Chapter 8

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University of Guelph
Human Resources and Organizational Behaviour
HROB 2010
Casey Cosgrove

Chapter 8: Leader-Member Exchange Theory Description • Leader-Member Exchange (LMX) theory is a process that is centered on the interactions between leaders and followers Early Studies • In the first studies, the exchange theory was then called vertical dyad linkage (VDL) • Researchers focused on the nature of the vertical linkages leaders formed with each of their followers • Researchers found two general types of linkages (or relationships): ◦ Those that were based on expanded and negotiated role responsibilities (extra-role), which were called the in-group ◦ Those that were based on the formal employment contract (defined roles), which were called the out-group • Within an organizational work unit, subordinates become a part of the in-group and out-group based on how well they work with the leader and how well the leader works with them • Membership in one group or the other is based on how subordinates involve themselves in expanding their role responsibilities with the leader • Subordinates who are interested in negotiating with the leader what they are willing to do for the group can become a part of the in-group ◦ These negotiations involve exchanges in which subordinates do certain activities that go beyond their formal job descriptions, and the leader, does more for those subordinatesN • If subordinates are not interested in taking on new and different job responsibilities, they become part of the out-group • Subordinates in the in-group receive more information, influence, confidence, and concern from their leaders than do out-group subordinates • In-group subordinates are more dependable, more highly involved, and more communicative than out-group subordinates • In-group members do extra things for the leader and the leader does the same, subordinates in the out-group are less compatible with leaders and just come to work, do their job and go home Later Studies • These studies focused on how the quality of leader-member exchanges was related to positive outcomes for leaders, followers, groups, and the organization in general • Researchers found that high-quality leader-member exchanges produced less employee turnover, more positive performance evaluations, higher frequency of promotions, greater organizational commitment, more desirable work assignments, better job attitudes, more attention and support from the leader, greater participation and faster career progress • Atwatr and Carmeli (2009) examined the connection between employees perceptions of leader-member exchange and their energy and creativity at work ◦ They found that perceived high-quality leader-member exchange was positively related to feelings of energy in employees, which relates to greater involvement in creative work • Harris, Wheeler, and Kaemar (2009) explored how empowerment moderates the impact of leader-member exchange on job outcomes such as job satisfaction, turnover, job performance, and organizational citizenship behaviors ◦ They found that empowerment and leader-member exchange quality had a slight synergistic effect on job outcomes Leadership Making • Leadership making is a prescriptive approach to leadership emphasizing that a leader should develop high-quality exchanges with all of the leader's subordinates rather than just a few • Leadership making promotes partnerships in which the leader tries to build effective dyads with all employees in the work unit • Leadership making suggests that leaders can create networks of partnerships throughout the organization, which will benefit organizations goals and the leaders own career progress • Nahrang, Morgeson, and Illies (2009), found that leaders look for followers who exhibit enthusiasm, participation, gregariousness, and extraversion ◦ Followers look for leaders who are pleasant, trusting, cooperative, and agreeable • Graen and Uhi-Bien (1991) suggested that leadership making develops progressively over time in three phases: ◦ 1. The stranger phase ◦ 2. The acquaintance phase ◦ 3. The mature partnership phase • During Phase 1 (stranger phase), the interactions in the leader-subordinates dyad generally are rule bound, relying heavily on contractual relationships ◦ Leaders and subordinates related to each other within prescribed organizational roles ◦ They have lower-quality exchanges, similar to those of out-group members ◦ The Subordinates complies with the formal leader, who has hierarchical status for the purpose of achieving the economic rewards the leader controls ◦ The motives of the subordinates during the stranger phase are directed toward self-interest rather than toward the good of the group • During Phase 2 (acquaintance phase), begins with an offer by the leader or the subordinate for improved career-oriented social exchanges, which involves sharing more resources and personal or work-related information ◦ It is a testing period to assess whether the subordinate is interested in taking on more roles and responsibilities and to assess whether the leader is willing to provide new challenges for subordinates ◦ Successful dyads in the acquaintance phase begin to develop greater trust and respect for each other ◦ They also tend to focus less on their own self-interest and more on the purposes and goals of the group • During Phase 3 (mature partnership), is marked by high-quality leader-member exchanges ◦ People who have progressed to this stage in their relationships experience a high degree of mutual trust, respect, and obligation toward each other ◦ They have tested their relationship and found that they can depend on each other ◦ In mature partnership, there is a high degree of reciprocity between leaders and subordinates: ▪ Each affects and is affected by the other ◦ Schriesheim, Castro, Zhou, and Yammarino (2001) found that good leader-member relations were more egalitarian and that influence and control were more evenly balanced between the supervisor and the subordinate ◦ Members may depend on each other for favors and special assistance ◦ The benefits for employees who develop high-quality leader-member relationships include preferential treatment, increased job0related communication, ample access to supervisors, and increased performance-related feedback ◦ The disadvantages for those with low-quality leader-member relationships include limited trust and support from supervisors and few benefits outside the employment contract How Does LMX Theory Work? • LMX theory works in two ways: ◦ It describes leadership ◦ It prescribes leadership • The central concept is the dyadic relationship that a leader forms with each of the leaders subordinates • LMX theory suggests that it is important to recognize the existence of in-group and out-group within a group or an organization • Working with in-groups it allows a leader to accomplish more work in a more effective manner than he or she can accomplish working without one • In-group members are wiling to do more than is required in their job description and look for innovative ways to advance the groups goals ◦ Leaders give in-group members more responsibilities and more opportunities ◦ Leaders also give in-group members more of their time and s
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