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doi: 10.1111/padm.12214

TRANSFORMATIONAL LEADERSHIP AND THE USE OF NORMATIVE PUBLIC VALUES: CAN EMPLOYEES BE INSPIRED TO SERVE LARGER PUBLIC PURPOSES?

SANJAY K. PANDEY, RANDALL S. DAVIS, SHEELA PANDEY AND SHUYANG PENG

This article asks whether and how transformational leadership in the public sector can influence the use of normative public values in organizational decisions. We focus on transformational leader- ship’s influence on three core normative public values (representation, equity, and individual rights). The extent to which public organizations and their employees emphasize normative public values in their decision-making can signal important messages to external stakeholders about respect for and responsiveness to all citizens, valuing citizens from different walks of life equally, and respect for constitutionally guaranteed rights. We propose a model in which transformational leadership has a direct influence (infusing) and an indirect influence (convincing others) on employee use of public values in organizational decision-making. Empirical tests provide support for the proposed model, with the indirect influence (convincing others) providing a stronger impetus. The article concludes with a discussion of the results and implications.

Building on Burns’s (1978) seminal contribution, a number of generic/mainstream man- agement scholars have made significant contributions to the study of transformational leadership (see Bass and Riggio 2006 for a synthesis). The use of values is at the heart of transformational leadership and therefore a number of scholars have characterized trans- formational leadership as ‘values-based leadership’ (e.g. Shamir et al. 1993; Brown and Trevino 2009). This scholarship, however, does not seek to identify specific values or study the inculcation or use of specific values as an important outcome. Instead, the outcomes of interest pertain to business metrics such as quality, teamwork, cost effectiveness, and profitability (Bass et al. 2003; Cha and Edmondson 2006).

Studies referring to public sector transformational leadership confirm a similar pattern (Fernandez 2005; Kuipers et al. 2014; Moynihan et al. 2014). For example, two recent stud- ies focus on the effect of transformational leadership on employee use of performance information (Moynihan et al. 2012; Kroll and Vogel 2014). Other studies examine the influ- ence of transformational leadership on follower satisfaction, organizational goal clarity, and performance (Oberfield 2012; Vigoda-Gadot and Beeri 2012; Bellé 2013; Caillier 2014; Jacobsen and Andersen 2015).

As a result, we know little about whether and how transformational leadership can fos- ter the use of normative public values in the public sector. This is matter of great import, and many public administration scholars have made a case for the important role of pub- lic sector leaders in upholding and advancing normative public values (Terry 1998; Beck Jørgensen 1999; Denhardt and Denhardt 2003; Bozeman 2007; Hartley et al. 2015). Public values encapsulate a normative consensus about citizen rights and obligations, and pro- vide the underpinnings for public policy and government action (Bozeman 2007). Under- scoring the crucial role organizational leaders play in the use of public values, Nalbandian

Sanjay K. Pandey is at the Trachtenberg School of Public Policy and Public Administration, George Washington Univer- sity, USA. Randall S. Davis is at the Department of Political Science, Southern Illinois University, USA. Sheela Pandey is at the Center for Organization Research and Design, Arizona State University, USA. Shuyang Peng is at the School of Public Administration, The University of New Mexico, USA.

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(2005, p. 311) notes that effective city managers forge ties with the community ‘on solid foundations of public values’. City managers, as leaders of their organizations, can accom- plish this if they influence other managers to use public values in decision-making.

This leads to the key questions we examine in this article on whether and how transformational leaders in the public sector can influence the use of normative pub- lic values in organizational decisions. Early and ongoing debates on authentic versus pseudo-transformational leadership provide an important lens with which to examine whether or not transformational leaders can influence the use of normative public values (Bass and Steidlmeier 1999; Price 2003; Hutchinson and Jackson 2013). On one side is the classic formulation of transformational leadership that highlights authentic transforma- tional leadership as an exercise steeped in morality. This morality is deontological and other-regarding, and is therefore expected to be supportive of the use of public values. On the opposing side are two major lines of dissent. First, there is the argument about the ‘dark side’ of transformational leadership, positing that it can be directed to serving self-interested ends, thereby subverting larger collective purposes (Conger and Kanungo 1998). Second, scholars focused on the public sector and cross-sector collaboration argue that transformational leadership has a performance-oriented technical bent and cannot be expected to have an influence on civic and other-oriented values of employees (Denhardt and Campbell 2006; Sun and Anderson 2012). This disagreement is amenable to an empirical test.

Such an empirical test requires choosing a set of public values. Although there is no consensus on a definitive list of public values, it is possible to identify public values around which there is widespread agreement. A number of scholars have argued about the unique role of the public sector in promoting certain values (Nalbandian and Edwards 1983; Van der Wal et al. 2008; Moore 2014; Witesman and Walters 2014). These include values such as equity, representation, and individual rights. Taken together, these values fall in the important domain where citizen concerns and public management actions intersect (Beck Jørgensen and Bozeman 2007). Bozeman and Johnson (2015) call such values ‘normative public values’ because they offer compelling justification for government action to ensure that all citizens are heard, respected, and treated equally.

How then can transformational leaders foster the use of normative public values in organizational decisions? We propose that transformational leaders motivate their follow- ers to embrace normative public values through two pathways – direct appeal (infusion pathway) and through an appeal to follower values (convince others pathway). We test our propositions using data from Phase IV of the National Administrative Studies Project (NASP-IV) that surveyed senior managers in local governments. We begin with a brief overview of the public values concept we employ and then map out potential linkage between transformational leadership and public values. Next, we introduce the study model and hypotheses. This is followed by the methods section, which provides details on data collection and measurement. Then, we present analysis and findings, which pro- vide support for both a direct and an indirect effect of transformational leadership on the use of public values in organizational decisions. We conclude with a discussion of study implications.

NORMATIVE PUBLIC VALUES AND TRANSFORMATIONAL LEADERSHIP

Public values have been an area of remarkable scholarly activity in recent years with sym- posia published in the Public Administration Review in 2014 and the American Review of

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Public Administration in 2015. (For completeness sake, we want to note that the PAR sym- posium was steeped in Mark Moore’s notion of public value, which is distinct from public values.) Although this research is bringing new perspectives to the study of public val- ues, assessments of progress routinely note that it is ‘relatively little’ (e.g. Davis and West 2009; Beck Jørgensen and Rutgers 2015). This is not unexpected because, ‘public values … brings with it all the associations and confusions of the two highly ambiguous and contested concepts it unites: Public and Value’ (Beck Jørgensen and Rutgers 2015, p. 4). Despite the multiplicity of perspectives, there is meeting of minds when it comes to public values that derive from the institutional role of the public sector in society.

This institutional perspective on the public sector recognizes the unique role of pub- lic organizations in society. Moore (2014, p. 466) describes this role as one of promoting ‘deontological values that account for the degree to which government has acted fairly and justly toward its individual citizens’. The inviolability of such values is echoed by Davis and West (2009, p. 608) who note that ‘some public values are tough or core: … and are not readily exchanged for other values’. Beck Jørgensen and Rutgers (2015) take up this theme by cautioning against the reductionist tendency to conflate such core values with individual values such as public service motivation.

Both recent and classic scholarship on public values has embraced the distinctiveness of the institutional role of the public sector and its prerogative as a promoter of deontolog- ical values (Nalbandian 1991; Van der Wal et al. 2008; Moore 2014; Peng et al. 2015). Beck Jørgensen and Bozeman (2007), in their study of public values inventory, have noted strong normative consensus around some core values when it comes to interactions between cit- izens and government. Writing in the context of municipal government, Nalbandian and colleagues have specified a set of core public values (Nalbandian and Edwards 1983; Nal- bandian 1991, 2005).

It is not practical to include a full set of public values and therefore we focus on three core normative public values, namely representation, equity, and individual rights. Rep- resentation is a crucial value in representative democracies. Nalbandian (2006, p. 1054) notes that representation is ‘based on the understanding that elected officials represent citizens in the absence of direct democracy’. When elected officials embrace this value, public managers are more likely to carefully weigh the implications of their decision for all segments of the citizenry. Equity can fuel fierce debates. Equity demands a just distribu- tion of resources and ensuring that there are ‘no second-class citizens’ (Nalbandian 2006, p. 1054). Individual rights include both property rights and civil rights and give meaning to constitutionally sanctioned due process ‘designed to prevent capricious and arbitrary government action’ (Nalbandian 2006, p. 1054). The extent to which public organizations and their employees emphasize these normative public values in their decision-making signals important messages to external stakeholders about respect for and responsiveness to all citizens, valuing citizens from different walks of life equally, and respect for consti- tutionally guaranteed rights.

Transformational leadership and normative public values Burns (1978, p. 19) defined transformational leadership thus: it ‘occurs when one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality’. Values were at the centre of Burns’s (1978) con- ceptualization of transformational leadership. Burns saw values as the ultimate levers for exercising influence, and argued that leaders who are at the most advanced stage of moral development are able to build support for universal values such as ‘justice and empathy’.

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Burns distinguished between ‘self-involved’ and ‘public-involved’ values, and argued that in order to rise to a higher moral plane, leadership needs to overcome multiple, press- ing, and specific daily needs associated with maintenance and promotion of self-involved values.

Although a number of leadership scholars have elaborated upon Burns’s concept of transformational leadership, the work of Bass and colleagues has attracted the greatest following (Bass 1985; Bass and Riggio 2006). Bass’s (1985) conceptualization of trans- formational leadership recognizes the importance of articulating a compelling vision. Transformational leaders exercise influence through three mechanisms, namely, idealized influence, intellectual stimulation, and inspirational motivation. In exercising idealized influence, leaders function as role models. Intellectual stimulation involves encourag- ing employees to think of old problems in new ways, and inspirational motivation is accomplished by articulating an appealing vision of the organization. A fourth dimen- sion, individualized consideration, is now regarded as being more transactional than transformational (Wright and Pandey 2010, p. 77).

Both accounts of transformational leadership offered by Burns and Bass work by acti- vating followers’ higher order goals and therefore offer plausible mechanisms by which organizational leaders can influence the use of normative public values. Burns’s concep- tion and portrayal of transformational leadership as raising followers to a higher plane of morality is more consistent with the pursuit of normative public values. Bass’s focus on leadership behaviours seems more technical and geared more towards the means and less towards the ends. However, Bass and Steidlmeier (1999) introduced the idea of authentic transformational leadership which is very similar to Burns’s model and would arguably have a similar effect.

MODELLING THE INFLUENCE OF TRANSFORMATIONAL LEADERSHIP ON NORMATIVE PUBLIC VALUES

Our key concepts are: transformational leadership, employees’ value congruence with organizational values, and employees’ use of public values in organizational decision-making. Value congruence is the extent to which individuals’ values match with the organizational values (Edwards and Cable 2009). We propose two mechanisms through which leaders exercise influence on the use of normative public values, a direct effect which we call the ‘infusion pathway’ and indirect effects which we call the ‘convince others pathway’. Our naming of these two mechanisms draws upon Wilson’s work (1989, p. 217).

We expect transformational leadership to instil and increase use of normative public values and to increase value congruence. Value congruence, in turn, is expected to exercise a positive influence on the use of public values by employees. In addition, we propose a moderated effect of transformational leadership on the use of normative public values. In other words, we propose that the effect of value congruence on normative public values is contingent on the level of transformational leadership. Figure 1 provides a conceptual diagram illustrating the infusion and convince others pathways in both the mediation and moderation models.

Transformational leadership and public values – the ‘infusion pathway’ Burns’s (1978) original conceptualization of transformational leadership emphasized the power of values. Burns did not claim this as an original insight; instead, he argued that this

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FIGURE 1 Conceptual diagram

perspective has been handed down from antiquity going back to Plato. He went so far as to call leadership ‘a process of morality’ that engaged follower values (Burns 1978, p. 7). A number of scholars are sceptical about this, even suggesting that the charismatic influence exercised by transformational leaders may have a dark side (Conger and Kanungo 1998). The contention of those who caution about this dark side is that idealized influence and inspirational motivation, the two commonly associated mechanisms through which trans- formational leaders exercise influence, make followers emotionally vulnerable and subject to being misdirected or exploited. Price (2003), for example, argues that leaders, by virtue of their position, often come to hold beliefs that undercut authentic transformational lead- ership. This could include regarding themselves as ‘excepted from moral requirements that apply more generally to the rest of us’ (p. 69) and therefore lead to thinly disguised self-interested and exploitative behaviours. Similarly, Hutchinson and Jackson (2013) note that the ‘dark side’ of transformational leadership exists because a lower capacity of cog- nitive moral reasoning can coexist with transformational behaviours.

Bass and Steidlmeir (1999) contend that such a characterization is more appro- priate for pseudo-transformational leaders: ‘[Authentic] transformational leadership must rest on a moral foundation of legitimate values. The opposite is inauthentic or pseudo-transformational leadership, that of leaders who consciously or unconsciously act in bad faith’ (p. 184). A recent study by Groves and LaRocca (2011) provides empirical support for the contention that transformational leadership indeed has a positive effect on follower values. Groves and LaRocca (2011, p. 522) offer the following assessment of their empirical findings: ‘Transformational leadership was strongly associated with leader deontological values, suggesting that such leaders’ strong beliefs in altruism,

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universal rights, and principles lay the groundwork for enacting the key motivational and inspirational behaviors that drive impressive leadership outcomes … ’ According to Groves and LaRocca, followers see transformational leaders as having a deontological (as contrasted with teleological) ethical frame. They identify with followers and do not see them as mere means to achieve leaders’ ends and therefore engage with followers in an authentic (and not instrumental) manner.

Public management research on managing employee values is consistent with Groves and LaRocca. Paarlberg and Perry (2007, p. 405) note that employees are not motivated merely by ‘values of the organization’. Based on empirical findings, they contend that ‘employees are motivated by broad societal and cultural values’ (p. 405). Normative pub- lic values, comprising equity, representation, and individual rights, contain deontological imperatives moulded and shaped in the broader social realm in representative democra- cies. Organizational leaders in the public sector can reinforce these values in articulating the organization’s vision, mission, values and goals. Given organizational goal ambiguity, a defining feature of public organizations, transformational leaders have the opportunity to talk about values and highlight the moral and ethical consequences of key decisions (Rainey 1982; Pandey and Rainey 2006; Sun et al. 2014). We, therefore, expect that trans- formational leaders will succeed in infusing organizations with normative public values, which in turn will result in greater use of normative public values in follower-employees’ decision-making. Therefore, we hypothesize:

Hypothesis 1: Transformational leadership is positively associated with the extent to which employees report that public values are used to make major organizational decisions.

Transformational leadership, value congruence and public values – the ‘convince others’ pathway Whereas the direct or ‘infusion pathway’ works by raising the attractiveness of broader social and public priorities, the ‘convince others pathway’ works through individual–organizational value congruence. Aligning individual values with collec- tive/organizational values is one of the key processes that transformational leaders use. Bass (1985) has argued that the level of value congruence should be a key variable in evaluating the influence of transformational leaders on followers. Further, value congru- ence has a demonstrated positive effect on follower performance, work attitudes, and behaviours (Meglino et al. 1989; Jung and Avolio 2000; Edwards and Cable 2009).

We argue that the public sector provides unique opportunities for transformational leaders to raise value congruence. Public employees are attracted to the public sector because they expect to derive fulfilment and satisfaction from public sector work but they are frustrated by organizational goal ambiguity and pervasive formal and informal constraints (Pandey and Stazyk 2008; Stazyk et al. 2011). A number of scholars, over time, have described these frustrations variously as ‘frustrated service ethic’ (Buchanan 1975), ‘resigned satisfaction’ (Giauque et al. 2012), etc. Others report on the negative effects of organizational tenure on public service values (e.g. Moynihan and Pandey 2007).

Transformational leaders can break through this frustration on both affective and cog- nitive levels by providing a ‘clear line of sight’ between organizational values and public values (Paarlberg and Perry 2007). In a comparison of high and low performing work units, Paarlberg and Perry (2007, p. 404) document that both employees and managers in high performing work units see interactions as having a personal and social component. Transformational leadership and its three key mechanisms – idealized influence, inspira- tional motivation, and intellectual stimulation – can break the ennui or meaninglessness

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employees experience when they are unable to see how their work makes a difference. Goodsell (2010) features one such leader, Jake Jacobsen, who transformed his agency by emphasizing individual rights of clients. His agency, like other social service agencies, had the twin challenge of serving ‘welfare’ recipients who are unfairly stigmatized and doing this with employees who feel powerless and frustrated. At the top of Jake Jacobsen’s list in transforming the agency was influencing employee attitudes towards clients, encouraging them to recognize their individuality, and treating the individual client in a respectful and holistic manner (Goodsell 2010).

Recent research on public sector transformational leadership has highlighted the salience of indirect effects of leadership. Writing about the indirect effects of trans- formational leadership, Moynihan et al. (2014, p. 98) note that, ‘The indirect effects of leadership may be among the most powerful but the easiest to miss.’ They summarize and point to a number of such mediating variables arguing that top leaders who serve in generalist functions have the most influence by setting the stage for change in these conditions that in turn lead to desired outcomes. For example, they argue that leaders can influence employee perceptions of red tape by influencing internal communication in the organization.

However, there are good arguments and evidence in support of accounting for the mod- erating effects in addition to a mediating effect. Lord et al. (1999) proposed that the effec- tiveness of leadership is contingent on the match between values and identities promoted by the leaders and the values and identities embedded in followers’ self-concept, arguing that transformational leadership is most effective when follower self-concept is defined at the organizational/collective level. This is in line with the argument that transformational leadership’s moderating effect is due to a ‘dual effect of fostering the positive and prevent- ing the negative effects’ of organizational circumstances (Shin and Zhou 2007; Kearney and Gebert 2009, p. 80). Transformational leadership, thus, creates favourable conditions for accentuating the positive relationship between employee beliefs and work-related out- comes. Thus, our expectation is that transformational leadership bolsters the relationship between value congruence and the application of normative public values to organiza- tional decisions. In order to account for the entirety of indirect effects of transformational leadership, both mediating and moderating effects need to be taken into account. There- fore, we offer the following hypotheses:

Hypothesis 2: Transformational leadership is positively associated with the level of value congruence reported by the employees.

Hypothesis 3: The level of value congruence reported by the employees is positively associated with the degree to which they believe public values are used in major organizational decisions.

Hypothesis 4: The positive influence of employee value congruence on the degree to which employees believe that public values are used in major organizational decisions will be more pronounced as the transformational leadership behaviours of organizational superiors increases.

METHODS

Data collection This study uses data from Phase IV of the National Administrative Studies Project (NASP-IV). NASP-IV data were collected from a nationwide sample in United States local government jurisdictions with populations of greater than 50,000. NASP-IV surveyed city managers, deputy/assistant city managers and agency heads. The agency heads managed

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one of the following functions: Finance/Budgeting, Public Works, Personnel/HR, Eco- nomic Development, Parks and Recreation, Planning, and Community Development. The sampling frame was generated with the assistance of the International City/County Management Association. The final sample included 3,316 respondents. When data collection ended, 1,538 respondents had completed the survey, for a response rate of 46.4 per cent. The 1,538 respondents came from 545 municipalities.

The analytic database comprised responses from a nationwide sample of agency heads of seven different functional areas of municipal government (N = 1,097) enumerated earlier. For the purposes of this analysis, we excluded responses from city managers and deputy/assistant city managers because respondents were asked to assess the trans- formational leadership of the city manager. The city manager is the top administrative leader of the municipal organization and typically reports only to governing bodies composed of elected officials. Select demographic characteristics of respondents used for this analysis are provided in table 1. The average age of study participants was 51.1 with an inter-quartile range of 11. In the study sample, a majority of respondents were male (67.8 per cent), white (83.2 per cent), highly educated (more than 54 per cent with graduate degrees), and well compensated (55.7 per cent with salaries over $100,000).

Measurement, control variables, and measurement model We used multiple survey items to operationalize the study variables – transformational leadership, value congruence, and normative public values. Transformational leadership was measured using five items adapted from the work of House (1998), value congruence was assessed with three items adapted from the work of O’Reilly and Chatman (1986) and Porter et al. (1974) and finally normative public values were measured with three items adapted from the work of Galloway and Edwards (1982) and Nalbandian and Edwards (1983). The appendix provides extensive information on all the study measures. We also used five control variables to account for alternative explanations. These include the size of the agency, type of agency, council manager government form, organizational tenure of the employee, and employee’s level of education. We control for the size of city government (operationalized as the number of employees) because it may be easier to attain value congruence in smaller organizations and also for the effects of transformational leadership to become manifest.

For similar reasons, we use type of agency as a control variable. To account for this, we divided organizations into two kinds – control agencies and service agencies. Control agencies (e.g. finance/budget agencies, human resource/personnel agencies, in our sample) are organizational departments whose clients are primarily other government agencies. External service providers are agencies that provide direct service to the public. Transfor- mational leadership may also be easier to attain in a council-manager form of government given the expanded political and leadership roles of city managers. To account for this, we include a variable that identifies the form of government. We also use two individual characteristics as control variables. We expect education to have an important influence on values. In particular, we expect respondents with a Masters in Public Administration (MPA) or related graduate degree to be different from others. We also control for the time spent in the organization because the length of association with the organization can have a major influence on employee values. We provide descriptive statistics for all observed items included in the model in table 2 and the frequencies for model items in table 3.

We used confirmatory factor analysis (CFA) to examine the measurement model prior to constructing the structural equation models (SEM) for hypothesis testing. Mplus version 7

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TABLE 1 Respondent demographics

Frequency Percent

Race Hispanic 40 3.6% African American 69 6.3% White 913 83.2% Asian/Pacific Islander 25 2.3% Other 11 1.0% Total 1,058 96.4% Missing 39 3.6% Total 1,097 100.0%

Job Finance/Budgeting 189 17.2% Public Works 179 16.3% Personnel/HR 167 15.2% Economic Development 118 10.8% Parks and Rec. 211 19.2% Planning 168 15.3% Community Dev. 65 5.9% Total 1,097 100.0%

Education Some College 42 3.8% Bachelor’s Degree 416 37.9% MPA 270 24.6% Other 331 30.2% Total 1,059 96.5% Missing 38 3.5% Total 1,097 100.0%

Sex Male 744 67.8% Female 353 32.2% Total 1,097 100.0%

was used to examine the CFA and all associated SEM models. Figure 2 presents the confir- matory factor model illustrating the standardized correlations between transformational leadership, value congruence, and the application of public values to major organizational decisions.

The findings presented in figure 2 indicate that this measurement model fits the data well (χ2(41) = 148.211, p < 0.001, RMSEA = .049, CFI = .980, NNFI(TLI) = .973). The results from the CFA model indicate that relatively high proportions of variance (between 57.5 per cent and 87.5 per cent) in questionnaire items are accounted for by the theoretical con- structs, which indicates that we have reasonably measured the constructs of interest. Our results also indicate that all model constructs are positively correlated, and significant at p ≤ 0.001.

ANALYSIS AND FINDINGS

Given that the CFA model fits the data reasonably well, and all parameters are in the expected direction, we proceeded with an examination of the structural equation models. Figure 3 provides the standardized parameter estimates for the structural equation model (SEM). The SEM confirms hypotheses 1 and 2 that transformational leadership positively

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TABLE 2 Descriptive statistics

Mean S.D. Min. Max

1 Normative Public Values1 (equity) 4.761 1.150 1 6 2 Normative Public Values 2 (representation) 4.890 1.102 1 6 3 Normative Public Values 3 (individual rights) 4.946 1.053 1 6 4 Value Congruence 1 (valuable) 4.855 1.023 1 5 5 Value Congruence 2 (priorities) 4.620 1.123 1 5 6 Value Congruence 3 (compatible) 4.341 0.419 1 5 7 Transformational Leadership 1 (vision) 3.845 0.675 1 5 8 Transformational Leadership 2 (example) 4.023 0.853 1 5 9 Transformational Leadership 3 (new thinking) 3.941 1.030 1 5 10 Transformational Leadership 4 (proud) 4.020 0.979 1 5 11 Transformational Leadership 5 (sense of future) 3.850 1.025 1 5 12 Current Tenure 13.140 9.541 0 42 13 Number of Employees 1,747.220 3,201.337 25 40,000 14 Council-Manager Government 0.718 N/A 0 1 15 MPA Degree 0.255 N/A 0 1 16 Service Agency 0.675 N/A 0 1

See appendix for item wording.

TABLE 3 Item frequencies for manifest variables

Frequencies 1 2 3 4 5 6

1 Normative Public Values 1 (equity) 6 24 83 254 409 267 2 Normative Public Values 2 (representation) 5 15 73 205 446 301 3 Normative Public Values 3 (individual rights) 1 23 72 215 360 375 4 Value Congruence 1 (valuable) 2 1 13 119 944 N/A 5 Value Congruence 2 (priorities) 5 13 50 252 761 N/A 6 Value Congruence 3 (compatible) 12 40 79 385 563 N/A 7 Transformational Leadership 1 (vision) 43 137 133 385 370 N/A 8 Transformational Leadership 2 (example) 37 92 138 344 458 N/A 9 Transformational Leadership 3 (new thinking) 25 101 171 384 385 N/A 10 Transformational Leadership 4 (proud) 30 59 191 367 420 N/A 11 Transformational Leadership 5 (sense of future) 45 97 205 348 374 N/A

influences both value congruence (standardized β = .550, p < 0.001) and the use of norma- tive public values in organizational decisions (standardized β = .106, p < 0.05). The results also indicate that value congruence is positively related to the degree to which one believes that organizational decisions account for normative public values (standardized β = .207, p < 0.001), which supports hypothesis 3.

Although figure 3 illustrates several direct relationships between model constructs, it does not provide information regarding the overall influence of transformational leader- ship on the application of public values. Transformational leadership influences the appli- cation of public values directly, but it also influences the application of public values indi- rectly through value congruence. Indirect effects are estimated as the product of multiple direct effects (Kline 2005). In this model the indirect effect of transformational leadership on public values through value congruence is .114 (p < .001). The total effect is then calcu- lated by adding the direct relationship between the independent and dependent variables

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FIGURE 2 Standardized parameter estimates for CFA model

to the indirect effect. In this case the overall effect of transformational leadership on the application of public values to major organizational decisions is .220. Taking both the direct and indirect effects into consideration indicates that the influence of transformational lead- ership on the application of public values is positive.

In the SEM we also added five model covariates including tenure, education, number of employees, form of government, and department to fully examine the relationships between transformational leadership, value congruence, and the application of public val- ues to organizational decisions. There are two significant relationships between the control variables and the constructs of interest in this study. First, those employees who work in service departments exhibit higher degrees of value congruence compared to those who work in control agencies. Second, those employees within council-manager forms of government report higher levels of transformational leadership. Table 4 presents the standardized parameter estimates associated with each of the control variables.

Finally, we sought to explore whether transformational leadership moderated the rela- tionship between value congruence and the application of normative public values to organizational decisions. Moderation and mediation are different processes to the extent that moderation does not imply causality whereas mediation does. The mediated model presented in figure 3 assumes that transformational leadership causes value congruence, and value congruence successively causes the application of public values. Moderation, on the other hand, occurs when the nature of a relationship between a dependent variable and an independent variable changes as a function of a third moderator variable, but there is no assumed causal relationship between the independent variable and the moderator. To examine the possibility of a moderated relationship, based on the recommendations provided by Muthén (2012), we first estimated a model including a latent variable inter- action term. The interaction term between transformational leadership and value congru- ence was significant at p < .01. The significant, positive interaction term indicates that the relationship between value congruence and the application of normative public values to major organization decisions becomes more positive at higher levels of transformational

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FIGURE 3 Standardized parameter estimates for SEM Note: *p = 0.05; **p = 0.01; ***p = 0.001.

TABLE 4 Standardized estimates for model controls

Transformational leadership EST S.E. EST/S.E. p

Tenure 0.017 0.033 0.512 0.609 Number of Employees 0.026 0.035 0.752 0.452 Service Agency −0.010 0.033 −0.303 0.762 MPA Degree −0.004 0.033 −0.126 0.900 Council-Manager Government 0.084 0.034 2.492 0.013

Value congruence EST S.E. EST/S.E. p

Tenure 0.033 0.031 1.074 0.283 Number of Employees −0.006 0.032 −0.190 0.849 Service Agency 0.130 0.031 4.275 0.000 MPA Degree 0.009 0.031 0.308 0.758 Council-Manager Government −0.014 0.031 −0.432 0.666

Normative public values EST S.E. EST/S.E. p

Tenure 0.051 0.036 1.404 0.160 Number of Employees −0.006 0.039 −0.165 0.869 Service Agency 0.007 0.037 0.182 0.856 MPA Degree −0.042 0.036 −1.156 0.248 Council-Manager Government −0.041 0.037 −1.110 0.267

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FIGURE 4 Unstandardized parameter estimates for latent interaction model Note: *p = 0.05; **p = 0.01; ***p = 0.001.

leadership, thus supporting hypothesis 4. To more fully explore the nature of the mod- erated relationship we next removed control variables from the model and followed the steps outlined by Muthén (2012). Figure 4 provides the unstandardized parameter esti- mates from the latent interaction model.

In the final step we plotted the interaction effect to depict the relationship between value congruence and the application of normative public values at different values of transformational leadership. In sum, the graph illustrates that the largest effect of value congruence on the application of public values to major organizational decisions occurs when employees also perceive that organizational superiors exhibit high levels of trans- formational leadership. Figure 5 illustrates the interaction plot.

The findings we present suggest that transformational leadership increases value con- gruence and it increases application of normative public values indirectly by shaping value congruence. In addition, our findings indicate that the relationship between value con- gruence and the use of normative public values is more pronounced at higher levels of transformational leadership. Although it is difficult to evaluate the relative importance of indirect effects against moderation, it is important to point out that transformational leadership is a statistically significant predictor of value congruence in both the media- tion and moderation models. Nevertheless, the results from our moderation model seem particularly important here. Although the relationship between value congruence and the application of normative public values is always positive, the presence of transformational leadership leads to a more rapid increase in the use of public values as value congruence increases. In sum, both these models indicate that transformational leadership is an impor- tant driver of the use of normative public values in organizational decisions.

CONCLUSION

Our study was motivated by the important question of whether and how transforma- tional leadership in the public sector can influence the use of normative public values in organizational decisions. This is a pressing imperative for public sector organizational leaders who are expected to uphold and fulfil normative public values such as equity,

NORMATIVE PUBLIC VALUES AND TRANSFORMATIONAL LEADERSHIP 217

0.5

1.5

2.5

1 2 3 4 5 6 7

N or

m at

iv e

P ub

li c

V al

ue s

Value Congruence

Two-Way Interaction Plot

Transformational Leadership = Mean

Transformational Leadership = +1 SD

Transformational Leadership = -1 SD

FIGURE 5 Relationship between value congruence and public values at varying levels of transformational leadership

individual rights, and representation. The ability of public sector leaders to inculcate into followers specific normative public values associated with democracy is substantively important. This is because decisions that incorporate normative public values send a sig- nal about the legitimacy and trustworthiness of public organizations (Rohr 1986, 2002; Denhardt and Denhardt 2003; Nalbandian 2005). Public sector transformational leaders, in this sense, have the capacity to contribute to the legitimacy of governing institutions.

This study provides evidence that transformational leadership is associated with employees reporting use of normative public values in organizational decisions. First, the significant direct relationship between transformational leadership and the application of normative public values is consistent with the infusion pathway hypothesis (hypothesis 1). Our study, therefore, provides evidence consistent with transformational leaders’ ability to directly influence and instil important public values directly into followers. Transformational leaders may do this by engaging employees in dialogue, in which public values are discussed, assessed, and confirmed or modified.

Second, the significant mediating and moderating relationships support the con- vince others pathway hypotheses. Transformational leaders can encourage followers to believe that their values align with organizational values (hypothesis 2), which increases the reported use of public values in decision-making by increasing value congruence (hypothesis 3). In addition, transformational leaders accentuate the favourable connec- tions between value congruence and the use of normative public values (hypothesis 4). Sizeable literatures in public management indicate that the values and preferences of pub- lic employees differ from employees in the private sector (e.g. Rainey 1982; Nalbandian and Edwards 1983; Houston 2006). This research suggests that public employees may

218 SANJAY K. PANDEY ET AL.

enter the public service already embracing normative public values. However, our find- ings indicate that transformational leadership is important even if employees already hold normative public values. Leaders who display transformational qualities appear to facilitate even better outcomes from already favourable conditions. In sum, the influ- ence of transformational leaders increases the integration of normative public values in follower-employees’ decision-making.

Third, our study reinforces claims that transformational leadership can play an impor- tant role in public organizations. The significance of simultaneously testing the ‘infusion pathway’ and the ‘convince others pathway’ lies in better understanding the contingent benefits of transformational leadership. In other words, this study helps explain the out- comes associated with transformational leadership under favourable and unfavourable organizational conditions. Favourable organizational conditions, in the context of this study, refer to situations where some degree of value congruence already exists. The results from the moderation model illustrate that there is always a positive relationship between value congruence and the application of normative public values, but increases in transformational leadership make the relationship more pronounced.

Unfavourable organizational conditions refer to those circumstances where value con- gruence does not exist prior to the entrance of the transformational leader. The results from the mediation model illustrate that increases in transformational leadership increase value congruence directly, and thereby lead to increased use of normative public values indi- rectly via value congruence. Taken together these results indicate that transformational leadership can benefit organizations under unfavourable circumstances by fostering value congruence, and it can benefit organizations in favourable circumstances by accentuat- ing the positive connection between pre-existing value congruence and the application of public values leading to better outcomes.

Despite the insights offered by these findings, it is important to acknowledge the study’s limitations. First, there are inherent limitations to cross-sectional data in providing evi- dence on actual transformational processes thereby compromising estimation of mediated relationships (Cole and Maxwell 2003; Maxwell and Cole 2007). For example, the mediated relationship between transformational leadership, value congruence, and public values is likely dynamic. Further studies can examine how these processes unfold over time. Sec- ond, we focused on three key normative public values derived from a broader constellation of public values. Including more values could reveal more complex relationships between transformational leadership and public values. It is also important to note that our study focused on employee reported use of normative public values in organizational decisions, which may not completely mirror actual use.

Even though we account for likely alternative explanations, it is possible that other important variables were omitted from the study model. For instance, when examining the effects of transformational leadership on followers’ attitudes and behaviours, previous studies have controlled for variables such as the length of the leader–follower relationship (Shin and Zhou 2003), the amount of time one spends with the leader (Avolio et al. 2004), and tenure of the leader in the organization (Jung and Sosik 2002). These variables can influence the salience of transformational leadership on followers’ use of public values; future research can evaluate our model with such control variables included. Furthermore, our study tested value congruence as the explanatory mechanism linking transformational leadership with the use of public values. Other mechanisms such as empowerment and organizational commitment can be examined to gain a fuller understanding of how trans- formational leaders exercise their influence.

NORMATIVE PUBLIC VALUES AND TRANSFORMATIONAL LEADERSHIP 219

Future research can also test the effect of pseudo-transformational leadership on employees’ use of public values. Barling et al. (2008) operationalize pseudo- transformational leadership as having low idealized influence but high inspirational motivation. Building on previous literature, they argue that pseudo-transformational leaders are equally skilled at conveying ideas and beliefs but the prominent difference is that they prioritize self-interest rather than collective interest and the greater good. Adapt- ing their approach can provide a mechanism to disaggregate transformational leadership into authentic and pseudo-transformational, and to independently evaluate the effects of the two components on the use of normative public values. Despite these limitations, our study breaks away from the familiar course charted by generic/mainstream management scholarship on transformational leadership and initiates a meaningful and relevant line of inquiry into how pubic sector leaders can influence the use of cherished normative public values.

ACKNOWLEDGEMENTS

We are grateful to John Nalbandian, Al Roberts, and three anonymous reviewers for thoughtful critique that has greatly improved our study. We are indebted to and inspired by John Nalbandian’s scholarship on public values. John championed this as an important area of inquiry long before the recent resurgence. Needless to say, any weaknesses are our responsibility. Finally, we want to note that the authorship order reflects the relative level of contribution with the exception that the second author and third author contributed equally and are listed in alphabetical order.

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APPENDIX

Normative public values These items were adapted from the Galloway-Edwards Professional Values Scale (Galloway and Edwards 1982; Nalbandian and Edwards 1983). Respondents rated the importance of specific values in ‘making major decisions about public services in your department’, on a 6-point scale ranging from ‘of little importance’ to ‘extremely important’:

1. Equity (a just distribution of resources) 2. Representation (responsiveness to all residents) 3. Individual rights (property rights, civil rights)

Value congruence Items were based on O’Reilly and Chatman (1986) and Porter et al. (1974). Value congru- ence was assessed using three measures rated on a 5-point scale ranging from ‘strongly disagree’ to ‘strongly agree’, with higher values indicating higher value congruence:

1. This organization provides valuable public services. 2. I believe that the priorities of this organization are quite important. 3. My personal values are compatible with those of this organization.

Transformational leadership The degree to which respondents believe the city manager exhibited transformational leadership was assessed using five measures rated on a 5-point scale ranging from ‘strongly disagree’ to ‘strongly agree’ (based on House 1998), with higher values indicating a higher degree of transformational leadership:

1. Clearly articulates his/her vision of the future. (vision) 2. Leads by setting a good example. (idealized influence) 3. Challenges me to think about old problems in new ways. (intellectual stimulation). 4. Says things that make employees proud to be part of the organization. (inspirational

motivation) 5. Has a clear sense of where our organization should be in five years. (vision)

Model controls We included several control variables to rule out potential alternative explanations. These were:

1. Current tenure measured in years. 2. Number of employees within the organization. 3. Education was dichotomized to reflect those who hold an MPA degree and those who

do not. 4. Department was dichotomized to distinguish service agencies from control agencies.

Control agencies (finance/budget organizations and human resource/personnel agencies) were coded as 0 and external service-providing agencies (public works, parks and recreation, economic development, planning, and community develop- ment) were coded as 1.

5. Form of government was dichotomized such that 1 represents council-manager forms of government and 0 represents all other forms.

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