0 19 )

C h ar is m at ic le ad er sh ip

33 .1 5

33 .8 6

8. 03 1

13 .4 9

2 0. 01 8

2 0. 01 9

2 0. 00 8

2 0. 01 4

(2 0. 73 0)

(2 0. 86 0)

(7 .3 09 )

(1 2. 02 )

(0 .0 17 )

(0 .0 30 )

(0 .0 15 )

(0 .0 18 )

S to re

C on

tr ol s

T en u re

2 1. 16 9

2. 59 4

2 2. 95 5* *

2 3. 12 3* **

2 0. 82 9

2 0. 69 6

2 0. 00 9* *

2 0. 00 9

2 0. 00 5* *

2 0. 00 7* *

2 0. 00 3*

2 0. 00 3*

(1 .5 37 )

(5 .2 65 )

(1 .1 00 )

(1 .1 26 )

(0 .6 63 )

(0 .6 21 )

(0 .0 03 )

(0 .0 09 )

(0 .0 02 )

(0 .0 03 )

(0 .0 02 )

(0 .0 02 )

S iz e

3. 16 3* **

2. 61 9

4. 55 7* **

4. 50 8* **

1. 39 5* **

1. 10 0* **

2 0. 00 3* **

2 0. 00 9*

2 0. 00 1*

2 0. 00 2* **

2 0. 00 04

2 0. 00 08

(0 .6 46 )

(3 .9 84 )

(0 .4 09 )

(0 .4 18 )

(0 .2 51 )

(0 .2 36 )

(0 .0 01 )

(0 .0 05 )

(0 .0 00 )

(0 .0 01 )

(0 .0 00 )

(0 .0 00 )

If ou ts ou rc ed

w or ke rs ar e em

p lo ye d

6. 30 6* **

2. 42 3

2 3. 07 2

4. 45 5

2 1. 65 4

0. 54 3

0. 00 1

0. 00 7

0. 06 5

0. 07 2

0. 05 5

0. 05 7

(2 .1 65 )

(5 .2 76 )

(2 6. 90 0)

(2 7. 52 0)

(1 6. 16 0)

(1 5. 13 0)

(0 .0 03 )

(0 .0 08 )

(0 .0 40 )

(0 .0 70 )

(0 .0 37 )

(0 .0 41 )

P ro d u ct iv it y (p re vi ou s ye ar )

0. 69 5* **

0. 82 3* **

(0 .0 15 )

(0 .0 19 )

S er vi ce

qu al it y (p re vi ou s ye ar )

0. 22 8* **

0. 19 3* **

(0 .0 15 )

(0 .0 17 )

Le ad

er C on

tr ol s

L ea d er ge n er al te n u re

2. 49 1

6. 61 8

2. 80 2*

1. 96 4

1. 06 4

1. 15 6*

0. 00 3

0. 01 1

0. 00 2

0. 01 6

2 0. 00 3* *

2 0. 00 2

(1 .5 15 )

(7 .3 84 )

(1 .6 08 )

(1 0. 52 5)

(0 .6 95 )

(0 .6 50 )

(0 .0 03 )

(0 .0 12 )

(0 .0 03 )

(0 .0 18 )

(0 .0 02 )

(0 .0 02 )

T en u re as a le ad er

2 1. 70 0

2 4. 77 3

2 0. 77 9

2 0. 74 8

2 0. 52 7

2 0. 62 4

0. 00 0

2 0. 00 9

0. 02 2

0. 08 6* **

0. 00 0

0. 00 0

(2 .1 91 )

(9 .6 47 )

(1 .5 61 )

(1 .5 97 )

(0 .9 47 )

(0 .8 86 )

(0 .0 04 )

(0 .0 16 )

(0 .0 14 )

(0 .0 24 )

(0 .0 02 )

(0 .0 02 )

L ea d er ag e

1. 48 1

2 2. 85 8

2. 67 0* **

2. 58 6* **

0. 33 1

0. 40 8

2 0. 00 3

2 0. 01 4

2 0. 00 1

2 0. 00 4

0. 00 2

0. 00 2

(1 .4 52 )

(6 .1 77 )

(0 .9 44 )

(0 .9 66 )

(0 .6 46 )

(0 .6 05 )

(0 .0 03 )

(0 .0 11 )

(0 .0 02 )

(0 .0 04 )

(0 .0 02 )

(0 .0 03 )

E m p lo ye

e C on

tr ol s

E m p lo ye e te n u re

47 .6 30 ** *

57 .3 53

53 .2 5* **

52 .1 6* **

13 .4 4* *

8. 25 1

0. 07 7* **

0. 15 9* *

2 0. 00 8*

2 0. 03 1* **

0. 00 4

0. 00 4

(1 3. 71 1)

(4 6. 53 2)

(9 .2 62 )

(9 .4 77 )

(5 .5 43 )

(5 .2 07 )

(0 .0 26 )

(0 .0 63 )

(0 .0 04 )

(0 .0 07 )

(0 .0 13 )

(0 .0 14 )

E m p lo ye e ag e

2 4. 51 2

2 4. 30 5

2 3. 88 1

2 4. 78 6*

2. 55 0

2. 67 9*

2 0. 02 2* **

2 0. 06 0* *

2 0. 00 01

2 0. 00 3

2 0. 00 2

2 0. 00 5

(3 .9 49 )

(1 2. 96 8)

(2 .8 38 )

(2 .9 04 )

(1 .6 91 )

(1 .5 83 )

(0 .0 08 )

(0 .0 24 )

(0 .0 02 )

(0 .0 04 )

(0 .0 04 )

(0 .0 04 )

C on st an t

32 8. 28 8* **

41 9. 24 1* **

23 6. 0* **

26 0. 10 0* **

14 7. 60 0* **

47 .9 80 ** *

9. 46 2* **

11 .1 42 ** *

9. 34 7* **

9. 80 5* **

7. 13 9* **

7. 46 6* **

(1 12 .9 11 )

(4 02 .1 89 )

(9 3. 75 )

(9 5. 93 )

(5 4. 51 )

(4 3. 82 )

(0 .2 33 )

(0 .8 76 )

(0 .1 40 )

(0 .2 44 )

(0 .1 91 )

(0 .1 62 )

O bs er va ti on s

69 9

69 9

69 9

69 9

69 9

69 9

69 9

69 9

69 9

69 9

69 9

69 9

R 2

0. 16 2

0. 27 0

0. 26 1

0. 53 7

0. 75 6

0. 84 5

0. 34 7

0. 46 6

0. 45 6

0. 57 5

0. 80 7

0. 84 9

Y ea r F E

Y es

Y es

Y es

Y es

Y es

Y es

Y es

Y es

Y es

Y es

Y es

Y es

S to re F E

Y es

Y es

Y es

Y es

Y es

Y es

N ot es :S ta n d ar d er ro rs cl u st er ed

at th e st or e le ve la re re p or te d in p ar en th es es (n

5 23 3) .L B E 5 le ad in g by

ex am

p le ;s to re te n u re

5 th e n u m be ro fy ea rs a st or e op er at es ;s to re si ze

5 th e n u m be r of em

p lo ye es .F E 5 fi xe d ef fe ct ;1

5 ye ar is fi xe d ef fe ct ,2

5 ye ar an d st or e ar e fi xe d ef fe ct s.

† p , .1 0

* p , .0 5

** p , .0 1

** * p , .0 01

2021 Eldor 471

organizational core values was higher (rather than lower). Thus, the analysis supportedmy hypothesis that the indirect effect of LBE on productivity (though engagement) is strongly enhanced in a higher rather than lower manifestation of organi- zational core values. Next, I reapplied the above analysis to examine the

integrated indirect effect of LBE on the second business-oriented performance measure: service quality. The results pattern was consistent with the

indirect path between LBE and productivity. Spe- cifically, the magnitude of the integrated indirect effect of LBE on service quality was 0.073 for lower manifestation of organizational core values and 0.092 for higher manifestation of organizational core values (see Table 4, Model 11). Calculating 10,000 sample draws, the 95%CI for this indirect effectwas, at the lower level, 0.045 to 0.110, p, .05, and, at the higher level, 0.058 to 0.128, p , .05. Given that the 95% CI did not include 0, these results clearly

TABLE 3 Fixed-Effects Panel Regressions of the Effect of LBE on Engagement and the Interactive Effect of LBE and Core Value Mani-

festation on Engagement at the Store Level of Analysis

Dependent Variable

Engagement

Model 7 Model 8 Model 9

1 2 1 2 1 2

Effect LBE 0.429*** 0.326*** 0.677** 0.710**

(0.052) (0.064) (0.336) (0.312) Core value manifestation 0.909*** 0.806**

(0.311) (0.274) Interactive Effect LBE3 Core value manifestation 0.142* 0.158*

(0.085) (0.081) Store Controls Tenure 20.001 20.006 20.001 20.011** 0.002 20.006**

(0.005) (0.010) (0.004) (0.002) (0.003) (0.001) Size 20.004** 0.011** 20.003* 0.006* 20.003** 0.013*

(0.002) (0.008) (0.001) (0.007) (0.001) (0.001) If outsourced workers are employed 0.014** 20.004** 0.010** 0.007** 0.007** 20.007**

(0.004) (0.012) (0.004) (0.001) (0.003) (0.002) Leader Controls Leader general tenure 20.003 0.034* 20.002 20.011** 20.003 0.007*

(0.005) (0.021) (0.004) (0.001) (0.004) (0.004) Tenure as a leader 0.005 20.016** 0.005 20.008** 0.003 20.012**

(0.007) (0.001) (0.006) (0.001) (0.005) (0.001) Leader age 20.005 20.071** 20.005 20.005** 20.001 20.039**

(0.005) (0.001) (0.004) (0.001) (0.003) (0.005) Employee Controls Employee tenure 0.006 20.244* 0.007 20.048** 20.038 20.242*

(0.036) (0.005) (0.031) (0.011) (0.023) (0.018) Employee age 20.011 0.161** 20.010 0.020** 20.001 0.117*

(0.012) (0.002) (0.011) (0.004) (0.008) (0.012) Constant 3.600*** 0.798** 2.209*** 0.622* 2.433*** 4.036***

(0.360) (0.091) (0.399) (0.298) (1.156) (1.088) Observations 699 699 699 699 699 699 R2 0.231 0.486 0.342 0.532 0.466 0.603 Year FE Yes Yes Yes Yes Yes Yes Store FE Yes Yes Yes

Notes: Standarderrors clustered at the store level are reported inparentheses (n5233). LBE5 leadingbyexample; store tenure5 thenumber of years a store operates; store size5 the number of employees. FE5 fixed effect; 15 year is fixed effect, 25 year and store are fixed effects.

†p , .10 *p , .05 **p , .01 ***p , .001

472 Academy of Management Journal April

indicate that the indirect effect of LBE on service quality was consistently significant at both the lower and higher levels. Thus, I can conclude that, while the indirect effect of LBE on service quality (through engagement) was consistently positive and signifi- cant at all levels, the strongest effect of LBE on ser- vice quality (through engagement) was when the manifestation of organizational core values was higher (rather than lower) among employees. Ac- cordingly, the interactive effect of LBE and core value manifestation enhances both store-level pro- ductivity and service quality through employee en- gagement. Thus, Hypothesis 4 was supported.

Endogeneity and Supplementary Checks

To reduce concerns related to endogeneity, I employed two checks that Wooldridge (2001) and other econometricians have recommended. The first concern is the possibility that the store-level perfor- mance outcomes (i.e., engagement, productivity, and service quality) drive the usage of LBE, rather than, as I theorize, the other way around (i.e., reverse causality). The results in Appendix A (Table A1) show that all the store-level performance outcomes did not predict LBE in the analyses. Second, as shown in Table 2 (Models 3 and 6), I controlled for the prior year’s performance (i.e., productivity and service quality, respectively), to rule out reverse causality (Edwards, 2008). To examine whether the relationship between LBE and business-level per- formance outcomes—productivity and service quality—is nonlinear, I also conducted a model in which I included all the controls, LBE, and its qua- dratic term, to test whether LBE has an inverted U- shaped relationship with store-level productivity and service quality. Results did not support a non- linear relationshipwith either of the examined store-

level performance indicators (see Appendix B, Table B1).

DISCUSSION

In this paper, I advance our understanding of the understudied LBE concept. In doing so, I integrate leadership literature with the resource management model to explain how LBE creates value at the business level of analysis. The findings provide substantial support for this thesis by displaying that LBE enhances productivity and fosters quality of service at the store level, above and beyond the effect of charismatic leadership. I further find that, when the manifestation of organizational core values is higher in theworkplace, the indirect effect of LBE on the examined business-level outcomes (through en- gagement) is stronger. Thus, I show empirically the synergistic interaction between complementary organizational domains—practical, through LBE, and conceptual, by organizational core value— demonstrating that the workforce is further engaged when these two are integrated, thereby maximizing value at the business level of the entire process (Sirmon et al., 2007, 2011).

Theoretical Contributions

By demonstrating the effect of LBE on core busi- ness performance (i.e., productivity and service quality), this study provides three substantial con- tributions to the budding research on LBE, specifi- cally, and the leadership literature more generally. First, whereas leadership scholars have suggested LBE as a practice that is potentially beneficial to ef- fective leadership, it has not been studied or exam- ined empirically as a stand-alone academic concept and research topic (Barsade & Mesiek, 2004; House,

TABLE 4 Bootstrapped Point Estimates and CI Results at the Store Level for Conditional Indirect Effect (Moderated by Core Value Manifestation) of LBE on Store-Level Performance: Productivity and Service Quality through Employee Engagement

Independent variable

Moderated by Core Value Manifestation

Model 10: Productivity Model 11: Service Quality

Indirect Effect through Employee Engagement

Bootstrapping (95%) CI

Indirect Effect through Employee Engagement

Bootstrapping (95%) CI

bYM 3 bMX

Lower Limit

Upper Limit bYM 3 bMX

Lower Limit

Upper Limit

LBE 21 SD 39.870 25.250 59.347 0.073 0.045 0.110 11 SD 49.116 31.807 70.295 0.092 0.058 0.128

Notes: n 5 233. Bootstrap sample size 5 10,000. CI 5 confidence interval, LBE5 leadership by example.

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1977; Yukl, 2006). The results demonstrate that LBE positively affects employee engagement at the store level and also that its consequences spill over onto business results (i.e., productivity and service qual- ity). Second, the leadership literature to date has conceptualized leadership almost exclusively froma verbal perspective. While advanced theoretical models of leadership have already suggested that effective leadership depends on active and interac- tive processes of influence (Cunliffe & Eriksen, 2011; Fairhurst & Uhl-Bien, 2012; Uhl-Bien, 2006), this study provides empirical evidence of the efficacy of such an approach that is practically oriented (i.e., LBE), and above and beyond the influence of verbally oriented leadership (i.e., charismatic lead- ership). By studying the concept of LBE, specifically, and the idea that leaders can influence employees by doing rather thanmerely by talking,more generally, I provide a more complete view and approach to the study of leadership, forming a baseline for future research. Third, while most leadership literature and much

empirical research have largely dealt with leader- ship effects at the individual or dyadic level of analysis, the findings of this study contribute to the leadership literature by revealing the effect of lead- ership at a higher level of analysis (i.e., business). To date, the vast majority of research has focused pri- marily on behavioral outcomes of leadership, leav- ing research at the business level (e.g., productivity) almost unexplored. To the best of my knowledge, no research has thus far linked leadership in general and LBE in particular with productivity and service quality. This study therefore contributes to the leadership literature by providing empirical evi- dence at the business level of analysis for the effect of leadership on core performance. The study also contributes to the stand-alone lit-

erature on organizational core values. Organiza- tional core values are widely studied and have been identified as a primary example of a specific domain that leadership researchers should isolate (House & Shamir, 1993; Schein, 2010). However, prior to this study, there has been no effort to examine core value manifestation as an organizational practice to create value for different stakeholders (e.g., employees, customers, and shareholders). This study provides a first look at its business consequences. The study also considers a key aspect of core values—that is, the way values are manifested. Whereas prior re- search has focused largely on the content of core values (O’Reilly et al., 1991), I focus on a less explored aspect of organizational core values, concentrating

on a written manifestation channel and its effect on outcomes at the business level. The study also contributes to resource manage-

ment theory. The findings of the study show that the synergistic effect jointly conveyed by practical and conceptual representations maximizes value crea- tion. Specifically, I demonstrate that the interactive effect of LBE and core value manifestation enhances engagement, productivity, and service quality at the store level. This expands our existing understanding of how motivation-enhancing resources can be stra- tegically integrated to positively affect business outcomes and create value to the entire organization and its stakeholders. This study also contributes to the integration of the micro and macro literatures, demonstrating that communicating the organiza- tional core values plays an important role in the process of creating value (i.e., an engagedworkforce, and enhanced productivity and service quality) by clarifying the link between organizational resources (i.e., LBE) and the organization’s ultimate purpose.

Implications for Management

The results of this study make a concrete practical contribution to managers, who, by leading by ex- ample, can help an organization bemore productive, serve its clients better, and fulfill the psychological needs of their employees. These findings indicate that LBE has an important, explicit impact not only on employees but also on business-level perfor- mance. Rather than seeing LBE as a peripheral attri- bute of leadership, this study establishes it as important to cultivating an engaged workforce and improving store-level productivity and service quality. Further, by integrating LBE with organiza- tional core values as a uniform strategy for the pro- vision of organizational expectations and objectives, practically as well as conceptually, the potential of organizational capacity and value are extracted. Managers should therefore embrace LBE and recog- nize its potential to create organizational value. Indeed, LBEmay very well be the answer to one of

the most pressing questions leaders keep asking: “How can I enhance an engaged workforce to gain a competitive advantage?” Recent engagement sur- veys in the United States have indicated that only one third of all employees are fully engaged at work (Harter, 2018). Thus, implementing LBE as a new leadership mechanism and tool for cultivating the engagement levels of employees canhave great value formanagers aswell ashuman resourcemanagement departments that are continuously looking for fresh

474 Academy of Management Journal April

ingredients to engage their human capital. Leader- ship training programs and the criteria for promoting managers should be aligned accordingly; specifi- cally, they should develop current leaders into ex- emplary ones and promote managers to key influential positions who are leading by doing and serving as role models for their employees. Although the study’s findings confirmed the sub-

stantive positive effect of LBE, there might also be downsides to this type of leadership for the organi- zations involved and their leadership, such as an overinvestment of time, emotional exhaustion, and the likelihood of increased employee dependency on their leaders’ activities. I also recognize that there are contexts in which LBE might be more challeng- ing; for example, the size of the organization or manager’s rank in the organizational hierarchy may lessen the appeal of LBE due to the required time and effort. Nevertheless, while I acknowledge that LBE demands time—and one of leadership’s biggest concerns is effective timemanagement—this may be time that is well worth taking.

Limitations and Directions for Future Research

Although the current two-time-point panel data study was derived from three sources of data sets (employees, financial results, and secret shoppers), it is not without limitations. First, although I have attempted to reduce commonmethodological biases by using a multisource, three-year panel data design and by arranging a three-month lag between the in- dependent variables and business-level perfor- mance, this detailed design does not fully facilitate a causal inference of the proposed effects. Future re- search using experimental design would enable a more decisive test of these causal relationships. Second, I acknowledge that employees’ subjective ratings may not perfectly reflect the actual LBE demonstrated by the store manager, and may be af- fected by factors such as social desirability and employee–leader relations. Nevertheless, I tried to minimize these factors by ensuring that employee questionnaires were completely anonymous, by as- suring the confidentiality of their answers, and refraining from any involvement of store leaders in the data collection and research process. Third, while this research examines the effect of LBE on productivity and service quality, above the influen- tial role of charismatic leadership, other leadership characteristics are likely to influence business per- formance, including ethical leadership and behav- ioral integrity. Future research could therefore

further disentangle the relationship between LBE and other leadership-related constructs. The model developed and tested in this study may be a useful approach to clarifying howLBE is similar yet distinct from traditional leadership approaches. Fourth, while this is the first attempt to explicitly

evaluate how core value manifestation through written statements influences businessperformance, this is only one mechanism of manifesting organi- zational core values. It would be of value to examine other potential ways of communicating core values (e.g., leader speeches and organizations’ conferences and videos). Building on the study’s findings of the business value of core value manifestation, future research would greatly benefit by continuing to re- fine the conceptualization and operationalization of core value manifestation. Doing so would provide a promising venue to advance both micro- andmacro- management theory with regard to leadership and how core values strategically affect business perfor- mance outcomes. Future research may also examine LBE in the context of national core valueswhere LBE may be more or less influential, or even contradic- tory. For instance, while some cultures grant greater latitude to authority than others (e.g., power distance inWestern vs. Eastern cultures; Bass, 1997; Hofstede Insights, 2019), it is reasonable to expect that it may affect the impact ascribed to “leading by doing.” Fifth,while I argued that the impactofLBEcan trickle

down through a cascading process (Schaubroeck et al., 2012) andcommunication channels (Barsade&Mesiek, 2004), particularly in contemporary organizations where technology, social media, and the Internet are commonly used as organizational and motivational tools (Toubiana&Zietsma, 2017), the samplewas taken from one retail chain of medium-sized stores. Future research may therefore extend the model of this study by examining this cascading process at a higher level of analysis (i.e., organization) and different context (e.g., high tech). Sixth, I tested the study’smodel only in Israel. Nevertheless, I note that Israel could be consid- ered amicrocosm formanagement studies representing freemarketnorms (Harel&Tzafrir, 1999), as its business firms share similar financial objectives, service expec- tations, anddesire for anengagedworkforce toWestern, industrial countries (Hofstede Insights, 2019; Sagie & Weisberg, 2001).

CONCLUSIONS

LBE is frequently emphasized by organizational consultants who often suggest that managers exem- plify expected employee behaviors. Perhaps because

2021 Eldor 475

it is widely stressed by practitioners, it has become more a catchphrase than an empirically valid, con- crete academic topic. Departing from the dominant employee-level analysis of leadership research, I demonstrate that LBE does indeed generate value in terms of a workforce’s level of engagement, produc- tivity, and service quality. I further demonstrate how leaders can foster the effect of their exemplary lead- ership in theirworkplace by integrating LBEwith the conceptual domain of organizational core values. Though not necessarily easy to incorporate in the already-hectic managerial routine, leaders should embrace LBE as a powerful leadership practice and motivational mechanism that can provide abundant rewards for organizations and for the variety of stakeholders involved.

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Liat Eldor ([email protected]) is a postdoctorate researcher and senior fellow at the Center for Human Re- sources in the Management Department at the Wharton School, University of Pennsylvania. Her current research focuses on organizational and macro-level factors that in- fluence employee–organization relationship and collective employee engagement, with particular emphasis on culti- vating organizational productivity and service quality.

480 Academy of Management Journal April

APPENDIX A

TABLE A1 Reverse Causality Fixed-Effects Regression Checks of the Effect of Engagement, Productivity, and Service Quality on LBE at

the Store Level of Analysis

Dependent Variable

LBE

Model A1 Model A2 Model A3

Engagement 0.083 (0.097)

Productivity 0.000 (0.000)

Service Quality 20.002 (0.029)

Store Controls Tenure 0.000 20.001 20.024*

(0.000) (0.003) (0.014) Size 20.007 20.002 20.002

(0.004) (0.001) (0.006) If outsourced workers are employed 0.021** 0.009** 0.010

(0.007) (0.003) (0.013) Leader Controls Leader general tenure 0.008 20.002 20.011

(0.008) (0.003) (0.014) Tenure as a leader 20.009 20.001 0.015

(0.011) (0.004) (0.024) Leader age 20.004 0.001 20.002

(0.006) (0.003) (0.015) Employee Controls Employee tenure 0.211** 20.003 0.184*

(0.051) (0.026) (0.085) Employee age 20.035* 20.004 20.074*

(0.015) (0.008) (0.041) Constant 3.704*** 3.151*** 5.441***

(0.478) (0.235) (0.905) Observations 699 699 699 R2 0.798 0.210 0.446 Year FE Yes Yes Yes Store FE Yes Yes Yes

Notes: Robust standard errors are reported in parentheses (n5 233). LBE5 leading by example; store tenure5 the number of years a store operates; store size 5 the number of employees. FE5 fixed effect; 15 year is fixed effect, 2 5 year and store are fixed effects.

†p , .10 *p , .05 **p , .01 ***p , .001

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APPENDIX B

TABLE B1 Fixed-Effects PanelRegressions of theNonlinearRelationship betweenLBEandStore-Level Productivity andServiceQuality

Dependent Variable Productivity Service Quality

Effect LBE 59.845* 0.050*

(35.514) (0.023) LBE squared 7.705 0.004

(5.098) (0.002) Store Controls Tenure 1.197*** 0

(0.372) (0.000) Size 2.478*** 20.005

(0.232) (0.007) If outsourced workers are employed 0.325 20.014

(0.397) (0.010) Leader Controls Leader tenure 0.399 0.009

(1.055) (0.027) Leader age 0.332 20.024*

(0.550) (0.014) Employee Controls Employee tenure 9.826*** 0.050

(2.949) (0.047) Employee age 20.774 20.009

(0.969) (0.025) Constant 456.235 12.781

(108.832) (0.546) Observations 699 699 R2 0.551 0.452 Year FE Yes Yes Store FE Yes Yes

Notes: Standard errors clustered at the store level are reported in parentheses (n 5 233). LBE 5 leading by example; store seniority 5 the number of years a store operates; store size5 the number of employees. FE5 fixed effect; 15 year is fixed effect, 25 year and store are fixed effects.

†p , .10 *p , .05 **p , .01 ***p , .001

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