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

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 demonstrate 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.