Predicting retail shrink from performance pressure, ethical leader behavior, and store‐level incivility

• Author: Michael S. Cole,Robert S. Rubin,Jaclyn M. Jensen
• Date: 01 July 2019
• DOI: http://doi.org/10.1002/job.2366
• Published date: 01 July 2019

RESEARCH ARTICLE

Predicting retail shrink from performance pressure, ethical

leader behavior, and store‐level incivility

Jaclyn M. Jensen

1

|Michael S. Cole

2

|Robert S. Rubin

1

1

Department of Management and

Entrepreneurship, Richard H. Driehaus College

of Business, DePaul University, Chicago,

Illinois

2

Department of Management,

Entrepreneurship, and Leadership, Texas

Christian University, Fort Worth, Texas

Correspondence

Jaclyn M. Jensen, Department of Management

and Entrepreneurship, Richard H. Driehaus

College of Business, DePaul University, 1 E.

Jackson Blvd., Suite 7100, Chicago, IL 60604.

Email: jjense10@depaul.edu

Summary

Retail shrink, a form of inventory loss due primarily to employee theft and shoplifting,

is a growing concern for retailers. Prior work on shrink has taken primarily an

individual‐level focus to understanding this problem but has yet to really explore

how the business context impacts shrink. The current study addresses this need by

delineating and testing a unit‐level (i.e., between‐stores) conceptual model, wherein

we examine the influence of performance pressure, ethical leader behavior, and

store‐level incivility on shrink in a field study of 111 U.S. retail stores. Results demon-

strate that performance pressure and ethical leadership interact to influence store‐

level incivility. Further, stores with higher incivility also had higher levels of shrink.

A focus on the contextual predictors of shrink provides timely insights into the role

of performance pressure and leadership on store‐level incivility and consequently

on retail shrink. In light of increasingly thin margins in the retail industry, the evidence

on how pressure to perform and ethical leadership influences retail shrink may offer a

solution to retailers looking to stem financial losses by promoting civility in the

workplace.

KEYWORDS

ethical leadership,performance pressure, retail shrink, store‐level incivility

1|INTRODUCTION

With losses for U.S. retailers exceeding $44.2 billion annually, the

problem of retail shrink, which refers to inventory loss due to

employee theft, shoplifting, administrative errors, and vendor fraud,

is substantial (National Retail Foundation, 2015). Yet, just two factors,

employee theft and shoplifting, account for roughly 40% and 33%,

respectively, of all store‐related shrink (National Retail Foundation,

2015). Employees thus play a significant role in the problem of shrink,

contributing actively as thieves or passively in ways that do not rein-

force theft deterrence. To be sure, such undesirable employee behav-

ior has substantive implications for a firm's financial well‐being and is

among the fastest type of growing crime in the United States (Detert,

Treviño, Burris, & Andiappan, 2007). Hence, understanding the causes

of these tangible losses is a significant organizational problem that

warrants continued scholarly inquiry.

Given the central role that employees play in contributing to this

direct source of financial loss, it is not surprising that much of the

existing research on antecedents of shrink has focused on individual

employee attitudes (e.g., job satisfaction; Kulas, McInnerney, DeMuth,

& Jadwinski, 2007; or justice perceptions; Greenberg, 1990, 1993,

2002; Shapiro, Trevino, & Victor, 1995), personality (e.g., integrity

testing; T. S. Brown, Jones, Terris, & Steffy, 1987), or demographic

characteristics (e.g., age; Hollinger, Slora, & Terris, 1992). Yet contex-

tual factors influencing shrink, such as leadership and the organiza-

tional environment, have largely been ignored (Avery, McKay, &

Hunter, 2012; Gruys & Sackett, 2003). This oversight is both theoret-

ically and practically unfortunate as a growing body of research dem-

onstrates that the normative environment plays a significant role in

influencing counterproductive work behavior (CWB; Detert et al.,

2007; Robinson & O'Leary‐Kelly, 1998). Importantly, we conceptualize

store shrink as a form of counterproductivity because shrink is the

Received: 10 September 2017 Revised: 11 March 2019 Accepted: 13 March 2019

DOI: 10.1002/job.2366

J Organ Behav. 2019;40:723–739. © 2019 John Wiley & Sons, Ltd.wileyonlinelibrary.com/journal/job 723

tangible result of various “negative employee actions that violate the

legitimate interests of an organization”(Detert et al., 2007, p. 993).

Thus, not only do characteristics or attitudes of employees themselves

predispose misconduct but also do social norms that emerge within an

employee's work unit (Biddle, 1979; Kish‐Gephart, Harrison, &

Treviño, 2010). As Katz and Kahn (1978, p. 195) highlighted, work-

place behavior “does not occur in isolation; it is itself shaped by sev-

eral additional or contextual factors.”Therefore, the central goal of

this research is to examine the contextual antecedents of retail store

shrink (Figure 1).

We focus the present study on two theoretically and practically

relevant contextual influences: performance pressure and ethical lead-

ership. This decision to draw from a broad theoretical framework is

notably consistent with the literature on CWB (see, e.g., Sackett &

DeVore, 2001). In particular, we look to performance pressure, defined

as the expectation that the business entity (i.e., retail store) must

deliver a superior performance outcome and that the store's perfor-

mance is tied to substantial consequences (Mitchell, Greenbaum,

Vogel, Mawritz, & Keating, in press), because meeting and exceeding

performance expectations are a ubiquitous requirement in business

today (Gardner, 2012a). Research on performance pressure has

uncovered a paradoxical set of consequences in that performance

pressures seem to positively impact motivation and productive work

behavior (Eisenberger & Aselage, 2009; Gardner, 2012b) but at the

expense of process losses (Gardner, 2012b), increased stress (Gardner,

2012a), and cheating behavior (Mitchell, Baer, Ambrose, Folger, &

Palmer, 2018). Recent theorizing on how performance pressure can

result in both positive and negative consequences suggests that

whether pressure is appraised as a challenge or threat will determine

if the pressure will result in more functional versus dysfunctional

behaviors (Mitchell et al., in press).

To facilitate our understanding of the factors that influence how

employees make sense of their performance environment, we turn

to the literature on ethical leader behavior. This stream of research

reveals that leader ethicality plays an important role in shaping the

contextual environment insofar as ethical leadership behaviors set

the tone for appropriate workplace conduct (M. E. Brown, Treviño, &

Harrison, 2005). Often characterized as a moral manager, ethical

leaders make a conscious attempt to shape subordinates' perspectives

via role modeling of ethical values, using rewards and punishments to

promote higher workplace standards and by treating subordinates

with care and concern (M. E. Brown & Mitchell, 2010; Ng & Feldman,

2015). Not surprisingly, then, research has shown that subordinates of

ethical leaders report experiencing lower levels of job‐related strain

and are less likely to engage in counterproductive behavior (e.g.,

Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009; Ng & Feldman,

2015; Resick, Hargis, Shao, & Dust, 2013). Therefore, theory and avail-

able evidence would suggest that a retail store's manager plays a crit-

ical role in helping his or her employees make sense of their

performance environment, which may have consequences for subse-

quent functional or dysfunctional interpersonal behavior among a

store's employees.

We also ground our conceptual model in Sackett and DeVore's

(2001) work on CWB, which conceptually differentiates employees'

dysfunctional behaviors (e.g., interpersonal mistreatment) from

counterproductivity, with the latter referring to the tangible outcomes

that result from employee behaviors (see also Detert et al., 2007). As

previously noted, we specifically identified a store‐level indicator of

counterproductivity—that is, store shrink (i.e., an objectively tracked

indicator of dollars lost due primarily to inventory loss)—as our focal

study outcome. Further, the effect of the organizational environment

on store shrink is likely mediated by factors that are more directly

related to employees' attitudes. Therefore, we focus on store incivility,

defined as an aggregate or collective construct that reflects store

employees' shared perceptions regarding the frequency with which

they engage in “low‐intensity deviant behavior with ambiguous intent

to harm the target, in violation of norms of mutual respect”

(Andersson & Pearson, 1999, p. 457). Uncivil stores contain employees

who, in the aggregate, are characteristically rude, discourteous, and

show a lack of regard for others (Griffin, 2010). Example behaviors

include gossiping about a coworker, interrupting colleagues, and rais-

ing one's voice unprofessionally.

An organizational environment that is infused with uncivil acts can

also be theoretically linked to store‐level shrink. This logic is consistent

with Morgeson and Hofmann (1999), who argued that a collective

construct “assumes an a posteriori permanence that can subsequently

influence individual and collective action”and, thus, has “a reality that

is partly independent of the interaction that gave rise to it”(p. 253).

For example, based on the tit‐for‐tat model of incivility (Andersson

& Pearson, 1999) and related literature on displaced aggression (e.g.,

Dollard, Doob, Miller, Mowrer, & Sears, 1939; Miller, Pedersen,

Earleywine, & Pollock, 2003), it seems reasonable to infer that

employees, in response to working in an uncivil milieu, may seek to

retaliate against their employer by stealing, intentionally damaging

merchandise, and/or turning a blind eye to theft deterrence (especially

in a retail environment where store merchandise is plentiful). Though

uncivil behaviors may seem innocuous, research suggests they can

be the starting point for more severe mistreatment that can saturate

a work context (Andersson & Pearson, 1999). Thus, the phenomenon

of store incivility merits greater attention as to the conditions that

FIGURE 1 Conceptual model

724 JENSEN ET AL.