Moderating Effects of Charismatic and Servant Leadership on Employee Wellbeing and Retention in M&As

Abstract

Employee concerns with regard to job (in)security have been associated with reduced physical health and job withdrawal. Past research establishes that mergers and acquisitions fail when leaders do not address the psychological effects of transformation processes, reflected in perceived job insecurity, on employees. We argue that employees tend to look to their leaders for support and reassurance during times of transition and change and two types of leadership—charismatic leadership and servant leadership—can serve a protective function for employees and reduce the negative effects of job insecurity. Data for this study were obtained from a medium-sized high-tech consulting company during a merger process. Perceived job insecurity, leadership as well as emotional exhaustion and turnover intentions were collected at two separate time points. In addition, objective data on sickness absence and actual turnover were available. Results provided support for the hypothesized model, in which perceived job insecurity enhanced emotional exhaustion and turnover intentions, culminating in sickness absence and actual turnover. As expected, charismatic leadership buffered against these negative outcomes. In contrast to our prediction, servant leadership even increased the detrimental effects of perceived job insecurity. Our discussion focuses on theoretical and practical implications of these results.