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Note to Startups: Employees Are Happiest When Leaders Have a Moral Compass A new study finds that people stick around when they trust bosses will do the right thing.

By Nina Zipkin

entrepreneur daily

Company culture starts at the top, so faulty leadership can make or break an organization. The organizations and companies that have found themselves in troubled waters lately -- Uber, Thinx, the Fyre Festival -- are all similar in one way: a lack of trust, ethics and clarity from the leaders who were supposed to be setting the tone.

A recent study from the University of Sussex and University of Greenwich conducted on in concert with the CIPD, a non-profit dedicated to improving work standards and practices in the U.K., found that employees are happier and more productive when they have bosses who lead with purpose.

The researchers characterize purposeful leadership as having three core elements: the people in charge have a strong moral compass, they have a commitment to stakeholders and they have a clear vision that they communicate clearly to employees.

Related: Uber Needs to Recreate its Company Culture. Here's What You Can Learn From Its Mistakes.

The researchers came to their conclusions from surveys of 1,033 employees and 524 leaders. They also conducted 46 interviews and held 16 focus groups with 79 people in total and drew from the CIPD's quarterly Employee Outlook survey.

Forty percent of the general population employees in the U.K. said they believed their leader behaved in an ethical way, which differed considerably from the test cases of five organizations that the researchers included in their findings.

The five companies were identified with pseudonyms that only revealed what kind of business they were: BuildCo, CareCharity, GovDep, PoliceOrg and RetailCo. Eighty-eight percent of employees at CareCharity and 80 percent at GovDep believed that their leaders were acting ethically, while 75 percent of RetailCo employees and 53 percent of PoliceOrg employees said the same.

Related: Why You Need This One Trait to Build a Successful Company Culture

The researchers found that 21 percent of U.K. employers categorized themselves as a "purposeful" leader. Additionally, 35 percent of leaders in the UK gave themselves a high rating when it came to communicating a clear vision and their commitment to stakeholders.

Forty-six percent of employees who thought their leader behaved ethically are also satisfied with their jobs, while the 18 percent who were dissatisfied didn't think their leader was ethical.

Thirty-one percent of employees didn't believe their leader is ethical and didn't find their work meaningful, compared to 34 percent who had a positive outlook about both.

Related: The 10 Golden Rules of Effective Management

Fifty-eight percent of people who thought they had an ethical boss want to stay at their company, but only 8 percent who didn't think they had an ethical boss and don't find their work meaningful say the same.

In order to be a successful boss, University of Greenwich professor and co-author Dr. Amanda Shantz says that leadership isn't only about hitting financial marks or completing day-to-day operations.

"The traditional focus on leader behaviours only goes so far as to develop their ability to perform in a role," Shantz explains. "Instead, what is required is a development of the whole person, while accepting that it is impossible to mold all individuals into a uniform model of morals and ethics."

Nina Zipkin

Entrepreneur Staff

Staff Writer. Covers leadership, media, technology and culture.

Nina Zipkin is a staff writer at Entrepreneur.com. She frequently covers leadership, media, tech, startups, culture and workplace trends.

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