1. Chapter 9 – Continued
Leader-Member Exchange (LMX) Theory
• A theory of leadership that focuses on the relationship that develops
between a leader and an employee.
• It is a social exchange relationship-based approach to leadership.
• Effective leadership processes result when leaders and employees
develop and maintain high-quality social exchange relationships.
• The basis for the effects of LMX is social exchange theory and the
norm of reciprocity.
Social Exchange Theory
• Individuals who are treated favourably by others feel obliged to
reciprocate by responding positively and returning that favourable
treatment in some manner.
• Employees in a high-quality relationship with their supervisor will
reciprocate with extra effort and higher commitment and
Leader-Member Exchange (LMX) Theory (continued)
• High LMX involves a high degree of mutual influence and obligation as
well as trust, loyalty, open communication, and respect between a
leader and an employee.
• In high-quality relationships, employees perform tasks beyond their
• Low LMX is characterized by low trust, respect, obligation, and mutual
• In low-quality relationships, the leader provides less attention and
latitude to employees. • Employees do only what their job descriptions and formal role
Leader-Member Exchange (LMX) Theory: Research Evidence
Employees with higher quality LMX have higher self-efficacy, more
positive work attitudes, and higher OCB and job performance.
Higher-quality LMX relationships result in positive outcomes for
leaders, employees, work units, and organizations.
• Transactional leadership is leadership that is based on a
straightforward exchange relationship between a leader and
• Transactional leadership behaviour involves:
– Contingent reward behaviour (leader reward behaviour)
– Management by exception
Management By Exception
• Leadership that involves the leader taking corrective action on the
basis of the results of leader-follower transactions.
• The leader monitors follower behaviour, anticipates problems, and
takes corrective actions before the behaviour creates serious
• Transformational leadership is leadership that provides followers with
a new vision that instills true commitment.
• Transformational leaders change the beliefs and attitudes of followers
to correspond with a new vision and motivates them to achieve
performance beyond expectations. • Popular examples of transformational leaders: Herb Kelleher, Michael
Eisner, Steven Jobs, and Carly Fiorina.
• Transformational leaders are usually good at the transactional aspects
of clarifying the paths to goals and rewarding good performance.
• What are the behaviours of these transformational leaders who
encourage considerable effort and dedication on the part of followers?
Behaviours of Transformational Leadership
• There are four key dimensions of transformational leader behavour:
– Intellectual stimulation
– Individualized consideration
– Inspirational motivation
• People are stimulated to think about problems, issues, and strategies
in new ways.
• This contributes to the “new vision” aspect of transformational
• The leader challenges assumptions, takes risks, and solicits followers’
• It often involves creativity and novelty
• This involves treating employees as distinct individuals, indicating
concern for their needs and personal development, and serving as a
mentor or coach when appropriate. • The emphasis is a one-on-one attempt to meet the concerns and
needs of the individual in question in the context of the overall goal or
• This involves the communication of visions that are appealing and
inspiring to followers.
• Leaders with inspirational motivation have a strong vision for the
future based on values and ideals.
• They stimulate enthusiasm, challenge followers with high standards,
communicate optimism about future goal attainment, and provide
meaning for the task at hand.
• They inspire followers using symbolic actions and persuasion.
• The ability to command strong loyalty and devotion from followers
and thus have the potential for strong influence among them.
• This is the most important aspect of transformational leadership.
• Charisma provides the emotional aspect of transformational
• The emergence of charisma is a complex function of traits, behaviours,
and being in the right place at the right time.
New and Emerging Theories of Leadership
• Leadership research has begun to focus on the broader context of the
• This has led to the emergence of new forms of leadership behaviours
– Empowering leadership – Ethical leadership
– Authentic leadership
– Servant leadership
• Empowering leadership involves implementing conditions that enable
power to be shared with employees.
• Empowering leaders provide participation and autonomy in decision
• Employees experience a state of psychological empowerment that
consists of feelings of meaning, competence, self-determination, and
• Empowering leadership provides employees with a greater feeling of
control over their work and a sense that they can make a difference in
their organization’s effectiveness.
• Empowering leadership has been found to be positively related to job
performance and creativity-re