Journal of Business Ethics (2021) 172:503–524

[Link]

ORIGINAL PAPER

Servant Leadership Influencing Store‑Level Profit: The Mediating

Effect of Employee Flourishing
Vincent J. Giolito1 · Robert C. Liden2 · Dirk van Dierendonck3 · Gordon W. Cheung4

Received: 28 June 2019 / Accepted: 13 April 2020 / Published online: 19 April 2020
© Springer Nature B.V. 2020

Abstract
Servant leadership and other ethical and moral approaches to leadership have been criticized for focusing on followers to
the potential detriment of other stakeholders, specifically shareholders. With individual data collected from 485 respondents
nested in 55 similar stores in a single company, within a large metropolitan area in France, we tested a multilevel model
whereby servant leadership relates positively to business-unit performance measured by profit growth—a key indicator for
shareholders—through the mediation of employee flourishing and revenue growth. With financial performance data col-
lected approximately 15 months after servant leadership was measured, results supported the hypothesized relationships. At
the individual level, this study also showed the association of servant leadership and employee flourishing to be negatively
moderated by individual perceptions of power distance orientation: the weaker the power distance orientation, the stronger
the influence of servant leadership on employee flourishing. Improving on prior studies that relied on data aggregated at the
group level and proximal indicators of performance, this multilevel study sheds light on how servant leadership, a prominent
form of ethically conscious leadership, may resolve the fundamental tension leaders face vis-à-vis the potentially diverging
interests of their stakeholders.

Introduction

Ethical and moral approaches to leadership have received

considerable attention of late, with hundreds of publications
Vincent J. Giolito work was started as part of a doctoral in scholarly, peer-reviewed journals (Anderson and Sun
dissertation at Université Paris-Dauphine (France). 2015; Hoch et al. 2018; Lemoine et al. 2019). Yet recently,
a number of authors have argued that positioning ethics
* Vincent J. Giolito as a core element of leadership may ignore the reality of
giolito@em‑[Link]
organizations in terms of performance and profit (Liu 2019).
Robert C. Liden They argue that moral approaches have a strong focus on
bobliden@[Link]
the good of one group of stakeholders, that is, followers,
Dirk van Dierendonck at the risk of downplaying that leaders are accountable for
dvandierendonck@[Link]
delivering organizational results to multiple stakeholders
Gordon W. Cheung (Banks et al. 2016; Donaldson and Preston 1995), includ-
[Link]@[Link]
ing those demanding financial performance (Mumford and
1
Strategy Department, EMLYON Business School, 23 avenue Fried 2014). In commercial organizations, the effectiveness
Guy de Collongue, CS 40203, 69134 Ecully Cedex, France of a business-unit leader is measured by objective, financial
2
University of Illinois at Chicago, 601 S. Morgan, Room indicators, typically the increase in profit (“bottom-line”)
Number 2232, MC 243, Chicago, IL 60607, USA of the business-unit, as organizational growth is the critical
3
Rotterdam School of Management, Erasmus University, performance indicator for shareholders (Davis et al. 1997;
Burgemeester Oudlaan 50, 3062 PA Rotterdam, Grant 2012).
The Netherlands Servant leadership is prominent among moral and ethical
4
Department of Management and International Business, The approaches to leadership (Eva et al. 2019; Lemoine et al.
University of Auckland, 12 Grafton Rd, Private Bag 92019, 2019). It focuses on humble and self-effacing leaders who
Auckland 1142, New Zealand

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Vol.:(0123456789)
504 V. J. Giolito et al.

behave ethically, for example offering listening, empathy, performance, we obtained data from a retail chain in a sin-
empowerment, and stewardship to their followers (Eva gle area in France (N = 485 employees nested in 55 similar
et al. 2019; Parris and Peachey 2013; Sun 2013; van Dier- stores) (Clapp-Smith et al. 2008; Rego et al. 2015). The
endonck 2011; Xu et al. 2020). Servant leadership promotes second precaution pertains to factors that can influence fol-
the self-growth of employees as a pathway toward their liv- lowers’ perceptions, most notably their implicit leadership
ing to their full potential, which is expressed in perceptions theories (Offermann et al. 1994) and their relationships with
of flourishing (Colbert et al. 2016; Huppert and So 2013; peers. In our model we thus introduced power distance ori-
Ribera and Ceja 2018; Seligman 2011). Servant leader- entation (Kirkman et al. 2009) and team-member exchange
ship uniquely prioritizes followers’ needs above those of (Seers 1989).
the organization and of the leaders themselves (Eva et al. From a theoretical perspective, we argue that our study
2019; Liden et al. 2008). It explicitly posits performance expands knowledge on servant leadership in three ways.
as a by-product of employees’ self-fulfillment (Frick 2004; First, whether financial performance of organizational units
Greenleaf 1970). By contrast, mainstream leadership theo- can coexist with efforts designed to enhance employee
ries, exemplified by transformational leadership (Bass and flourishing largely remains an empirical question. Although
Steidlmeier 1999; Bass and Riggio 2005), prioritize collec- strong arguments can be made for the altruistic value in
tive objectives, making positive outcomes for followers a bringing to fruition the full potential of employees through
corollary. Because research has shown that servant leader- servant leadership regardless of organizational outcomes, for
ship explains variance in several performance indicators organizations to be sustainable, organizational effectiveness
and employees’ need satisfaction above and beyond trans- is essential (Mumford and Fried 2014). Second, this study
formational, authentic and ethical leadership (Hoch et al. introduces the construct of employee flourishing (Seligman
2018; Lee et al. 2020), servant leadership might also resolve 2011). Flourishing, developed within the stream of posi-
the fundamental tension between the needs of employees tive psychology (Seligman and Csikszentmihalyi 2000),
and those of other stakeholders. Extant evidence has relied represents an Aristotelian view which posits well-being as
almost exclusively on follower outcome variables (e.g., need people’s active and relational participation in realizing their
satisfaction, individual performance: Chiniara and Bentein unique potential (McMullin 2018; Waterman 1990, 1993,
2016; team organizational citizenship behavior: Ehrhart 2007). Flourishing is an integrative construct (Ribera and
2004). Of the few exceptions, Chen et al. (2015) and Liden Ceja 2018). While encompassing job satisfaction (Cropan-
et al. (2014) examined customer satisfaction as a unit-level zano and Wright 1999) and the satisfaction of basic needs
dependent variable, and Peterson et al. (2012) focused on for self-determination and intrinsic motivation (Deci and
organizations’ return on assets as the dependent variable in Ryan 2000), it adds that people need to perceive meaning in
their research1. what they do; and constantly measure their accomplishments
To provide clarity on this issue, our main research ques- toward personal goals (Seligman 2011). Third, by introduc-
tion was whether in a commercial organization, servant ing power distance orientation as a moderating variable, our
leadership is positively related to financial performance, study brings about details on a boundary condition relating
measured in profit growth, while at the same time enhanc- to the influence of servant leadership. Finally, we examine
ing employees’ flourishing. Put differently, does prioritizing team-member exchange (TMX), which refers to the quality
the needs of followers jeopardize an organization’s financial of relationship that an individual has with other group mem-
performance? This question called for two precautions. First, bers (Seers 1989), as a force that complements servant lead-
exploring outcomes across levels in management research ership in influencing employee flourishing. For practitioners,
requires disentangling individual- and group-level respec- this work offers servant leadership as a novel pathway for
tive effects (Preacher et al. 2010). Although business-unit business organizations to attain critical outcomes expected
profit is the outcome of a group-level effort, perception by two key stakeholders—employees and shareholders. To
variables are primarily individual; and to the extent that fol- the best of our knowledge, no other study on ethical and
lowers within a group share those perceptions, they may moral forms of leadership had developed a model including
represent a group-level effect (Klein and Kozlowski 2000a). financial profit as an outcome variable.
We built a multilevel model that delineates group-level
(i.e., between-groups) and individual-level effects. To test it
while eliminating exogenous factors influencing group-level Theoretical Background

Servant Leadership
1
Peterson and colleagues (2012), measured financial performance
by corporate return on assets, which may depend on organizational Sometimes presented as just one among several recent
choices independent from the leader-followers relationship. leadership theories infused with ethical and moral values

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Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 505

(Anderson and Sun 2015), servant leadership retains a dis- group-level function towards the group’s actions (Morgeson
tinctive particularity: servant leaders put the people they and Hofmann 1999). Servant leaders are stewards of their
lead first (Graham 1991; Stone et al. 2004; van Dierendonck teams (van Dierendonck and Nuijten 2011), in the sense
2011). Servant leaders set “the following priorities in their that for them, “collectivistic behaviors have higher utility
leadership focus: followers [needs] first, organizations sec- than individualistic, self-serving behaviors” (Davis et al.
ond, and their own last” (Eva et al. 2019, p. 113). This prior- 1997, p. 24). The group-level consensus of servant leader-
ity for followers distinguishes servant leadership from other ship perceptions has been shown to be associated with a
leadership theories, most notably transformational leader- number of group-level outcomes: procedural justice climate
ship (Eva et al. 2019; Hoch et al. 2018; Parolini et al. 2009; (Ehrhart 2004), team potency (Hu and Liden 2011), group
van Dierendonck et al. 2014). trust (Schaubroeck et al. 2011) and, in turn, group service
culture and operational quality (Liden et al. 2014).
Individual Level
Flourishing
Servant leaders enact specific behaviors with individual fol-
lowers in the leader–follower relationship (for reviews see Individual Level
Eva et al. 2019; van Dierendonck 2011). Liden et al. (2008)
identified seven behavioral dimensions. Servant leaders (1) Responding to calls for research beyond the “narrow focus
provide emotional healing by caring for each individual on job satisfaction” (Inceoglu et al. 2018, p. 180), individual
employee when he or she incurs setbacks in their profes- flourishing has received recent attention from organizational
sional or even personal life; (2) display conceptual skills; scholars (Colbert et al. 2016). Seligman contends that flour-
(3) empower people, providing the employee with latitude ishing consists of doing things “for their own sake” (2011,
to find their own best way to work; (4) behave ethically and p. 97), not in the expectation of obtaining rewards or avoid-
willingly help the employee to make difficult, values-loaded ing inconveniences. This view aligns with an Aristotelian,
decisions; (5) put their followers first; (6) help them grow eudemonic vision of individual well-being that includes the
and succeed; and (7) invite individual followers to create active, conscious and interactive realization of one’s own
value for the community, even beyond the boundaries of unique personality (e.g., Waterman et al. 2006). In the most
the organization. Those seven dimensions have been shown developed model to date, Seligman (2011) conceived of
to closely reflect other characteristics of servant leadership flourishing as the association of five dimensions2: (1) posi-
proposed in the literature, particularly listening, providing tive emotions, such as joy and contentment (Fredrickson
direction, offering interpersonal acceptance and tolerance 1998, 2000); (2) flow, referring to the perception of being
for errors. Individual perceptions of servant leadership have immersed in an activity to the point of losing the sense of
been shown to be associated with a number of individual- oneself and time (Csikszentmihalyi 1991), for example by
level positive outcomes (Barbuto and Wheeler 2006; Ehrhart exerting a creative activity (Conner et al. 2018); (3) high-
2004; Eva et al. 2019; Liden et al. 2008; Page and Wong quality interpersonal relationships, as a foundation for
2000; Sendjaya et al. 2008; van Dierendonck and Nuijten mutual trust (Colbert et al. 2016; Dutton and Heaphy 2003;
2011). Recent studies in sales organizations have shown Heaphy and Dutton 2008); (4) meaning, i.e., the amount of
that servant leadership influences salespersons’ individual significance something holds for an individual in relation
performance both directly and through the mediation of per- to their cognitive evaluation of what is important in life3
ceived organizational support (DeConinck et al. 2018). Serv- (Pratt and Ashforth 2003; cited by Rosso et al. 2010); and
ant leadership also is positively associated with proactive (5) accomplishment, as manifested in the attainment of goals
behavior and, in turn, higher salesperson performance (Var- valued by an individual (Judge et al. 2005; Latham et al.
ela et al. 2019). Conversely, servant leadership is negatively 2010; Sheldon and Houser-Marko 2001).
associated with individual job boredom (Harju et al. 2018). Flourishing brings about an expansion of prior well-being
constructs, as it introduces two important dimensions miss-
Group Level ing in prior conceptualizations: a time perspective through
the dimension of accomplishment, by which individuals
It is essential to note that the servant leadership behaviors
play a role not only in the relationship between the leader
and an individual follower, but also with a team as a whole,
2
bringing about group-level, bottom-up outcomes (Klein Seligman (2011) refers to this conceptualization as the perma
model of flourishing, with flow reworded as engagement.
and Kozlowski 2000b). Experiencing servant leadership 3
Building on Rosso et al.’ (2010) remarks on the confusion of mean-
behaviors from a leader is likely to bring about a group con- ing and meaningfulness of work, we use here the definition of mean-
sensus (Bliese and Halverson 1998) that has a collective, ingfulness.

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506 V. J. Giolito et al.

recognize how they grow, as evidenced by the progress they Power Distance Orientation
make towards goals they value (Bandura 1971; Stajkovic and
Luthans 1998); and the perception of working toward mean- Individual Level
ingful, not meaningless goals (Seligman 2011). In addition,
employee flourishing encompasses prior constructs: (a) job Not all employees agree on what the ideal leader is (Offer-
satisfaction (Cropanzano and Wright 1999; Wright et al. mann and Coats 2017), as “individuals possess their own
2007; Wright and Cropanzano 2004) through the dimen- naïve, implicit theories of leadership” (Offermann et al.
sion of positive emotions (Fredrickson 1998); and (b) the 1994, p. 44). Implicit leadership theories refer to “cogni-
satisfaction of critical needs for autonomy, competency and tive structures or schemas specifying traits and behaviors
relatedness identified by self-determination theory (Deci and that followers expect from leaders” (Epitropaki and Martin
Ryan 2000; Ryan and Deci 2000), as autonomy and compe- 2004, p. 293). At the individual level, followers develop their
tency are represented in the “flow” dimension of flourishing own standards (Bandura 1991, 2001, 2006) based on their
(Csikszentmihalyi 1991), and relatedness corresponds to the implicit leadership theories, against which they judge lead-
relationships dimension of flourishing (Dutton and Heaphy ers and in turn react—cognitively, affectively, and behavio-
2003). The construct of employee flourishing recognizes rally—to leaders’ behaviors. We propose that one specific
that people cannot flourish in isolation, but, on the contrary, individual implicit leadership theory, power distance orien-
experience personal growth in their relationships with others tation, plays a role in how followers perceive servant lead-
and the world (McMullin 2018). ership. Building on cultural studies,4 Kirkman et al. (2009)
In sum, individual flourishing brings about an active and have defined power distance orientation as an individual-
interactive representation of well-being. While prior theories level construct that represents the leader-followers gradient
examine to what extent people have a good life, employee that followers take for granted. For example, an individual
flourishing reflects the extent to which people think and feel employee with low power distance orientation accepts and
that they lead a fulfilling life in the world (Huppert and So even appreciates when the leader asks about their personal
2013; Keyes 1998, 2002; McMullin 2018; Ryff and Singer life; conversely, an employee with high power distance ori-
2000). entation believes that he or she should not engage in per-
sonal relationships with the leader (Daniels and Greguras
Group Level 2014; Kirkman et al. 2009). In the latter case, because serv-
ant leaders do tend to engage in personal relationships with
Employee flourishing, like related well-being constructs, followers, it might result in cognitive dissonance and nega-
has a collective dimension (Barsade and Knight 2015). tive affect for followers.
Social interaction within a group generates a sharing of
cognitive and affective perceptions, creating a consensus Group Level
that determines an average level of well-being in a given
group and a bottom-up, group-level phenomenon (Klein As with many other individual-level variables, power dis-
and Kozlowski 2000b; Preacher et al. 2010). On the affec- tance orientation may aggregate to the group level to the
tive side, one mechanism for such a group-level consensus extent that group members form a consensus about the
is emotional contagion, referring to the transfer of moods acceptable distance that should separate them from the
between people (Barsade 2002), which can result either in leader. The consensus level of power distance orientation
more positive or more negative group affect (Dasborough that emerges at the group level of analysis (Kozlowski
et al. 2009). On the cognitive side, what employees share and Klein 2000) is likely to play a role in the relationship
and agree on about the functioning of the group, for example between the leader and the collective formed by group mem-
about their leader, serves as a structure for the collective bers (Hu et al. 2018; Schaubroeck et al. 2007). For example,
perception of flourishing (Morgeson and Hofmann 1999). in occasions that involve a dialogue between the leader and
Group-level employee flourishing, in that sense, builds on the group (e.g., group meetings), it is likely that a consen-
what has been proposed as collective well-being, referring sus level of high power distance orientation makes servant
to a group’s “positive feelings linked to a desire to contribute leaders less effective in conveying behaviors of emotional
to effective performance” (Warr and Nielsen 2018, p. 10).
Also termed employee morale (Bowles and Cooper 2009),
group-level well-being has started to receive scholarly atten-
tion in the context of schools and the military (e.g., Britt and
4
Dickinson 2006). We reason that the consensus of group- Initially, power distance had been defined at a national level to
describe the degree to which people perceive that it is appropriate for
level employee flourishing should emerge in other types of power to be distributed unequally (Daniels and Greguras 2014; Hofst-
organizations as well, in both the public and private sectors. ede et al. 2010; House et al. 1999).

13
Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 507

healing (Liden et al. 2008) to appease collective negative Chiniara and Bentein 2016; Mayer et al. 2008). Although
emotions—and conversely. these are important outcomes, we contend that employee
flourishing (Seligman 2011), representing a broader and
Team‑Member Exchange (TMX) integrative construct, is capable of enhancing servant lead-
ership theory for several reasons.
While people increasingly work within teams (Bishop and Building on Liden et al.’ (2008) delineation of seven
Scott 2000), Seers (1989) aptly observed that people in the servant leadership behavioral dimensions, we first propose
workplace are influenced not only by leaders but also, and that servant leaders’ emotional healing fosters an individual
perhaps primarily, by their peers and coworkers (Shapiro employee’s positive emotions by providing comfort that
et al. 2016). The quality of intra-group relationships between helps ease negative emotions (Fredrickson 2000). Sec-
followers can thus emerge as a configural property (Klein ond, servant leaders’ efforts to empower people allow the
and Kozlowski 2000a) that can be distinct from the influence employee to experience flow, for example, by being assigned
of the leader. to a position in which he or she can exert competency yet
At the individual level, Seers (1989) developed the indi- face some form of challenge (Csikszentmihalyi 1991). Third,
vidual TMX construct to describe how employees, as mem- servant leaders enhance employees’ perceptions of a high-
bers of a team, assess other members’ willingness to assist quality dyadic relationships with them by putting subor-
peers and to share ideas and feedback in the context of work. dinates first and helping them grow and succeed. Fourth,
TMX reflects the degree to which individuals within a work- through their conceptual skills, ethical behavior and con-
ing group perceive they communicate, collaborate and coor- cern for creating value for the community, servant leaders
dinate (Cohen and Bailey 1997). It parallels, but is distinct also develop the meaning the individual employee perceives
from the leader-member exchange construct (for reviews: in his or her work (Asag-Gau and van Dierendonck 2011).
Dulebohn et al. 2012; Rockstuhl et al. 2012). Finally, because servant leaders help followers grow and
At the group level, the aggregation of TMX is relevant to succeed—for example by providing frequent feedback—they
the extent that team members share perceptions about col- cultivate the sense of accomplishment that the employee
laboration in their team. The group-level consensus is likely perceives toward his or her individual objectives (Spears
to be formed by comparison to other groups that employees 2002). In essence, we expect a positive association between
have been part of, or by comparison in time with perceptions individual perceptions of servant leadership and employee
of collaboration in the same team at an earlier date. The flourishing.
consensus may result in a shared perception of belonging We further reason, however, that the nature of leader–fol-
to a “good group”, i.e., communicating collaborating, and lower dyadic relationships is dependent on the employee’s
coordinating effectively and agreeably, in turn influencing individual power distance orientation. Power distance ori-
group-level outcomes (Hoegl and Gemuenden 2001; Valen- entation has a specific salience in relation to servant lead-
tine et al. 2015). ership, because servant leaders become closer to followers
than other leaders, as servant leaders help followers grow
and succeed, and even tend to their emotional difficulties
Hypotheses Development (Liden et al. 2008). Greenleaf (1977) conceived of the serv-
ant leader as primus inter pares, not a power holder (van
Servant Leadership, Employee Flourishing Dierendonck 2011). So, we reason that there is a strong
and Power Distance Orientation tension between servant leadership, which implies a blur-
ring of the lines between professional and personal lives in
Individual‑Level Relationships the leader–follower relationship (Eva et al. 2019), and high
power distance orientation, which in the follower’s mind
We reason that servant leadership may be associated with separates the roles and, in turn, the people enacting them.
individual employee flourishing in several ways, fulfilling For example, high individual differences in power distance
the promise that servant leaders contribute to employees orientation between leader and follower have been shown
experiencing self-growth to become “healthier, wiser, to be associated with high employees’ perceptions of con-
freer, more autonomous” (Greenleaf 1977, p. 7). Prior flict with the leader (Graham et al. 2018). We suggest that
studies have shown servant leadership as conducive to individual power distance orientation may play a modera-
various understandings of individual well-being for fol- tion role in the relation between individual perceptions of
lowers, from job satisfaction (Donia et al. 2016; Hoch servant leadership and employee flourishing. For example,
et al. 2018) and job crafting (Harju et al. 2018) to the ful- individual power distance orientation positively moderates
fillment of the basic needs of autonomy, competency and the negative influence of abusive supervision—the oppo-
relatedness proposed by self-determination theory (e.g., site of servant leadership—on both employee individual

13
508 V. J. Giolito et al.

job satisfaction and psychological health, the latter being serving the community at large, beyond the strict definitions
a construct close to employee flourishing (Lin et al. 2013). of their duties (Liden et al. 2008), they satisfy the aspiration
We suggest that the direction of the moderation is nega- for a shared meaning among employees called for by group-
tive: the higher the individual level of power distance ori- level employee flourishing. Servant leadership, moreover, is
entation, the weaker the association between individual enacted by transparent communication, allowing for group-
perceptions of servant leadership and employee flourishing. level psychological safety (Edmondson 1999; Edmondson
We propose these differential effects despite the consistent and Lei 2014; Schaubroeck et al. 2011), thereby enabling
findings that transformational leadership and servant lead- the sense of collective accomplishment that is part of group-
ership tend to be positively correlated, and that the power level employee flourishing.
distance moderation has been shown to be positive for trans- We also argue that the nature of the relationship between
formational leadership (Schaubroeck et al. 2007). Our logic group-level perceptions of servant leadership and employee
is that servant and transformational leadership are quite dif- flourishing might differ depending on degree of the con-
ferent with respect to the moderating role of power distance sensus of power distance orientation within the group. For
orientation. There is a strong rationale for why adherence example, group-level power distance orientation has been
to authority among high power distance followers would shown to positively moderate the impact of transformational
increase allegiance to conforming with the leader’s vision leadership on performance-related outcomes (Schaubroeck
within transformational leadership (Schaubroeck et al. et al. 2007). Yet, mirroring the reasoning at the individual
2007). However, servant leaders’ prioritization of follower level, we contend that group-level power distance orientation
needs over organizational goals and their own needs suggests negatively moderates the relationship between group-level
that a much closer relationship between leader and follower servant leadership and employee flourishing. For example,
is needed in order for servant leadership to show its strong- while leader humility is a feature of servant leadership, it
est relationships with outcomes (Graham et al. 2018). The has been shown that humble leaders may obtain higher team
rationale for the negative moderation effect is that, whereas performance in terms of team creativity only within teams
power distance orientation aligns positively with transfor- where power distance is low (Hu et al. 2018). In essence,
mational leadership in isolating the visionary, charismatic we suggest that high group-level power distance orientation
leader from the inspired followers, servant leadership by prevents servant leaders from fully taking advantage of their
contrast makes the leader and followers closer to each other closeness with the group they lead.
as team members (Chiniara and Bentein 2016).
Hypothesis 1b At the business-unit (store) level, servant
Hypothesis 1a At the individual level, servant leadership is leadership is positively associated with employee flourish-
positively associated with employee flourishing, and power ing; and power distance orientation negatively moderates
distance orientation negatively moderates this relationship this relationship so that the greater the employee power dis-
so that the greater the employee power distance orientation, tance orientation, the weaker the relationship from servant
the weaker the relationship between servant leadership and leadership to employee flourishing.
employee flourishing.
Group‑Level Servant Leadership, Flourishing,
Group‑Level Relationships and Performance

We reason that at the group level under the direction of Group‑Level Servant Leadership and Performance
a single leader, such as in a business-unit (e.g., a store),
the relationships hold in a parallel fashion (Preacher et al. Extensive evidence exists of an association between servant
2010). Schaubroeck et al. (2011) noted that unlike many leadership and performance at the group level (Eva et al.
approaches to leadership in which leaders strive to gain and 2019). For example, researchers have shown that servant
retain power, servant leadership is group-oriented and aims leadership explains team performance measured as super-
at building a shared sense of community among employ- visor-rated group task effectiveness, to a greater extent than
ees by promoting teamwork and sharing. They went on to transformational leadership (Schaubroeck et al. 2011). Mul-
describe servant leaders as: (a) minimizing conflicts within tilevel studies have observed servant leadership as condu-
the group, thereby avoiding unnecessary negative emotions cive to team innovation (Yoshida et al. 2014) and service
and fostering shared positive emotions, one dimension of climate (Walumbwa et al. 2010). Complementarily, research
group-level employee flourishing (Barsade 2002; Ilies et al. on leader humility—a characteristic of servant leaders—has
2007); and (b) nurturing a group consensus of positive rela- shown humility to positively influence team performance
tionships between team members, another dimension of (Rego et al. 2019). Increasingly, research has focused on
flourishing. As servant leaders offer followers a sense of external measures of performance at the group level, and

13
Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 509

shown its positive association, for example, with indicators 2018) and, specifically in a commercial organization, to
of service quality measured by external audits and customer higher business-unit revenue (Varela et al. 2019). Employ-
satisfaction ratings (Liden et al. 2014). Yet as is apparent in ees’ positive emotions facilitate contact with clients as they
a recent and exhaustive review (Eva et al. 2019), scholars broaden behavioral repertoires (Fredrickson 1998) and favor
have not explored the impact of servant leadership on finan- empathy, which has been shown to be a predictor of cus-
cial indicators as outcome variables at collective levels (see tomer orientation and, in turn, the loyalty of customers (Ger-
Peterson et al. 2012 for an exception at the organizational lach et al. 2016). Employees experiencing flow demonstrate
level). competency and autonomy (Csikszentmihalyi 1991), which
Moreover, variables indicating team performance in prior should be appreciated by customers. Group-level employee
works relate to the quantity and quality of followers’ out- flourishing involves high-quality relationships between
put, without examining to what extent resource allocation group members that facilitate interdependent task assistance
may influence such performance. Leaders, servant or else, and thus better service (Colbert et al. 2016). Moreover, as a
are also managers enacting HR processes (López-Cotarelo flourishing group of employees finds meaning in the shared
2018). As such, they have some discretion in allocating mission, it can build on it to collectively deepen the relation-
resources (Wangrow et al. 2015) ranging, in the case of retail ships with customers. We reason that flourishing employ-
stores, from local advertising budget to individual employee ees: (a) work to the best of their capacities to increase store
bonuses. One could argue that servant leaders obtain higher revenue, a critical goal at the group (store) level; and (b) do
performance by awarding them more generous bonuses so without increasing store costs, hence increasing profits
(Fried et al. 1999), which would add to costs at the business- (Fried et al. 1999; López-Cotarelo 2018).
unit level. As profits equal revenue minus costs, growing
profits along with revenue requires that business-unit lead- Hypothesis 2 At the business-unit (store) level, servant
ers control costs. Hence, business-unit “bottom-line” finan- leadership is positively associated with profit growth through
cial outcomes, such as profit growth, allow for more robust the mediation of employee flourishing and revenue growth.
inferences based on the broadest responsibilities of lead-
ers. By refraining from being generous with organizational Team‑Member Exchange (TMX)
resources, servant leaders would thus preserve the interests
of shareholders along with those of followers. Individual Level
For business leaders, growth in revenue and profit is
critical (Davis et al. 1997; Grant 2012). Revenue growth in Several studies have confirmed individual perceptions of
stores has been shown to be an outcome of other forms of TMX as a significant variable for explaining employee job
leadership, such as transformational leadership and authentic satisfaction (Liden et al. 2000; Seers 1989; Seers et al. 1995).
leadership (e.g., Clapp-Smith et al. 2008; Rego et al. 2015). Conversely, loneliness tends to lower individual performance
We reason that servant leadership is positively related to (Ozcelik and Barsade 2018). We thus reasoned that commu-
business-unit growth in revenue, because it develops nication, collaboration and coordination expressed by TMX
employee behaviors, such as helping others, service orienta- also influence individual employee flourishing (Seligman
tion and sharing, that are conducive to higher sales. Further, 2011) in at least four of its five dimensions: (a) positive
we argue that, notwithstanding the arguments that leaders emotions, which are captured by individual perceptions of
might devote more resources to their teams, servant leaders job satisfaction; (b) the affective quality of relationships
are able to control costs. Servant leadership should hence an employee perceives he or she has with others at work,
be associated with both revenue growth and profit growth. as relationships quality is determined by frequency of and
benevolence in interactions (Dutton and Heaphy 2003); (c)
Group‑Level Flourishing and Performance the meaning an employee assigns to their work; and (d) the
perception of accomplishment he or she derives from it, due
Building on the perspective of flourishing individuals in to the feedback they receive from others (Liden et al. 2000).
flourishing institutions (e.g., the workplace) proposed by
positive psychology (Seligman and Csikszentmihalyi 2000), Hypothesis 3a At the individual level, employee TMX is
we reason that the relationship between group-level percep- positively associated with employee flourishing.
tions of servant leadership and store profit growth may not
be direct, but rather, mediated by group-level employee Group Level
flourishing (Bowles and Cooper 2009; Peterson et al. 2008)
and revenue growth. Team-member exchange is also a construct relevant at the
All dimensions of group-level flourishing (Seligman group level of analysis based on the consensus emerging
2011) seem conducive to performance (Lacanienta et al. from group members’ perceptions (Valentine et al. 2015).

13
510 V. J. Giolito et al.

Table 1  Descriptive statistics and correlations, individual level

Mean SD Min Max Median 1 2 3 4 5 6

1. Servant l­eadership† 3.53 0.82 1.00 5.00 3.57

2. Employee fl ­ ourishing†† 7.15 1.05 3.33 10.00 7.26 0.50**
3. Power distance o­ rientation† 2.53 0.83 1.00 5.00 2.40 0.14** − 0.04
4. ­TMX† 3.93 0.62 1.00 5.00 4.00 0.37** 0.51** − 0.01
5. ­Age††† 39.23 10.55 19.00 64.00 39.00 0.12** 0.00 0.12** 0.06
6. Tenure with l­eader††† 4.07 4.33 1.00 37.00 3.00 0.07 − 0.03 0.12** 0.09* 0.24**
7. Tenure in ­job††† 6.71 6.28 1.00 33.00 5.00 0.07 − 0.04 0.09 0.09 0.50** 0.27**
†
1–5 scale; ††1–10 scale; †††years (N = 485 followers)
**p < 0.01; *p < 0.05

One study, based on a construct very similar to group-level work by holding a morning meeting with all employees
TMX, showed it to be positively associated with higher lev- as a group. Within stores, employees broke down in three
els of team performance as rated by team members, team major functions: sales at the counter; goods delivery; and
leaders, and external raters (Hoegl and Gemuenden 2001). administrative tasks. They interacted with each other on a
Another study found that high group-level TMX offsets the daily if not hourly basis.
negative effect of low leader-member exchange (Wang and We narrowed down the sample in several steps. In order
Hollenbeck 2018). We thus reason that group-level per- to ensure stability in leadership, we first excluded two stores
ceptions of TMX are positively associated with employee whose leader was missing due to internal re-assignments.
flourishing. We also excluded: seven stores where the manager had less
than one year in tenure; eight stores where a majority of
Hypothesis 3b At the business-unit (store) level, TMX is employees had less than one year in tenure with the man-
positively associated with employee flourishing. ager; and two stores with fewer than three employees, as
smaller unit sizes do not provide adequate power for multi-
level analyses (Bliese 2000). We made sure that leaders had
Method remained the same for the entire period during which we
collected the performance data. The final sample consisted
Settings, Sample, and Procedure of 485 respondents (employees) with one year or more of
tenure in their job and with their store manager, nested in
To minimize the potential impact of exogenous factors, 55 stores.
the empirical study that we designed to test our multilevel Among the 485 respondents in the sample, 78.6% were
model was undertaken in a single company, a retail chain male. Average age was 39.26 years overall (SD 10.53 years;
in a major metropolitan area of France, where all stores range 19–64 years). Following French regulations, ethnic-
(referred to as business-units in the hypotheses) directly ity was not asked. Average tenure with store leader was
report to general management. Several prior studies relied 4.08 years (SD 4.32; range 1–37). Average tenure in the
on this type of setting (Clapp-Smith et al. 2008; Hunter job was 6.72 years (SD 6.27; range; 1–33). The level of
et al. 2013; Liden et al. 2014; López-Cotarelo 2018; Rego education was a high school degree or lower for 79% of the
et al. 2015), which allows for a comparison between analo- respondents. Key individual-level descriptive statistics and
gous, yet independent groups (formed by store employ- correlations are reported in Table 1.
ees) to examine the influence of leaders on their respective In the final sample of 55 business-units, the average num-
teams. The retail chain of our sample is part of a larger, ber of respondents was 8.82 per business-unit (SD 5.61;
publicly listed group. At the time of the study, it employed range 3–33, see descriptive statistics and correlations for
12,000 people in 900 stores. To avoid potential regional business-units in Table 2). The HR department at the com-
differences (e.g., in economic conjuncture), we focused pany confirmed that leaders in the business-units we retained
on one geographic area, where we initially selected all the did not change over the following year, and that employee
72 stores. In each store there was only one level of leader- turnover was less than 3% per year. Average growth was
ship, with all employees directly reporting to the leader negative for both revenue (− 2.26%) and profit (− 1.80%),
(a salaried manager, not a franchisee). For example, the reflecting in part a lower number of working days due to
store leader conducted annual performance reviews with
each employee individually; and set priorities for the day’s

13
Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 511

Table 2  Descriptive statistics and correlations, group level

Mean SD Min Max Median 1 2 3 4 5 6

1. Servant l­eadership† 3.59 0.38 2.84 4.43 3.57

2. Employee fl ­ ourishing†† 7.18 0.39 6.36 7.98 7.27 0.38**
3. Power distance o­ rientation† 2.53 0.37 1.44 3.47 2.48 0.12 0.04
4. ­TMX† 3.98 0.30 3.38 4.79 3.96 0.15 0.50** 0.00
5. Revenue ­growth††† − 2.26 9.95 − 20.45 25.07 − 2.33 0.34* 0.50** 0.18 0.17
6. Profit g­ rowth††† − 1.80 2.31 − 6.95 3.37 0.03 0.05 0.14 − 0.02 0.06 0.38**
7. Store size 8.82 5.61 3.00 33.00 8.00 − 0.24 − 0.13 0.02 − 0.26 − 0.09 0.02
†
1–5 scale; ††1–10 scale; †††percentage points (N = 55 stores)
**p < 0.01; *p < 0.05

bank holidays (− 1.30%) and in part poor economic condi- were translated into French and verified via back translation
tions at the time of the investigation.5 (Brislin 1979).
The lead author personally visited all stores and adminis-
tered paper-and-pencil questionnaires to employees during Servant Leadership
paid work hours at Time 1. Several precautions addressed
the risk of bias incurred with investigations based on surveys Servant leadership was assessed with the SL-7 scale devel-
(Podsakoff et al. 2003). To avoid influence from leaders, oped and validated by Liden et al. (2015), which is one of
the lead author exposed the objective of the research and the three scales recommended for its rigor by Eva et al.
the directions without leaders being present, making clear (2019) out of 16 existing instruments for measuring servant
that participation was not mandatory and that the research leadership. The scale represents the seven behavioral dimen-
was not commissioned by the company. Employees com- sions of servant leadership with the item from each of the 7
pleted questionnaires in the presence of the lead author, the dimensions of the original 28-item scale (Liden et al. 2008)
leader being outside of the room. To guarantee anonymity having the highest factor loading. Examples of questions
of the questionnaires, respondents were identified by a code, are: “My [store] manager notices right away when there is
not by their names. Only five employees in the final sample a work-related problem” (conceptual skills); “My manager
declined to participate (response rate: 99%). In some larger puts my best interests ahead of his/her own” (putting subor-
stores of the sample, not all staff were present to fill out dinates first); “I would seek help from my manager if I had
the survey due to holidays and two-shift workdays. Over- a personal problem” (emotional healing). Multiple scholars
all the respondents represented 72% of total staff in the 55 have used Liden et al.’s (2008) original 28-item scale (e.g.,
business-units. Schaubroeck et al. 2011), the SL-7 (Liden et al. 2015), or
Performance data were obtained from company records another variant of the scale (Peterson et al. 2012).
15 months after the survey. As such, they were subject to The SL-7 was shown to closely parallel the SL-28: in a
internal and external audits according to procedures appli- series of six studies with five different samples (Liden et al.
cable to a publicly listed group. Respondents to the question- 2015), correlations between the SL-7 and the SL-28 ranged
naire could not know of the future performance of their own from 0.78 to 0.97 and its criterion-related validities mirrored
business-unit at the time of the survey. those of the SL-28 (Liden et al. 2008). Questionnaire length
concerns guided the choice of the SL-7, as other scales are
Variable Operationalization comprised of 14 to 30 items (Ehrhart 2004; van Dieren-
donck and Nuijten 2011). We employed a 5-point scale with
We measured variables of interest with existing instru- “strongly disagree” to “strongly agree” endpoints. We con-
ments that had met the requirements of internal consist- ducted a confirmatory factor analysis at the individual level
ency, reliability and validity in prior studies. Scale items and found values consistent with findings by Liden et al.
(2015), confirming its use as a one-dimensional scale. Cron-
bach’s alpha was 0.82. We used individual data in each store
for individual-level analyses, and the store mean for group-
level (between-groups) analyses.
5
The dispersion in revenue growth was high, as indicated by the
standard deviation in Table 2. Suspecting that outliers may have a dis-
proportionate influence, we tested our model without the stores with
extreme values. The results were not different.

13
512 V. J. Giolito et al.

Store Performance consists of 6 items loading on a single factor and rated

along a 5-point Likert-style scale (endpoints were “abso-
Store performance was measured as follows. Fifteen months lutely agree” to “absolutely disagree”). Example items are:
after the survey, the company provided the revenue (store “Managers should make most decisions without consulting
sales) and operating profit (calculated as store revenue minus subordinates”; “It is frequently necessary for a manager to
operational expenses, i.e., cost of goods sold and salaries, use authority and power when dealing with subordinates”;
excluding financing, depreciations and one-off costs) of each “Managers should seldom ask for the opinions of employ-
store. Figures related to the semester in which survey data ees”. We had to remove one item (“Managers and employees
were collected (Time 1), and the same semester one year should have personal relationships outside work”) because
later (Time 2) (Harter et al. 2010), so as to offset seasonal- a number of respondents reacted forcefully and refused
ity issues typical in the specific sector. We chose semester to answer the question during data collection. Cronbach’s
over yearly data, because a longer period would have led to alpha was 0.70. We used individual data in each store for
exclude more stores due to leader changes among business- individual-level analyses, and the store mean for group-level
units. We calculated: (a) the revenue growth of each store, (between-groups) analyses.
measured as the percentage difference in total sales to cus-
tomers between the Time 1 and Time 2; and (b) the profit
Team‑Member Exchange (TMX)
growth of each store, measured as the difference in profit
margins (calculated as the ratio of operating profit over rev-
Seers (1989) elaborated and tested a 34-item scale for
enue, expressed in percentage points) between Time 1 and
TMX. Based on it, Liden et al (2000) developed a 9-item
Time 2. Our operationalization of profit corresponds to what
version, which we used after translation into French. Ques-
businesspeople typically refer to as profitability.
tions include: “I feel that I am loyal to my coworkers”;
“My coworkers have asked for my advice in solving a job-
Employee Flourishing
related problem of theirs”; “My coworkers value the skills
and expertise that I contribute to our work group”. Raters
Employee flourishing was operationalized as follows. Based
responded on a 5-point scale denoting their degree of agree-
on Seligman’s (2011) theorization, Butler and Kern (2016)
ment (anchors: “absolutely disagree” to “absolutely agree”).
created a 15-item survey, with three items representing each
Cronbach’s alpha for the TMX scale was 0.85. We used indi-
dimension of the PERMA construct (positive emotions,
vidual data in each store for individual-level analyses, and
flow, good relationships, meaning, and accomplishment).
the store mean for group-level (between-groups) analyses.
Several studies have used this instrument (Kern et al. 2015;
Khaw and Kern 2015). We used a 10-point version of the
survey adapted for the workplace with “never-always” or Convergent and Discriminant Validity, Aggregation
“absolutely not-absolutely” anchors. Items included (Butler
and Kern 2016): “At work, how often do you feel joyful?” We tested the convergent validity of our instruments by
(Positive emotions); “At work, how often do you become means of confirmatory factor analyses (CFAs). Because the
absorbed in what you are doing?” (Flow); “To what extent data were nested within supervisor, the number of estimated
do you receive help from your coworkers when you need parameters had to be less than the number of supervisors
help?” (Relationships); “To what extent do you gener- (55) to have an identified model for estimating the standard
ally feel that you have a sense of direction in your work?” errors. Hence, we needed to break down the measurement
(Meaning); “How often do you feel you are making progress models in a three-step process. First, we tested servant lead-
towards accomplishing your work goals?” (Accomplish- ership and TMX; then employee flourishing and power dis-
ment). Because PERMA dimensions coalesce in a single tance orientation; eventually we tested employee flourishing,
flourishing construct, we averaged the scores from the five power distance orientation and TMX as summated scales
dimensions to obtain the measure of employee flourishing and servant leadership as a latent variable. We kept servant
at work (Butler and Kern 2016). Internal consistency was leadership as a latent variable to provide adequate degrees
verified with a Cronbach’s alpha of 0.86. We used individual of freedom; if all variables were summated scales, the num-
data in each store for individual-level analyses, and the store ber of degrees of freedom would have been zero. The last
mean for group-level (between-groups) analyses. model provided fit indices as follows: χ2 = 67.07; df = 32; χ2/
df = 2.10; CFI = 0.97; TLI = 0.95; RMSEA = 0.05; SRMR
Power Distance Orientation 0.03; all values were within the limits generally accepted for
this type of models (Hu and Bentler 1999). The correlation
We measured power distance orientation with the scale coefficient among the four variables ranged from − 0.110 to
developed by Dorfman and Howell (1988). The instrument 0.567, which are all significantly lower than 1.

13
Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 513

Table 3  Aggregation and ICC rwg awg

within-group agreement indices
ICC(1) ICC(2) Min Mean Max Min Mean Max

Servant leadership 0.28 0.77 0.21 0.73 1.00 0.34 0.72 0.96
Employee flourishing 0.14 0.59 0.56 0.88 0.99 0.67 0.90 0.99
Power distance orientation 0.23 0.73 0.20 0.69 0.98 0.23 0.70 0.97
TMX 0.27 0.77 0.28 0.83 0.98 0.35 0.77 0.96

We sought aggregation indices for all of our variables, relying only on variables aggregated at the group level
that is, how variance can be “explained” by belonging to a (e.g., Clapp-Smith et al. 2008; Rego et al. 2015). UMM
group (Bliese and Halverson 1996; Bliese 2000). For servant analysis allows for a simultaneous analysis of mediation
leadership, ICC(1) was 0.28; ICC(2) was 0.77. For employee effects and thus improves on step-by-step mediation analy-
flourishing, ICC(1) was 0.14; ICC(2) was 0.59. For power sis (Baron and Kenny 1986). At the individual level, the
distance orientation, ICC(1) was 0.23; ICC(2) was 0.73. independent, mediating and moderating variables, i.e.,
For TMX, ICC(1) was 0.27; ICC(2) was 0.77. All indices servant leadership, power distance orientation and TMX
were in the range commonly accepted for aggregating data were group-mean centered. At the group level (between-
at the group (Bliese 2000; James et al. 1984). The ICC(2) for groups), all variables were group means.
employee flourishing was an exception. However, flourish- To examine if the mediating effects were partial or full
ing is by essence an individual construct (Seligman 2008, mediations, we included the direct relationships: (a) from
2011), making its aggregation at the group level a formative servant leadership to revenue growth; (b) from servant lead-
variable (Klein and Kozlowski 2000a). In such cases, inter- ership to profit growth; and (c) from employee flourishing to
rater agreement associated with the group-level may be less revenue growth. We included interaction terms at individ-
relevant, particularly when the number of groups is moder- ual and group levels to examine moderation effects. We ran
ate, group size is small (below 10), and the sampling ratio the main analyses with the Mplus package with multilevel
is high (over 66%) (Bliese 2000; Lüdtke et al. 2008). Addi- functionalities (Muthén and Muthén 2013). Specific analyses
tionally, within-group agreement measures, rwg (James et al. (e.g., Cronbach’s alpha, correlations, aggregation indices)
1993) and awg (Brown and Hauenstein 2005) were found were run with the R software language and its multilevel
to be at or above the generally accepted 0.7 cutoff value. package (Bliese 2013).
Aggregation indices and within-group agreement measures
are reported in Table 3.

Analysis Results

Multilevel analyses pose specific statistical issues due to Correlations and Control Variables
the nesting of respondents in groups, particularly in mod-
erated mediation models. Preacher et al. (2010) suggest Individual Level
that researchers should run the same model simultaneously
at both the individual level and group level (business-unit Prior to running the analysis of our hypothesized model, we
level, i.e., between-groups), and we did accordingly. We obtained bivariate correlations of the variables and controls.
tested our model with an Unconflated Multilevel Mod- At the individual level, servant leadership was correlated
eling (UMM) approach, which is close to hierarchical with employee flourishing, power distance orientation and
linear modeling and allows for a repartition of variance TMX. Additionally, employee flourishing was correlated
into individual and group levels (Preacher et al. 2010). with TMX. As for demographic control variables, servant
We chose UMM instead of the multilevel structural equa- leadership was correlated with employee age; power dis-
tion modeling (MSEM) framework because of the rela- tance orientation was correlated with employee age and ten-
tively small number of groups (business-units), small ure with leader. TMX was correlated with leader tenure. A
group size (n < 10), formative measure for flourishing, a perceptual control variable relating to person-organization
high sampling ratio (> 66%), and low ICCs. In such cases, fit (Kim et al. 2005; Vondey 2010) was not correlated to
MSEM results will have large variability and RMSE (root any other variable. Individual correlations are reported in
mean square error) will be large (Lüdtke et al. 2008). The Table 1. There was no correlation between the variables of
UMM approach delineates moderated mediation in mul- our model and employees’ sex, level of education, and func-
tilevel models (Bauer et al. 2006), improving on analyses tion (sales, delivery, administration).

13
514 V. J. Giolito et al.

Business Unit
Team Member
Exchange
Business Unit
Power Distance 0.450*** (H3b)
Orientaon
Business Unit 0.484** 0.419**
Revenue Profit
ns Employee
(H2) Growth (H2) Growth
(H1b) (H2) Flourishing
0.309**
Business Unit
Servant
Leadership
Business Unit (Level-2)

Individual Individual Individual (Level-1)

0.363***
Servant Employee
Leadership (H1a) Flourishing
-0.131*
0.330*** (H3a)
Individual
Power Distance
Orientaon Individual
Team Member
Exchange

Standardized coefficients.
***: p < .001; **: p < .01; *: p < .05.

Fig. 1  Model results. Standardized coefficients

Group Level Test of Hypotheses

At the group level (between-groups), servant leadership was Main Model

positively correlated with employee flourishing and revenue
growth as reported in Table 2. Employee flourishing was We first ran our model at both individual and group lev-
correlated with revenue growth and TMX. Revenue growth els with all control variables. None of the control variables
was correlated with profit growth. There was no correlation had a significant effect. Hence, consistent with Becker’s
between the variables of our model and control variables rep- recommendation (2005), we did not include them in our
resenting group-level characteristics, including geographic model for testing the hypotheses to preserve the number of
subarea, prior store performance, leader’s tenure in job and parameters we could estimate in the model (the number of
with their own leaders, and leaders’ ratings of their own serv- estimated parameters needs to be smaller than the number
ant leadership, flourishing, power distance orientation, and of business-units). Model fit information was as follows:
TMX. We also included store size as a control variable, as χ2 = 7.42; df = 11; χ2/df = 0.67; CFI = 1.00; TLI = 1.04;
servant leadership may be thought of as less effective in larger RMSEA = 0.00; SRMR = 0.01 (individual) and 0.04 (group
groups, because of the leader–follower proximity it implies; level, between-groups), within acceptable limits (Hu and
store size was found to be uncorrelated to other variables. Bentler 1999). Overall model results appear in Fig. 1.
Finally, we found no relationship between our variables of Hypothesis 1a proposed that, at the individual level,
interest and leader sex and education level. servant leadership is positively associated with employee

13
Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 515

the greater the employee power distance orientation, the

weaker the positive relationship from servant leadership
to employee flourishing. Between-groups servant leader-
ship was found to be positively associated with employee
flourishing (b = 0.32; p < 0.01; 95% CI [0.09, 0.56];
beta = 0.31). The interaction term denoting a moderation
of group-level power distance orientation was not statisti-
cally significant (b = − 0.04; p = 0.89; 95% CI [− 0.67,
0.58]; beta = − 0.01). Hypothesis 1b was partially sup-
ported: although the moderating effect was not supported,
the main effect of a positive association between servant
leadership and employee flourishing at the group level was
statistically significant.
Hypothesis 2 proposed that, at the group level (between-
groups), servant leadership is positively associated with
profit growth through the mediation of employee flourish-
ing and revenue growth. As indicated above, group-level
perceptions of servant leadership and employee flourishing
were found to be positively associated. In turn, group-level
employee flourishing was positively associated with rev-
enue growth (b = 12.19; p < 0.01; 95% CI [4.28, 20.11];
beta = 0.48). And profit growth was positively associated
Fig. 2  The interaction effect of power distance orientation. The hori-
with revenue growth (b = 0.10; p < 0.01; 95% CI [0.04,
zontal axis represents servant leadership; the vertical axis represents 0.16]; beta = 0.42). The group-level direct relationships:
employee flourishing (individual level) (a) from servant leadership to revenue growth; (b) from
servant leadership to profit growth; and (c) from employee
flourishing to revenue growth were all statistically non-
flourishing, and that power distance orientation negatively significant. This means that, at the group level, the posi-
moderates this relationship so that the greater the employee tive association from servant leadership to profit growth
power distance orientation, the weaker the relationship was fully mediated by employee flourishing and revenue
between individual perceptions of servant leadership and growth. We estimated confidence intervals of indirect
employee flourishing. Individual perceptions of servant effects with parametric bootstrapping (Efron and Tibshi-
leadership were found to be positively associated with rani 1993) of 50,000 cases using the Monte-Carlo simula-
employee flourishing (b = 0.53; p < 0.001; 95% CI [0.42, tion function of Mplus. In the relationship from servant
0.64]; beta = 0.36). The interaction term denoting the mod- leadership to employee flourishing to revenue growth, the
erating effect of power distance orientation was found to estimated unstandardized coefficient was 3.90 (p < 0.01);
be statistically significant (b = − 0.24; p < 0.05; 95% CI the 95% bias-corrected confidence interval (BCCI) was
[− 0.46, − 0.01]; beta = − 0.13). Simple slope test results [0.99, 8.93]. In the full relationship between servant lead-
showed that servant leadership was positively associated ership to employee flourishing to revenue growth and
with employee flourishing when power distance orienta- profit growth, the estimated unstandardized coefficient was
tion was high (power distance orientation at mean plus one 0.38 (p < 0.01); the 95% BCCI was [0.08, 1.14]. Hypoth-
standard deviation; b = 0.35; p < 01; 95% CI [0.12, 0.58]), esis 2 was supported.
and the positive relationship was stronger when power dis- Hypothesis 3a proposed that, at the individual level,
tance orientation was low (power distance orientation at individual perceptions of TMX and employee flourishing
mean minus one standard deviation; b = 0.71; p < 01; 95% were positively associated. We found a positive associa-
CI [0.53, 0.89]). Hypothesis 1a was supported. The interac- tion between individual-level TMX and employee flourish-
tion is depicted in Fig. 2. ing (b = 0.62; p < 0.01; 95% CI [0.48, 0.76]; beta = 0.33),
Hypothesis 1b suggested that, at the group level providing support for Hypothesis 3a. Hypothesis 3b sug-
(between-groups), servant leadership is positively associ- gested that, at the group level (between-groups), TMX
ated with employee flourishing, and that power distance is positively associated with employee flourishing. We
orientation negatively moderates the positive relationship found a positive association between group-level TMX and
from servant leadership to employee flourishing, so that employee flourishing (b = 0.61; p < 0.01; 95% CI [0.33,
0.88]; beta = 0.45). Hypothesis 3b was supported.

13
516 V. J. Giolito et al.

Supplementary Analyses Theoretical Implications

To check potential alternative explanations, we conducted Servant Leadership

several analyses in addition to running our main model. At
the business-unit (group) level, because revenue growth The present study expands knowledge on the implications
and profit growth can be thought of as a single dimension of servant leadership at the group level of analysis in at
of business-unit performance, we combined both variables least two ways. First, it empirically counters some theo-
in a single variable representing business-unit financial retical arguments proposed by critics of ethical and moral
performance. The analysis showed employee flourish- approaches to leadership (Alvesson and Einola 2019; Liu
ing still mediating the relationship between group (store) 2019). Some scholars have argued that moral approaches
level servant leadership and business-unit financial per- to leadership, including servant leadership, “simply do not
formance. In part because the influence of power distance work in the real world” (Mumford and Fried 2014, p. 630),
orientation was somewhat small, we ran a model without because leaders must tend to the needs of stakeholders other
this variable; we found the same significant relationships than their followers. The prioritization of followers, they
between servant leadership, employee flourishing and rev- reason, overlooks the tensions to which managers are con-
enue growth and profit growth. At the individual level, fronted: “positive, prosocial interactions with followers may
we tested whether TMX mediated the relationship from occur only by sacrificing the concerns of other stakeholders”
servant leadership to employee flourishing; we did not (Mumford and Fried 2014, p. 626). First in line among other
find a significant mediation. At the store level, although a stakeholders come shareholders demanding profit. Manag-
mediating effect of TMX was significant, the majority of ers are judged based on their ability to grow profit, which
the effects of servant leadership on employee flourishing supposes to control costs. Critics note that a leader may
did not go through TMX, as indicated by a large direct succeed in boosting follower satisfaction because followers
effect from servant leadership to employee flourishing. “like” him or her (Brown and Keeping 2005), possibly by
Regarding control variables, supplementary analyses with using managerial discretion through the reward system in a
employee age and tenure with leader, as well as leader age way that is favorable to followers, thus increasing costs and
and tenure with director showed these control variables did lowering profits (Fried et al. 1999). Prior research had left
not have any significant effects. The conclusions on our this issue open. Earlier studies had shown servant leadership
hypotheses remained the same. associated with higher subjective performance assessments
and customer satisfaction ratings, but had remained essen-
tially silent regarding the implications on costs and profits.
Our results show that indeed, servant leadership, by putting
Discussion employees’ needs first (Eva et al. 2019; van Dierendonck
2011), fulfills the promise of growing profit, a key metric
The test of our multilevel, moderated mediation model for shareholders (Davis et al. 1997). Servant leaders control
verified that, at the group level of analysis (between- costs and preserve profits. In that sense our findings close
groups), servant leadership is positively associated with a loop in the association of servant leadership with various
store profit growth, through the full mediation of group- indicators of performance. This study thus invites viewing
level employee flourishing and store revenue growth. This servant leaders as stewards of the collective in the broadest
finding demonstrated that organizations do not sacrifice sense, effectively acting for the good of a set of stakeholders
financial outcomes by practicing servant leadership, a with diverse and often conflicting interests, from employ-
form of leadership that is recognized for being ethical ees aspiring to self-growth to shareholders demanding profit
and employee-focused. Additionally, group-level TMX growth (van Dierendonck 2011).
was positively associated with employee flourishing. At Second, by delineating both individual- and group-level
the individual level of analysis, servant leadership was processes in a moderated mediation model, this investiga-
associated with employee flourishing, as was TMX. The tion adds to prior studies conducted only at the group level
individual-level relationship between servant leadership showing that ethical and moral approaches to leadership
and employee flourishing was negatively moderated by contribute to improve operational performance measured
individual power distance orientation, so that the higher in business-unit revenue (Clapp-Smith et al. 2008; Rego
the power distance orientation, the weaker the associa- et al. 2015). Our study also complements the only study on
tion between servant leadership and employee flourish- servant leadership that had a financial indicator as the out-
ing. Although causal inferences cannot be drawn from a come variable (returns on assets at the organizational level
correlational field study, our results lead to a number of only: Peterson et al. 2012), by showing effects at both indi-
contributions. vidual and group levels within a homogenous sample, thus

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Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 517

eliminating a number of exogenous factors that may interfere that introducing employee flourishing goes one important
at the organizational level of analysis. step further. On the one hand, the construct serves an inte-
Incidentally, our findings also rebut the suspicion that grative purpose, thus complementing explorations on the
ethical and moral leadership approaches foster performance impact of ethical forms of leadership on specific aspects of
only when circumstances are favorable (Cohen et al. 2004; well-being in the workplace (e.g., Harju et al. 2018 on job
Humphreys 2005). The reasoning was that while servant crafting; Rego et al. 2019 on psychological capital). Flour-
leadership might be effective when leaders can afford to ishing integrates job satisfaction, which mostly captures self-
demonstrate ethical, moral and prosocial behaviors, chal- reported positive emotions, with the perceptions of compe-
lenging environments warranted a more visionary, or even tency, autonomy, and relatedness, the three critical needs for
authoritarian leadership. Because we found a positive asso- intrinsic motivation identified by self-determination theory
ciation of servant leadership and performance amid a busi- (Ryan and Deci 2000). Introducing the construct responds to
ness downturn, with negative average revenue and profit the calls for broader and more complex conceptualizations
growth in store revenue and profit, we suggest that, on the of well-being in leadership studies (Inceoglu et al. 2018).
contrary, servant leaders may contribute to better collective Flourishing adds two more cognitive dimensions: mean-
outcomes in a variety of environments. Out of the 22 stores ing and accomplishment. Toward providing meaning, the
that achieved positive growth in revenues, 18 had leaders morally-connoted behaviors of servant leadership, such as
rated above average on servant leadership. It thus seems that behaving ethically, helping followers grow and succeed, and
servant leadership may prove effective in both good times tending to their emotional pains (Liden et al. 2008, 2015),
and bad. play an important role. “The servant leader elevates people”,
noted Ciulla (1995, p. 17), implying that by reciprocation
Power Distance Orientation (Blau 1964) and/or social learning (Bandura 1977), follow-
ers should develop the sense of right and wrong, good and
At the individual level, our study provides evidence that evil, and act in accord with the former while rejecting the
individual power distance may serve as a boundary condi- latter. Finally, accomplishment reflects people’s aspiration
tion related to the effectiveness of servant leadership. This for progress toward personal goals, and their constant moni-
finding invites to recognize that indeed, ethical and moral toring of such progress (Colbert et al. 2016). Implicit here
approaches to leadership may not constitute the only “one is the assumption that people value self-growth toward the
best way to lead” (Mumford and Fried 2014, p. 623). In par- realization of their full potential of leading a good life, an
ticular, factors contributing to servant leadership and other important domain of ethics, particularly in the Aristotelian
ethical and moral forms should be sought in employees’ perspective of well-being based on eudemonia or self-ful-
implicit leadership theories (Rush et al. 1977). Interestingly, filling, as opposed to hedonism or the pursuit of positive
although we found a significant positive unit-level relation- feelings and the avoidance of pain (Waterman 1993, 2007).
ship between servant leadership and flourishing, support was
not found for a moderating effect of power distance orienta- Team‑Member Exchange (TMX)
tion at the group level. It is possible that the decreased vari-
ance and lower power available at the unit level of analysis Perhaps the most critical source of support for employees
may have contributed to difficulties in finding any moder- other than their immediate leader is coworkers. Although
ating effect that may exist in the population. Nonetheless, leaders typically possess more power and control over
the main effect showing that servant leadership at the group resources, team members may best understand the difficul-
level relates positively with group-level flourishing indicates ties faced by their peers, thus putting them in a position
that although servant leadership behaviors tend to be pro- to be able to provide meaningful job-related and emotional
vided to followers on an individual/dyadic basis, the group support. Indeed, our results demonstrate a strong positive
also flourishes as a whole under the influence of a servant relationship between TMX and employee flourishing at both
leader. One possible explanation is that coworkers are aware the individual and team levels. These results, combined with
of and sensitive to the way their colleagues are treated by the the positive relationship between servant leadership and
leader (Peng et al. 2014). flourishing, indicate that servant leadership and TMX work
in tandem to positively influence employees’ degree of flour-
Employee Flourishing ishing and, in turn, collective performance.

While prior studies had shown servant leadership to be Strengths and Limitations
associated with job satisfaction and the meeting of funda-
mental needs for self-determination and intrinsic motiva- Objective financial measures of performance as the depend-
tion (Eva et al. 2019; van Dierendonck 2011), we suggest ent variables represent a strength of our research, as they

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518 V. J. Giolito et al.

mitigate the risk of same source-common method bias and Preston 1995). Building on our multilevel approach, we
perceptual biases (Podsakoff et al. 2003). The high level suggest that researchers go one step further by exploring
of homogeneity between the stores—same brand, same servant leadership, employee flourishing and performance
region, same general management, and same simple hier- at the organizational level. The way was paved by Peterson
archical structure—reduced the possibility of exogenous et al. (2012), and should inspire future studies of executive
factors influencing relationships among variables. The high leadership that include variables relating to people in the
response rate made possible by the collection of data on-site organization. Access to CEOs is notoriously difficult. One
during paid work hours may have precluded biases based on possible approach is to develop research designs that cap-
employees’ willingness participation to the research (Tim- ture servant leadership on the part of executives, in the vein
merman 2005). Collecting the data on-site likely served to of upper-echelons studies (Hayward and Hambrick 1997).
increase the quality of the data, because respondents were Researchers may also build on a recent study by Stollberger
not rushed as participants tend to be when completing sur- et al. (2019) on a three-level, “trickle-down” effect of servant
veys on their own time. Data quality was also enhanced, leadership on performance by including objective financial
because a researcher was present to answer questions and indicators as outcome variable. In addition, heeding recent
increase assurance of the confidential handling of the data. works (e.g., Katz-Navon et al. 2019; Li et al. 2018), col-
An additional strength of our work lies in the time-lagged leagues may want to investigate potential curvilinear, not
data collection, with independent variables collected in Time linear influences of ethical forms of leadership.
1, and dependent variables in Time 2 over a year later. This Lastly, our findings showing a strong effect of TMX
design addresses a common objection to cross-sectional on employee flourishing and in turn on revenue and profit
results linking leadership and performance, i.e., the poten- growth may invite further investigation on how the quality
tial for reverse causality (Antonakis et al. 2010; Phillips and of interrelationships within a business-unit may contribute
Lord 1981). Lagged data collection, in our study, provides to well-being and performance. Consistent with the writings
a temporal element for assuming causality, with employ- of Greenleaf (1970), who stressed the importance of serv-
ees’ perceptions of leadership and flourishing preceding ant leaders promoting helping and communal sharing, lead-
business outcomes. Our findings align with the conclusions ers may positively influence follower TMX. Indeed, initial
from Harter et al. (2010): Based on longitudinal analyses studies (Malingumu et al. 2016; Xu and Wang 2019; Zou
of the Gallup investigations in over 2,000 business-units in et al. 2015) seem to support this idea, suggesting that future
10 organizations over 10 years, they concluded that reverse research should address the degree to which servant leaders
causality (i.e., performance at Time 1 improving employee may influence a wide range of team process variables.
perceptions at Time 2) “existed, but was weaker” than the
main effect of employee perceptions at Time 1 influencing Implications for Practitioners
performance at Time 2 (2010, p. 378).
A weakness of our study, however, pertains to the limited Paradoxical as it still is, servant leadership inevitably raises
number of variables that could be included. Also, generaliz- a question from the business community: Does servant
ability may be limited by the collection of data in a specific leadership really “work”? Our results, combined with those
region of France. Although servant leadership has been of prior studies showing servant leadership to be associ-
shown to predict favorable outcomes in a wide variety of cul- ated with a range of performance indicators, question the
tural settings (Hu and Liden 2011; Liden et al. 2014; Mittal veridicality of this criticism. Indeed, our investigation dem-
and Dorfman 2012; Pekerti and Sendjaya 2010; Schaubroeck onstrates that the more business-unit managers were rated
et al. 2011; van Dierendonck 2011; Walumbwa et al. 2010), as engaging in servant leadership, the better they developed
its relationship with our specific variables needs to be inves- their businesses relative to managers rated lower on servant
tigated more broadly. Nevertheless, our conclusions dovetail leadership, even as judged by the objective financial indica-
those of prior studies in the retail sector (Clapp-Smith et al. tors used to operationalize unit performance in our inves-
2008; Rego et al. 2015). tigation. Revenue and profit growth are perhaps the most
salient of all organizational effectiveness measures, critical
Avenues for Future Research to virtually all corporate organizations, and relevant at all
levels of the organization, from frontline leaders to CEOs
Having shown the importance of employee flourishing for and boards. Because servant leadership has also been shown
understanding group-level performance, our research first to explain a higher proportion of variance than other forms
invites for a broadening of well-being conceptualizations in of leadership with respect to many proximal outcomes (Hoch
organizational research. Second, from a theoretical stand- et al. 2018; Lee et al. 2020), it might be that servant leader-
point, we also encourage renewed attention to the broad set ship is the most “effective” form of leadership from a strict
of stakeholders that leaders have to face (Donaldson and business point of view.

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Servant Leadership Influencing Store‑Level Profit: The Mediating Effect of Employee… 519

A second contribution of interest for practitioners lays in Bandura, A. (1977). Social learning theory. Englewood Cliffs, NJ:
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Bandura, A. (1991). Social cognitive theory of self-regulation. Organi-
ness leaders increasingly consider the perceptions of their zational Behavior and Human Decision Processes, 50(2),
workforce as an important factor, were it only to attract tal- 248–287.
ented employees (Turban and Cable 2003). By introducing Bandura, A. (2001). Social cognitive theory: An agentic perspective.
employee flourishing as an outcome of servant leadership Annual Review of Psychology, 52, 1–26.
Bandura, A. (2006). Toward a psychology of human agency. Perspec-
and an antecedent to performance, our study confirms the tives on Psychological Science, 1(2), 164–180.
salience of this approach. Banks, G., Pollack, J., Bochantin, J., Kirkman, B., Whelpley, C., &
O’Boyle, E. (2016). Management’s science-practice gap: A grand
challenge for all stakeholders. Academy of Management Journal,
59(6), 2205–2231. https​://[Link]/10.5465/amj.2015.0728.
Conclusion Barbuto, J. E., & Wheeler, D. W. (2006). Scale development and con-
struct clarification of servant leadership. Group & Organization
Management, 31(3), 300–326.
We set out to examine two critical promises of servant lead- Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator vari-
ership, one of the prominent ethical and moral approaches able distinction in social psychological research: Conceptual,
on leadership: its ability to help followers experience per- strategic, and statistical considerations. Journal of Personality
and Social Psychology, 51(6), 1173–1182.
sonal growth through flourishing, and to fulfill collective, Barsade, S. G. (2002). The ripple effect: Emotional contagion and its
business goals objectively measured by financial indicators. influence on group behavior. Administrative Science Quarterly,
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simultaneously contribute to followers’ most critical self- Barsade, S. G., & Knight, A. P. (2015). Group affect. Annual Review
of Organizational Psychology and Organizational Behavior,
developmental goals and to the objective goals of business 2(1), 21–46. https​://[Link]/10.1146/annur​ev-orgps​ych-03241​
organizations. We discovered that servant leadership enables 4-11131​6.
followers to flourish without sacrificing the financial perfor- Bass, B. M., & Steidlmeier, P. (1999). Ethics, character, and authentic
mance of the organization. Our findings offer servant leader- transformational leadership behavior. The Leadership Quarterly,
10(2), 181–217.
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humanistic goals. We wish that our study may inspire schol- York: Psychology Press.
ars to seek a deeper understanding of servant leadership and Becker, T. E. (2005). Potential problems in the statistical control of
practitioners to find practical applications in organizations. variables in organizational research: A qualitative analysis with
recommendations. Organizational Research Methods, 8(3), 274–
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