Followers’ reactions to self-serving leaders: the influence of the organization's budget policy

Purpose - – Even though leaders often are seen as responsible guides, they sometimes behave in a self-serving way, for example, by spending the company's budget on their own, frivolous needs. In this study, the authors explore an aspect of such behavior: the authors examine how an organizational budget policy makes such spending more legitimate in the eyes of followers. Specifically, the authors examine when followers will react to a leader's self-serving behavior as a function of: the role of organizational budget policies, and whether followers are directly affected by the leader's behavior. The authors test two particular budget policies, i.e. carry-forward vs non-carry-forward (a.k.a., “use-it-or-lose-it” budget policies), which differ on whether a department/team's allocations not spent by the end of the fiscal year flow back to the central administration. The paper aims to discuss these issues. Design/methodology/approach - – Study 1 is a multi-source field study that should enhance the external validity of the results. Study 1 was analyzed with regression analyses and bootstrapping techniques. To be able to draw causal inferences, the authors also conducted an experimental study (Study 2). Findings - – Followers react more negatively – by showing increased turnover intentions and decreased commitment and cooperation – to a leader's self-serving behavior in a carry-forward policy than in a use-it-or-lose-it budget policy. Thus, organizational policies, such as the budget policy, affect how followers react to self-serving leaders. Originality/value - – The authors focus on self-serving leader behavior. The authors show that followers’ reactions to self-serving leaders are not necessarily negative and are influenced by the specific organizational context in which the self-serving behavior occurs. More specifically, the authors add to the literature by introducing budget policies as influencing followers’ reactions to leaders’ behavior.