The mediating role of levers of controls on the association between sustainable leadership and organisational resilience

As organisational resilience relates to the ability of organisations to respond to adversity it is inherently reliant on the ability of organisations to cope with and/or respond to the uncertainty and ambiguity in their operating environment (Kantur & Iseri-Say, 2012). Everly, Jr. (2011) here refers to the importance of leadership in facilitating organisational resilience. In particular, through focusing on environmental, social and community concerns, in addition to economic (financial) objectives, sustainable leadership facilitates organisational resilience through providing organisations with an improved understanding of and closer relationship with their stakeholders, thereby enabling them to better respond to crisis situations (Pal et al., 2014). Specifically, as sustainable leadership assists in establishing good relationships and interacting with both internal and external stakeholders (e.g. staff, customers, suppliers, locals, governments etc.) (Maak and Pless, 2006; Suriyankietkaew & Avery, 2016), it enables organisations to better recognise opportunities and threats and develop new capabilities as environmental circumstances change (Lengnick-Hall & Beck, 2009) i.e. be more resilient. Similarly, Avery and Bergsteiner (2011) claim that the focus of the sustainability leadership philosophy on stakeholders and their social, environmental and ethical concerns creates an interdependency which assists organisations in being more resilient. Lengnick-Hall et al. (2011) also emphasise the importance of establishing good relationships with various stakeholders in order to “obtain a rich array of resources from inside and beyond the boundaries of the firm” (p.251), thereby assisting organisations in responding to environmental complexities and crisis situations. In addition, Williams et al. (2017) maintain that the relationship an organisation has with their stakeholders can influence organisational resilience through affecting how an organisation’s stakeholders themselves perceive a crisis, respond to the crisis and importantly, their willingness to assist the organisation in dealing with the crisis.

A sustainable leadership philosophy is inherently aligned with the deployment of sustainable business practices, i.e. the use of financial, social and environmental practices, with Ortiz-de-Mandojana and Bansal (2016) suggesting that sustainable business practices improve organisational resilience through assisting organisations in embracing opportunities and responding to threats. They argue that such practices facilitate the identification of maladaptive tendencies and enable them to deal with extraordinary events to minimise their effect on performance, and to reduce performance volatility. Further, social and environmental practices can help organisations to better deal with disruptions and increase their chance of survival (Ortiz-de-Mandojana & Bansal, 2016).

Therefore, we hypothesise that sustainable leadership will be positively associated with organisational resilience.

Belief systems Sustainable leaders will advocate the joint pursuit of economic (financial), environmental and social performance, utilising belief systems to convey their organisation’s vision and purpose (Arjaliès & Mundy, 2013) and in particular, their societal, environmental and ethical concerns. For example, Arjaliès and Mundy (2013) highlight the important role of belief systems in initiating, communicating and uniting employees to focus on CSR values within an organisation. Similarly, organisations undertaking sustainable leadership would need to communicate their environmental vision and goals and articulate plans for implementing environmental initiatives. Organisations would also need to stress the importance of ethical behaviour to employees, and place greater emphasis on communicating with and addressing the concerns of various stakeholders, including employees themselves who may be provided with additional training and/or mentoring. Consequently, it is expected that organisations engaging in sustainable leadership will use belief systems to a greater extent.

Boundary controls Similarly, as boundary controls are used to restrict and prevent undesirable employee behaviour and to minimise organisational risk, it is envisaged that such controls will be used to ensure that employees comply with their organisation’s sustainable leadership philosophy. For example, Laguir et al., (2019, 547) state that organisations “mobilize boundary systems to implement employee CSR activities through ethics guides, codes of conduct, guidelines on agreed upon social activities, and diversity guidelines”. Similarly, Bhuiyan et al. (2022, p.4) refer to the role of boundary controls in “establishing clear expectations regarding the specific CSR activities that employees need to engage with and the manner in which such activities are to be provided”. Accordingly, it is expected that sustainable leadership will lead to a higher extent of use of boundary controls, with such controls, including the use of prescribed codes, principles and procedures (Widener, 2007), used to set the sustainability guidelines and expectations for employees.

Interactive use of controls In respect to the use of controls, the focus of sustainable leadership on a broader range of objectives, including social and environmental performance, and the concern of sustainable leaders with addressing the demands of various stakeholders, and not just shareholders, necessitates greater internal interactions and communication i.e. higher interactive use of controls. In particular, as the interactive use of controls facilitates communication in relation to the external environment (Bhuiyan et al., 2022), organisations are more likely to use controls in an interactive way in order to better understand stakeholder’s concerns and the pressure to behave in a sustainable manner. Furthermore, as the “interactive use of controls facilitate creative dialogues and information sharing” (Baird et al., 2018, 259), sustainable leaders are more likely to use controls in an interactive way in order to promulgate the merits of sustainability, discuss and resolve stakeholder’s concerns and develop and implement sustainability plans and actions. For example, there is evidence that the interactive use of controls enhances CSR innovation (Arjaliès & Mundy, 2013; Laguir et al., 2019) and promotes CSR use (Hosoda, 2018) through encouraging communication between different levels of the organisation in regard to CSR practices (Bhuiyan, 2022). Further, the interactive use of controls is positively associated with organisational learning and hence, the discovery of unique approaches to address stakeholder needs (Bhuiyan et al., 2022; Simons, 2000). Therefore, we expect that there will be a positive association between sustainability leadership and the interactive use of controls.

Diagnostic use of controls The diagnostic use of controls will enable organisations to monitor progress and performance in respect to the achievement of sustainability goals (Witcher & Chau, 2010). Such monitoring and the evaluation of performance is desirable in respect to providing clear performance expectations, facilitating the empowerment of and motivating employees (Baird et al., 2019) to achieve sustainability goals, and limiting individuals’ undesirable behaviour (Su & Baird, 2017). A sustainable leadership approach requires more extensive monitoring and evaluation of performance, as in addition to economic (financial) goals leaders pursue social and environmental goals and aim to satisfy the demands of various stakeholders. For example, Battaglia et al. (2016) refer to the requirements to produce a sustainability report and a sustainability annual plan to ensure that an organisation’s activities are in line with their overall sustainability strategy. Similarly, Bhuiyan et al. (2022) refer to the role of the diagnostic use of controls in implementing and monitoring the performance of CSR activities. Consequently, it is expected that a sustainable leadership approach will be positively associated with the extent to which the diagnostic approach to using controls is applied.

Bracci and Tallaki (2021) provide evidence of the role of MCSs in developing resilience capacities stating that MCSs can enhance organisations’ resilience by directing employees’ behaviour towards organisational goals. Specifically, through influencing the culture, enhancing communication and facilitating improved decision making, MCSs can enhance organisational resilience (Bracci & Tallaki, 2021). Consequently, this study focuses on the influence of the MCS, specifically each of the four levers of control, on an organisation’s ability to survive, adapt and emerge (i.e. their organisational resilience) during the COVID-19 global pandemic.

Belief systems There is widespread evidence that through communicating core values, belief systems enable organisations to better understand customer needs (Shurafa & Mohamed, 2016) and can facilitate the innovativeness and creativity of employees (Simons, 2000). Seville et al. (2015) here refers to the importance of establishing a learning culture to facilitate organisational resilience with Koronis and Ponis (2018) referring to the role of beliefs in establishing such core values. Further, belief systems enhance an organisation’s understanding of and development of solutions to the opportunities and threats in their external environment (Baird et al., 2019; Mundy, 2010) and inter-functional coordination (Slater & Narver, 2000), thereby supporting an organisation’s ability to respond, adapt and benefit from crisis situations i.e. their organisational resilience. Rodríguez-Sánchez et al. (2019) here refer to the importance of open communication and collaboration while Pal et al. (2014) refer to the importance of conveying a clear vision and effective interactions to nurture resilience. Similarly, Parsons (2010) refers to the importance of shared beliefs in achieving resilience and Morais-Storz et al. (2018) refer to the importance of top management’s beliefs in supporting resilience. Accordingly, we expect that belief systems will facilitate organisational resilience and hypothesise a positive association between belief systems and organisational resilience.

Boundary controls Boundary controls are used to provide guidelines in respect to unacceptable behaviour (de Haan-Hoek et al., 2020). Such controls may constrain organisational resilience through limiting the ability of employees to search for and resolve problems and restricting their opportunity-seeking and learning behaviour (Mundy, 2010). Specifically, Widener (2007) maintains that boundary controls including codes of conduct, prescribed rules, and specified procedures, restrict employee behaviour, thereby limiting the ability of organisations to respond and adapt to external uncertainty. Further, as boundary controls limit organisation’s ability to engage in continuous improvement initiatives (Mundy, 2010) and limit their ability to respond to external threats and opportunities, such controls may have a negative effect on organisational resilience.

However, as boundary controls define strategic activities (Simons, 1995), this may assist organisations in coping with the crisis situations affecting their product markets. Specifically, boundary controls provide organisational participants with clear lines of responsibility (Bhuiyan et al., 2022), and a clear “structure by placing limits on inappropriate behaviours, setting clear targets and expectations, and monitoring feedback” (Speklé et al., 2017, 74). Hence, through providing clear guidelines in respect to the core competencies and off-limit behaviour, organisations may be in a better position to adapt to and respond to the circumstances affecting their defined product domain (i.e. organisational resilience). This is consistent with Annarelli and Nonino (2016, 3) who suggest that organisational resilience can be developed through “preparedness and preventive measures to minimize threats probability and to reduce any impact that may occur”.

Therefore, in line with these arguments we hypothesise that boundary controls will be positively associated with organisational resilience. Specifically, boundary controls, which define an organisation’s operating domain and set boundaries on inappropriate behaviour (Speklé et al., 2017), are expected to facilitate organisational resilience through providing clear guidelines in respect to the focus of organisations and acceptable processes and procedures.

Interactive use of controls The interactive use of controls enhances organisational resilience through emphasising face-to-face communication, discussion and debate (Lengnick-Hall et al., 2011; Su & Baird, 2017) in respect to the environment uncertainties influencing an organisation. Specifically, “interactive control systems enable top-level managers to focus on strategic uncertainties to learn about threats and opportunities as competitive conditions change and to respond proactively” (Simons, 1995, p.81). Accordingly, the interactive use of controls encourages organisational learning and innovation which can lead to enhanced organisational performance (Beuren & dos Santos, 2019; Henri, 2006; Su & Baird, 2017). Similarly, interactive control systems facilitate communication in relation to the external environment, thereby enabling a greater understanding of a firm’s threats and opportunities (Bhuiyan et al. (2022). Hence, organisations will be better informed to respond to competitors’ strategies and actions and consequently, be more resilient. Therefore, we expect that there will be a positive association between the interactive use of controls and organisational resilience.

Diagnostic use of controls The diagnostic use of controls involves the use of controls to monitor and evaluate performance for the purpose of ensuring that operations align with the organisation’s strategic goals (Simons, 2000). Through focusing on the achievement of desired outcomes, irrespective of the means used to achieve such outcomes, the diagnostic use of controls empowers employees with a high level of autonomy in respect to decision-making rights, thereby enabling them to react immediately to unexpected events (Su et al., 2022). Similarly, top management do not waste time constantly monitoring employees’ behaviour, with the time saved able to be deployed addressing external threats and identifying opportunities (Su et al., 2017) i.e. enhancing organisational resilience.

In addition, the diagnostic use of controls is expected to enhance organisational resilience through identifying gaps in performance and facilitating innovation. First, the diagnostic use of controls enables the identification of gaps in performance through monitoring and comparing actual results with performance expectations, thereby promoting the initiation of corrective action (Sakka et al., 2013) to facilitate organisational resilience. Secondly, through maintaining control and stability in respect to performance, the diagnostic use of controls enables organisations to be more creative, i.e. to take advantage of opportunities through innovation, thereby enhancing their organisational resilience. For example, Widener (2007) reported a positive association between the diagnostic use of controls with an organisation’s orientation to learn, while Baird et al. (2019) found that the use of such controls was positively associated with management innovation.

Therefore, it is expected that there will be a positive association between the diagnostic use of controls and organisational resilience.

In line with the previously formulated hypotheses which maintain the association between sustainable leadership and Simons’ (1995) levers of control, and the subsequent association between these levers of control and organisational resilience, it is expected that the levers of control will mediate the association between sustainability leadership and organisational resilience. Specifically, we maintain that a sustainable leadership approach warrants additional focus on the levers of control which in turn exhibit a positive influence on organisational resilience. Through examining this mediating role, we contribute to the sparse empirical research examining the interrelationship between leadership and MCSs (Su & Baird, 2017), through examining the unique association between sustainable leadership and the levers of control, and providing an initial empirical insight into the subsequent influence of these levers of control on organisational resilience. It is expected that the four levers will positively mediate the association between sustainable leadership and organisational resilience i.e. sustainable leadership will lead to a greater emphasis on each of the levers of control, which will in turn lead to enhanced organisational resilience.

The theoretical model is summarised below in Fig. 1.

As previously indicated, sustainable leadership refers to the focus of leaders on being part of the community and addressing societal and environmental values as opposed to solely focusing on economic (financial) returns and satisfying shareholders. Hence, sustainable leaders are more likely to be concerned with ethical behaviour and meeting environmental, social and community expectations. We developed a fourteen-item measure of sustainable leadership based on Avery and Bergsteiner’s (2011) foundation leadership practices (see Table 2). While Avery and Bergsteiner (2011) refer to nineteen leadership practices, including 5 additional higher-level practices, we focused on the foundation practices as they represent the basis for the emergence of the higher-level practices, while “performance is not likely to improve unless the foundations are in place” (Avery & Bergsteiner, 2011, 12). Each of the fourteen items assess key leadership aspects with the anchors for each measure depicting a shareholder-first philosophy, whereby the focus is on shareholders and financial returns, and the sustainable leadership approach, which is concerned with all stakeholder’s concerns, and social, environmental, and ethical concerns. Avery and Bergsteiner (2011, 1, 3) refer to the sustainable leadership approach here as pursuing “economic value by creating societal value” and the shareholder-first philosophy as being “tough, ruthless, asocial, profit at any cost” and.

Respondents were required to indicate the extent to which all of the leaders in their organisation focused on each practice (as listed in Table 2), using a series of 5-point Likert scales with the unique anchors (see Table 2) representing either a shareholder first philosophy or a sustainable leadership approach. For example, in respect to the first practice ‘developing people’, respondents were required to indicate the extent to which all of the leaders in their organisation focused on developing people selectively (i.e. representing a shareholder first philosophy) through to developing everyone continuously (i.e. representing a sustainable leadership approach).

Exploratory factor analysis revealed that the 14 items loaded onto one dimension with confirmatory factor analysis (CFA) (see Appendix) resulting in one of the fourteen items being removed (‘CEO and top team’). The CFA results show that the remaining 13 items all had loadings in excess of 0.6 and the measure exhibited a good model fit (CMIN/DF = 1.157; AGFI = 0.962; CFI = 0.997; GFI = 0.980; RMSEA = 0.020). Accordingly, the level of sustainable leadership was measured as the average score of these thirteen items with higher (lower) scores indicating higher (lower) sustainable leadership.

Simons’ (1995) four levers of control were measured using established scales. Specifically, we used Widener’s (2007) four item measures of belief systems and boundary controls and Su et al.’s (2015) five (four) item measures of the interactive (diagnostic) use of controls (see Appendix). The measure of the interactive use of controls focuses on the communication and interaction between operational and senior level managers and hence, is representative of Henri’s (2006) attention-focusing dimension, while the four items used to measure the diagnostic use of controls focus on the premises used to capture diagnostic control in both Henri (2006) and Widener (2007). Respondents were required to indicate the extent to which they agreed that each statement represented the practices within their organisation using a 5-point Likert scale with anchors of “1 Strongly disagree” to “5 Strongly agree”. Exploratory factor analysis (EFA) resulted in all 17 items loading onto their respective dimension of control with the subsequent CFA results (see Appendix) indicating that the overall model exhibited a good fit (CMIN/DF = 2.554; AGFI = 0.894; CFI = 0.959; GFI = 0.924; RMSEA = 0.062). Accordingly, the four levers of control were measured as the average score of the items loading on each dimension with higher (lower) scores indicating a higher (lower) focus on each control.

Organisational resilience was measured using Kantur and Iseri-Say’s (2015) nine-item construct (see Appendix) with respondents required to indicate the extent to which they agreed that each statement described their organisation on a 5-point Likert scale with anchors of “1 Strongly disagree” to “5 Strongly agree”. All nine items loaded onto the one dimension with the CFA results indicating that the model exhibited a good fit (CMIN/DF = 1.824; AGFI = 0.957; CFI = 0.987; GFI = 0.974; RMSEA = 0.045). Accordingly, organisational resilience was measured as the average score of the nine items with higher (lower) scores indicating greater (less) resilience.

The model considered the effect of two control variables, organisational size and environmental uncertainty, on the four levers of control, and organisational resilience. Organisational size was measured based on the number of employees and environmental uncertainty was measured using Su et al.’s (2015) three item construct (see Appendix) using anchors of “1 = not at all” and “5 = To a great extent”. The three items loaded onto one dimension and the factor loadings exceeded the cut-off point of 0.6. While the goodness of fit could not be determined as there were only three items, the Cronbach’s alpha, composite reliability and AVE scores (see Table 3) support the reliability of the construct and hence, environmental uncertainty was measured as the average score of the three items.

Given sustainable leadership is operationalised as the leadership style of all of the organisation’s leaders and hence, represents an overall organisation leadership philosophy, it is possible that sustainable leadership moderates the effect of the use of various control mechanisms on organisational resilience. Accordingly, we examined alternative models which considered the potential of sustainable leadership to moderate the relationship between controls and organisational resilience. First, we conducted regression analysis to examine the effect of the interaction between sustainable leadership with each of the four levers of control on organisational resilience. Table 7 presents the results of this regression analysis with Model 1 showing that three of the four levers of control (all except boundary controls) were significantly associated with organisational resilience. These results are consistent with the SEM findings shown in Table 5.

We then considered the effect of the interactions between sustainable leadership with the four levers of control, with Model 2 showing two significant findings, although sustainable leadership exhibited a negative moderating effect on the association between boundary controls and organisational resilience (β = − 0.79; p = 0.00) suggesting that leaders reinforcement of boundary controls has a detrimental effect on their effect on organisational resilience. Only one of the four interactions (beliefs) exhibited a significant positive effect on organisational resilience (β = 0.86; p = 0.00). This finding suggests that sustainable leadership strengthens the positive association between belief systems and organisational resilience through assisting in communicating the values, purpose and goals of an organisation to employees. In particular, sustainable leadership will support belief systems that convey the societal, environmental and ethical concerns of various stakeholders, thereby enhancing the ability of organisations to respond to the demands of such stakeholders, and hence, be resilient in the face of the increasing complexities and uncertainty in their external environment. However, given the increase in the explanatory power of model 2, compared to model 1, is small (0.55–0.57) the effect of this interaction is minimal.

Further analysis was also undertaken to include the interactions between sustainable leadership and the four levers of control as control variables (influencing organisational resilience) in an adjusted SEM. The results of this analysis are presented in Table 8 and reveal that only one of the four interactions (beliefs) exhibited a significant association with organisational resilience (β = 0.09; p = 0.00). Alarmingly, the model fit of this adjusted SEM model was extremely poor [CMIN/DF = 26.32; AGFI = 0.576; CFI = 0.924; GFI = 0.880; RMSEA = 0.249] and therefore, we maintain the initial model shown in Fig. 1 (with the results presented in Table 5 and Fig. 2), whereby the effect of sustainable leadership on organisational resilience transpires through the levers of control.