Leader-Member Exchange Theory

Organizations function through working roles of people that are often defined through hierarchies of positions, titles, and responsibilities.  In one aspect these structures are clearly defined by positions and policies, yet there remain unofficial and ambiguous structures that are defined by interpersonal relations (Betts, p. 115, 2004).  People generally embrace work environments from at least one of two perspectives: leader to member or member to member (Chung-Kai & Chia-Hung, 2009).  Leader-member exchange theory (LMX) is the focus of such structures in the context of relationships between managers and subordinates. LMX is defined in terms of a series of transactions between managers and subordinates that result in psychological categories of statuses, persuasion, and or lack thereof.  The concept is that managers are limited in their allocation of time and resources; therefore pure equality among employees is simply not possible (Deluga, & Perry, 1994).  Members find their status’ within favorable or unfavorable groups based upon how well they do or do not work with leadership (Northouse, 2010).

Grouping

 These differentiations of familiarity and preferential treatments are further categorized as “high” and “low” quality, or “in” and “out” groups. Employees who are members of high groups are predictably more productive, strive for excellence, and assume responsibilities beyond their job descriptions.  LMX references these behaviors as the likely reasons why they achieve favorable statuses with management.  This naturally results in greater notability through increased interactions, and shared work related opinions.  Contrastingly, those of the low quality groups will experience minimal interactions with management weakening notability, appreciation, and mutual opinions (Mayfield, & Mayfield, p.74, 1998).  This group is not necessarily formed though leadership biases, but rather by the common attitude of not acting beyond their clearly defined job descriptions.  Naturally this outlook on the workplace is not well received by leaders who tend to see things in terms of the organization’s interest –in light of big picture thinking (Northouse, 2010).

Behaviors

“Traditionally, leadership is treated as if it were completely determined by a leader’s attributes…toward all workers…In contrast, LMX theory defines leadership as the specific work interactions between a leader and an individual worker” (Mayfield, & Mayfield, p. 73, 1998).

The LMX model follows at least four specific behaviors.

1) Individualized consideration, the action of meeting member’s needs from an individual and subjective standpoint.  These needs can be emotional, physical, professional, etc.

2) Inspirational motivation, the process of vision casting.

3) Idealized influence, the building of rapport through the expression of personalities.

4) Intellectual stimulation, the leadership’s expression of special knowledge that promotes education of creativity (Chung-Kai & Chia-Hung, 2009).

Traits

Day and Crain’s (1992) research shows that traits are very important factors in the overall perceptions leaders hold of members.  Such traits are thought of as instruments of impressions about productivity, social acceptance, employee turnover, etc.  Favorable and unfavorable characteristics are subjectively considered.  However, two predictable elements of leader’s assumptions of quality relations are 1) member’s skills; and 2) leader’s personal favoring of the of members (Day, & Crain, 1992).

Emotions

Studies by Glasø and Einarsen (2008) observe the expression of emotions within the context of LMX environments.  They report that leadership is a highly involved process of emotional exchanges –many of which are not genuinely felt.  Notably, a large number of leaders make a distinction between “suppressed” and “faked” emotions.  Suppression is regarded as a quality to the application of LMX; whereas faking is perceived as dishonest.  More than 97% of surveyed leaders report that they suppress emotions, and in spite of the dishonest opinion, more than 94% report faking them.  The most common suppressed emotions are described as negative (frustration, disappointment, etc.), while the most common faked are described as positive (interest, enthusiasm, etc.).  It follows that members selected for leadership positions also share a commonality for natural emotional regulation abilities above those not selected as leadership penitential.  Contrastingly, once appointed to higher levels of status, leaders are then afforded more room for negative emotional expression, which ironically is often perceived by members as competence (Glasø, & Einarsen, 2008).  This obviously leads to perceptions of unjust or unequal circumstances in the work environment.

Organizational Justice

Piccolo, Bardes, and Judge (2008) report that employees’ attitudes about job satisfaction, commitment, fatigue, and intentions regarding separation are all affected by perceptions of fairness in matters of procedure, distributions, and treatment.  Organizational justice is typically viewed through the lenses of procedural and interpersonal transactions with leaders.  Procedural judgments are formed around perceived fairness in the enforcement of policies, and interpersonal judgments are formed by interpretations of direct interactions with leaders.  It follows that productive outcomes flourish in environments of equability.  The key component is that leadership holds the trust of their high quality members.  Where trust is low, studies show that even fair conditions have little or no affect on employee cooperation.  However when trusted, employees are more likely to dismiss, justify, or at least minimize perceived negative circumstances because of their relationships with leadership.  “Exceptional leaders—in terms of their confidence, charisma, and leadership style—motivate followers to focus on aspects of procedural and interpersonal fairness…thus enhancing the utility of organizational justice” (Piccolo, Bardes, & Judge, p. 280, 2008).

Trust

Deluga (1994) identifies trust as the essential element of employee satisfaction, productivity, and leadership effectiveness.  Of course it follows that perceptions of an unfair professional climate is the leading cause of suspicion and loss of trust in leadership. This outcome aligns with equity theory which predicts that employees will give back to organizations the proportion that they believe they are rewarded.  Low quality leadership exchanges are directly related to losses of morale and declined productivity.  However, high quality relationships result in employees feeling an obligation to return high quality labor.  Therefore, in spite of LMX outcomes of in and out crowds, leadership should do everything possible to sell the idea that all employees are treated equally.  Additional trust building actions are “supervisor availability, competence, consistency, discreetness, fairness, integrity, loyalty, openness, promise fulfillment, receptivity and overall trust” (Deluga, p. 317, 1994).

Leader’s Perspective

Wilson, Sin, and Conlon (2010) provide research to the LMX school of thought considering the perspective of leaders’ transactions that result in their benefit from member resources.  They demonstrate that managers establish relationships with members through the allocation and reception of resources.  Leaders control resources valuable to members in the ability to assign preferred assignments, supply information, favorable recommendations, friendship, etc.  Members have resources valuable to leaders in greater commitment to organizational goals, personal loyalty to leaders, volunteering of time, etc.  In turn, a more concrete list shows that both leaders and members can reward each other with status, affiliation (love), service, information, goods, and money. (While money is a reasonable reward, it seems to be one of the least useful because the amount exchanged sends the message of also being the value of the recipient.)  Status comes from leadership in the form of preferred parking, unofficial authority, etc. and members provide it in terms of admiration and validation.  Affiliation is typically expressed by leadership in the form of encouraging words, while members express it through loyalty.  Leaders provide service by special favors and members by citizenship.  Information is a resource when leadership develops mentoring relationships, and members allocate “grapevine” talk upward.  Goods are typically office furnishings controlled by leadership, and members also provide them with personal gifts.  Lastly, money is supplied to members in the form of bonuses and raises, while it is supplied by members in the form of productivity that impacts leaders pay.  The essence of LMX is the proper utilization of these rewards to facilitate high quality relationships that produce high quality exchanges and results in the work environment (Wilson, Sin, & Conlon, 2010).

The Chosen

The members who demonstrate attitudes favorable to leaders are generally selected for greater tasks –and are thereby transferred into the high quality class.  The process of their development follows a rather predictable three stage path.  In the first stage leaders interact with members on the level of rules and psychological contracts.  During this time roles are scripted and rooted in self interest.  At this point the only direction of influence is from leaders to members.  In the second stage testing begins between the two parties to determine trust, rapport, and personality.  At this point influence begins to flow upward from members to leaders.  In the third stage high exchanges occur regularly and both leaders and members have their focus on the interest of the organization’s goals (Northouse, 2010).  It is truly in this stage that members are negotiating and enjoying a sense of ownership over their personal situations.  This is a level of high quality because studies show “the relationship between locus of control and intrinsic/extrinsic job satisfaction, work-related well-being, and organizational commitment, was mediated by perceptions of LMX relations” (Martin, Charles, & McNamara, p.144, 2005).

Area of Further Study

LMX seems to be a well established concept of leadership.  Yet, in the new 21st Century the workplace is changing rapidly.  More and more people are working in decentralized, and boundaryless organizations. Outsourcing, telecommuting, and virtual offices are all ways in which the contemporary work environment is rapidly changing.  More studies need to be conducted to discover the present perceptions of interpersonal transactions, as well as how to implement and LMX model in a world were leaders and members may rarely (if ever) interact in person.

References

Betts, S C (Jan 2004). Resolving a paradox between mentoring, LMX and charisma: a process approach to leadership development.(leader-member exchange)(Report).  Journal of Organizational Culture, Communications and Conflict, 8, 1. p.111(15). Retrieved June 30, 2010, from Academic OneFile via Gale

Chung-Kai, L., & Chia-Hung, H. (2009). The Influence of Transformational Leadership on the Workplace Relationships and Job Performance. Social Behavior & Personality: An International Journal, 37(8), 1129-1142. Retrieved from Academic Search Complete  database.

Day, D V, & Crain, E C (Dec 1992). The role of affect and ability in initial exchange quality perceptions. Group & Organization Management, 17, n4. p.380(18). Retrieved June 30, 2010, from Academic OneFile via Gale

Deluga, R. (1994). Supervision trust building, leader-member exchange and organizational citizenship behaviour. Journal of Occupational & Organizational Psychology, 67(4), 315-326. Retrieved from Psychology and Behavioral Sciences Collection database.

Deluga, R J, & Perry, J (March 1994). The role of subordinate performance and ingratiation in leader-member exchanges.  Group & Organization Management, 19, n1. p.67(20). Retrieved June 30, 2010, from Academic   OneFile via Gale

Glasø, L., & Einarsen, S. (2008). Emotion regulation in leader-follower relationships. European Journal of Work & Organizational Psychology, 17(4), 482-500. doi:10.1080/13594320801994960.

Martin, R, Thomas, G, Charles, K, Epitropaki, O, & McNamara, R (March 2005). The role of leader-member exchanges in mediating the relationship between locus of control and  work reactions.  Journal of Occupational and Organizational  Psychology, 78, 1. p.141(7). Retrieved June 30, 2010, from Academic OneFile via Gale:

Mayfield, J., & Mayfield, M. (Wntr 1998). Increasing Worker Outcomes by Improving Leader Follower Relations.  Journal of Leadership Studies, 5, 1. p.72. Retrieved June 30, 2010, from Academic OneFile via Gale

Northouse, P. G.  (2010).  Leadership: Theory and Practice (5th ed.).  Thousand Oaks, CA: Sage Publications.  ISBN: 978-1-4129-7488-2.

Piccolo, R., Bardes, M., Mayer, D., & Judge, T. (2008). Does high quality leader-member exchange accentuate the effects of organizational justice?. European Journal of Work & Organizational Psychology, 17(2), 273-298. doi:10.1080/13594320701743517.

Wilson, K., Sin, H., & Conlon, D. (2010). What About the Leader In the Leader Member Exchange? The Impact of Resource Exchanges and Substitutability on the Leader. Academy of Management Review, 35(3), 358-372. Retrieved from Business Source Complete database.