LEADER-MEMBER EXCHANGE THEORY

LEADER-MEMBER EXCHANGE THEORY
LEADER-MEMBER EXCHANGE THEORY

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LEADER-MEMBER EXCHANGE THEORY

LEADER-MEMBER EXCHANGE THEORY is a relationship-based theory of leadership. LMX theory rests firmly on the assumption that leaders influence employees in their group through the quality of the relationships they develop with them (Juneja, 2015). One of the early findings of the LMX theory is that, leaders develop relationships of varying quality with their subordinates and such differentiation characterizes a wide majority of the work groups studied. 

A high quality relationship is characterized by trust, liking, professional respect, and loyalty. They are characterized by the exchange of valued resources. In these relationships, leaders provide support, developmental opportunities, men- toring, and other benefits to the employee.

The provision of such resources results in a motivation to reciprocate to the leader on the part of members, by demonstrating behaviors such as loyalty and higher levels of voluntary behaviors. In other words, the relationship between high LMX quality and promanagerial and occasionally proorganiza- tional behaviors is frequently believed to be a sense of responsibility and high levels of devotion to the supervisor. Furthermore, there is a relationship between LMX quality and outcomes and the degree to which employees believe their leader’s promises will be kept (Hao, et al., 2019).

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LEADER-MEMBER EXCHANGE THEORY

The theory states that all relationships between managers and subordinates go through three stages. These are Role-Taking, Role-Making and Routinization (Mindtools, n.d.). When team members initially join the group, they take on roles. Managers utilize this period to examine the talents and competencies of new employees. When new team members begin working on projects and responsibilities as part of the team, role-making happens.

As new team members adjust to their new roles, supervisors often want them to work hard, be loyal, and demonstrate trustworthiness (Mindtools, n.d.). According to the idea, managers classify new team members into one of two categories, in-group or out-group, during this period. If team members demonstrate loyalty, trustworthiness, and skill, they are placed in the In-Group (Mindtools, n.d.).

This group consists of the team members in whom the management has the most faith. In addition, this group receives additional one-on-one time with the manager. People in this category frequently share their manager’s attitude and work ethic. If team members break the manager’s trust or demonstrate that they are uninspired or inept, they are placed in the Out-Group (Gregersen, et al., 2016).

The work of this group is frequently limited and unchallenging. Out-group members have less access to the management and are less likely to be given opportunities for promotion. Routines between team members and their supervisors are created during the Routinization phase (Mindtools, n.d.). In-Group team members strive hard to keep their bosses’ goodwill by demonstrating trust, respect, empathy, patience, and perseverance. Members of the out-group may begin to resent or distrust their bosses (Mindtools, n.d.).

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LEADER-MEMBER EXCHANGE THEORY

One of two metrics is used in most empirical studies on LMX theory. The LMX-7 is a single-dimensional scale with seven components (Martin, et al., 2017). The LMX-Multidimensional is made up of 12 components namely affect, loyalty, contribution, and professional respect, each of which captures three dimensions. Many researchers prefer to collapse the dimensions since the multidimensional measure is made up of highly linked dimensions that lie under a second-order component.

Another prevalent trend in LMX research is to assess LMX quality via the eyes of the employee. Correlations are usually minimal when LMX is measured from the perspective of members and leaders. Furthermore, during the early phases of a relationship’s growth, the correlation is less, and the overlap grows as time passes the lack of agreement could be explained by a number of different mechanisms (Gooty & Yammarino, 2016).

When employees and managers are asked how much they like, respect, and feel loyal to one other, it’s only natural that their responses differ. Second, in their relationship, each individual may have varying degrees of success in satisfying the expectations of the other. Third, due to social desirability concerns, leaders may be less inclined to disclose a poor-quality conversation with a team member. Finally, some of the poor correlations reported might be due to the measuring method (Gooty & Yammarino, 2016).

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Member performance and competence appear to be important predictors in the LMX development process as these are helpful behaviors in establishing trustworthiness (Erdogan & Bauer, 2015). When the relationship begins, trust develops as a result of a mutual testing process. Employee’s satisfactory responses to the testing efforts of leaders result in the development of trust on the part of the leader. 

In addition to member performance and similarity to leaders, member personality has been frequently examined as a predictor in cross-sectional work (Erdogan & Bauer, 2015). Meta-analytic results revealed that following member competence and perceived similarity, member positive affec- tivity and the locus of control are the characteristics with the strongest correlations to LMX quality (Martin, et al., 2015).

Furthermore, goal orientation has been explored as an antecedent. Mastery orientation, which refers to the degree to which a person is interested in acquiring new skills, improving and learning, has been shown to be positively related to LMX quality, whereas performance orientation, which refers to the degree to which the person is preoccupied with looking like a high performer and being evaluated well, has been negatively related (Martin, et al., 2015).

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LEADER-MEMBER EXCHANGE THEORY

The way that leaders develop different quality relationships with members of their team has been referred to as the LMX differentiation process (Anand, et al., 2015). LMX differentiation is defined as a process by which a leader, through engaging in differing types of exchange patterns with subordinates, forms different quality exchange relationships with them. LMX differentiation does not refer to the mean LMX quality in the team, but to the extent that there are differences in LMX quality within the team (Anand, et al., 2015).

Although LMX differentiation refers to the process by which leaders develop different quality relationships with each team member, the results of that process will be differentiation patterns of LMX quality between team members. Three main properties of the differentiation process pattern that can be identified and assessed include central tendency, variation, and relative position (Cobb & Lau, 2015).

The first property of the differentiation process concerns the within‐team central tendency, which is normally assessed as the team mean or median score. Although most research has examined the mean, some argue that the median is a better indicator of aggregation because it represents the middle person in the team while the mean might not correspond to any team member (Cobb & Lau, 2015). 

There are two dimensions to LMX variation: dispersion which is the amount of spread of LMX between team members and distribution shape, the pattern of LMX within the team. The third property of the LMX differentiation process refers to the within‐team relative position or location of each team member’s LMX quality with respect to other members of the team who are managed by the same leader. It the relative standing of a team member’s LMX compared to other team members (Cobb & Lau, 2015).

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It is important to note that the presence of LMX differentiation increases the salience of fairness concerns. Studies on LMX differentiation highlight the importance of employee awareness of how LMXs are distributed within the group. Employees react not only to their own relationship quality, but also to their coworkers’ relationship quality, and distribution of LMXs matter.

Taking this idea a step further, scholars also started investigating social comparison processes directly, by introducing the concept of relative LMX. Relative LMX is a statistical computation of the degree to which a person’s LMX quality is higher or lower than the team’s LMX average. Utilizing a social comparison approach, scholars argued that having a higher-quality exchange compared to one’s team members is a source of satisfaction.

Controlling for one’s LMX quality, relative LMX is positively related to self- efficacy, performance, citizenship behaviors, and psychological contract fulfillment. In addition to examining relative LMX operationalized as the difference between focal person’s LMX score from the group mean, researchers developed a perceptual measure of relative LMX, directly asking individuals to compare their own rela- tionship quality to the other relations the leader develops with team members.

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LEADER-MEMBER EXCHANGE THEORY

Investigations of the nomological network of LMX quality are numerous and this is a mature field of investigation. Yet, there are still research avenues that are important to investigate. One issue is the evolving nature of organizations. LMX theory originated in the 1970s, at a time organizations were charac- terized by tall hierarchies, unity of command, and authority concentrated more at the top (Chen, et al., 2018).

Today, while such organizations continue to exist, there are more novel and contemporary structures under which managers and employees develop relationships. For example, in many contemporary organiza- tions, employees may report to more than one manager, whereas LMX theory is based on the assumption that each member has one, clearly identifiable manager who controls resources valued by the member (Chen, et al., 2018). 

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Recent research (Vidyarthi, et al., 2018) has examined LMX relationships in such a context and showed that in a sample of information technology consultants reporting to two managers, convergence of the quality of these relationships was associated with more positive outcomes. The authors con- tended that each LMX relationship would serve as a compar- ison point for the other relationship, evoking social comparison processes.

In other words, similar to the comparisons employees engage in with their coworkers’ LMXs, it seems that they also compare the multiple exchanges they have with different leaders in their work lives (Vidyarthi, et al., 2018). Such findings indicate that LMX theory would benefit from an extension and testing of the theory in settings that are different from the traditional orga- nizational forms.

As organizations introduce matrix structures where members report to multiple leaders for finite periods of time, or when they eliminate managers by introducing lattice organizations where there are no assigned leaders, the utility of the theory remains unclear. Extension of LMX theory to contemporary organizational structures is an important future direction. 

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A second research direction relates to an examination of LMX quality in relation to coworker relationships (Wang, et al., 2018). We know that LMX quality is associated with positive job attitudes and behaviors. However, we know significantly less about when and why coworkers experience envy or jealousy, or feel nega- tively toward high LMX members. (Tse, et al., 2018) showed that the degree to which LMX quality is positively associated with one aspect of coworker relations is contingent on the degree to which high LMX members also demonstrate help- fulness and discretion.

Systematic investigation of the effects of LMX quality on coworker emotions, behaviors, and reactions to the focal person is a noteworthy area of research. The importance of this topic is also evidenced by the fact that the most recent meta-analysis in LMX theory (Martin, et al., 2016) includes relationships of LMX to a large number of outcomes, but any indicators of coworker relationships is curiously missing, which likely indicates the small number of studies examining LMX quality in relation to coworker relations. 

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LEADER-MEMBER EXCHANGE THEORY

In conclusion, while research on LMX has entered a mature phase where much is known about its measurement, anteced- ents, boundary conditions, and consequences, much also remains left to uncover. These include future understanding of how LMX relationships develop and the boundary conditions for relationship devel- opment, how LMX is measured, how relative LMX affects what we know, as well as the key future research themes of the changing nature of work in terms of content and organizational structures, the influence of the social network of relationships, as well as the dark side of LMX. Given these and other potential research questions, we are excited about the future of LMX as a vibrant research area. 

LEADER-MEMBER EXCHANGE THEORY

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References

Anand, S., Vidyarthi, P. R. & Park, H. P., 2015. LMX Differentiation: Understanding relational leadership at individual and group levels.. new york: Oxford University Press.

Cobb, A. T. & Lau, R. S., 2015. In: Trouble at the next level: Effects of differential leader–member exchange on group-level processes and justice climate. s.l.:s.n., p. 1437

Chen, X. P., He, W. & Weng, L. C., 2018. What is wrong with treating followers differently? The basis of leader–member exchange differentiation matters. Journal of Management, Issue 44, pp. 946-971..1459.

Erdogan, B. & Bauer, a. N., 2015. The Oxford Handbook of Leader-Member Exchange. New york: Oxford University press.

Hao, Q., Shi, Y. & Yang, W., 2019. How leader-member exchange affects knowledge sharing behavior: understanding the effects of commitment and employee characteristics. 

Gregersen, S., Vincent-Höper, S. & Nienhaus, A., 2016. Job-related resources, leader–member exchange and well-being: a longitudinal study.. Work Stress, Issue 30, p. 356–373. 

Gooty, J. & Yammarino, F. J., 2016. The leader–member exchange relationship: a multisource, cross-level investigation. J. Manage, Issue 42, p. 915–935.

 Juneja, P., 2015. Management Study Guide. [Online]  Available at: https://managementstudyguide.com/transformational-leadership.htm [Accessed 3 July 2021].

Martin, R., thomas, G., Legood, A. & Russo , S. D., 2017. Wiley Online Library. [Online]  Available at: https://onlinelibrary.wiley.com/doi/full/10.1002/job.2202 [Accessed 3 July 2021].

Martin, R. et al., 2016. Leader-member exchange (LMX) and performance: a meta-analytic review. p. 67–121. Mindtools, n.d. MindTools. [Online]  Available at: https://www.mindtools.com/pages/article/leader-member-exchange.htm
[Accessed 3 july 2021].

Tse, H. H. M., Troth, A. C., Ashkanasy, N. M. & Collins, A. L., 2018. Affect and leader-member exchange in the new millennium: a state-of-art review and guiding framework.. p. 135–149. 

Vidyarthi, P., Rolnicki, S. & Anand, S., 2018. Leader-member exchange and organizational citizenship behaviors: contextual effects of leader power distance and group task interdependence.. p. 489–500.

Wang, D., Gan, C. & Wu, C., 2018. LMX and employee voice: a moderated mediation model of psychological empowerment and role clarity.. p. 605–615.

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