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Chapter 7: Leader-Member Exchange Theory

Overview

LMX Theory Description

LMX Theory Perspective

Early Studies

Later Studies

Phases in Leadership Making

How Does the LMX Approach Work?

Definition

Leader–member exchange (LMX) theory:

conceptualizes leadership as a process

that is centered on the interactions between a leader and followers

Some theories focus on leaders:

trait approach, skills approach, and style approach

Other theories focus on the follower and the context:

situational leadership, contingency theory, and path–goal theory.

Dimensions of Leadership

LMX theory makes the dyadic relationship between leaders and followers the focal point of the leadership process

LMX Theory Description

Development - LMX theory first described by Dansereau, Graen, & Haga (1975); Graen & Cashman (1975); and Graen (1976)

Revisions - Theory has undergone a number of revisions since its inception and continues to be of interest to researchers

Assumption - LMX theory challenges the assumption that leaders treat followers in a collective way, as a group.

LMX - Directed attention to the differences that might exist between the leader and each of his/her followers

Perspective

First studies of LMX called – Vertical Dyad Linkage (VDL)

Focus on the vertical linkages leaders formed with each of their followers

Leader’s relationship to a work unit viewed as a series of vertical dyads

Early Studies

Leader’s work unit as a whole was viewed as a series of vertical dyads; leader forms unique relationship with each follower

Researchers found two general types of linkages (or relationships)—those based on

Expanded/negotiated role responsibilities (extra-roles) = in-group

Relationships marked by mutual trust, respect, liking, and reciprocal influence

Receive more information, influence, confidence, and concern than out-group members

Formal employment contract (defined-roles) = out-group

Relationships marked by formal communication based on job descriptions

Early Studies

In-group/out-group status based on how well follower works with the leader and how well the leader works with the follower

How followers involve themselves in expanding their role responsibilities with the leader determines whether they become in-group or out-group participants

Becoming part of the in-group involves follower negotiations in performing activities beyond the formal job description

Early Studies

Follower

In-Group

more information, influence, confidence, & concern from leader

more dependable, highly involved, & communicative than out-group

Out-Group

less compatible with leader

usually just come to work, do the job, & go home

In-Group & Out-Group Followers

Out-Group

Leader

In-Group

Later Studies (Graen & Uhl-Bien, 1995)

Initial research primarily addressed differences between in-groups and out-groups; later research addressed how LMX theory was related to organizational effectiveness

Later research focus on the quality of leader–member exchanges resulting in positive outcomes for

Leaders

Followers

Groups

Organizations in general

Researchers found that high-quality leader–member exchanges resulted in

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

Faster career progress

Later Studies (Graen & Uhl-Bien, 1995)

Later Studies

Gerstner and Day (1997)

LMX consistently related to member job performance, overall satisfaction, supervisor satisfaction, commitment, role conflict and clarity, turnover intentions.

Support for psychometric properties of LMX Questionnaire

Ilies, Nahrang, and Morgeson (2007)

Meta-analysis of 51 research studies

Positive relationship between LMX quality and citizenship behaviors (discretionary employee behaviors that go beyond the prescribed role, job description, or reward system.

Leadership Making (Graen & Uhl-Bien, 1995)

A prescriptive approach to leadership that emphasizes that a leader should develop high-quality exchanges with all of her or his followers, rather than just a few.

Three phases of leadership making which develop over time:

(a) stranger phase

(b) acquaintance phase

Scripted

One Way

Low Quality

Self

Leadership Making (Graen & Uhl-Bien, 1995)

Stranger

Interactions within the leader-follower dyad are generally rule bound

Rely on contractual relationships

Relate to each other within prescribed organizational roles

Experience lower-quality exchanges

Motives of follower directed toward self-interest rather than good of the group

Phase 1

Leadership Making (Graen & Uhl-Bien, 1995)

Begins with an “offer” by leader/follower for improved career-oriented social exchanges

Testing period for both, assessing whether

the follower is interested in taking on new roles

leader is willing to provide new challenges

Shift in dyad from formalized interactions to new ways of relating

Quality of exchanges improves along with greater trust & respect

Less focus on self-interest, more on goals of the group

Phase 2

Acquaintance

Leadership Making (Graen & Uhl-Bien, 1995)

Mature Partnership

Marked by high-quality leader–member exchanges

Experience high degree of mutual trust, respect, and obligation toward each other

Tested relationship and found it dependable

High degree of reciprocity between leaders and subordinates

May depend on each other for favors and special assistance

Highly developed patterns of relating that produce positive

outcomes for both themselves & the organization

Phase 3

Partnerships are transformational – moving beyond self-interest to accomplish greater good of the team & organization

How Does the LMX Theory Approach Work?

Focus of LMX Theory

Strengths

Criticisms

Application

How Does LMX Theory Work?

LMX theory works in two ways: It describes leadership and it prescribes leadership

In both - the central concept is the dyadic relationship

Descriptively:

It suggests that it is important to recognize the existence of in-groups & out-groups within an organization

Significant differences in how goals are accomplished using in-groups vs. out-groups

Relevant differences in in-group vs. out-group behaviors

How Does LMX Theory Work?

Best understood within the Leadership–Making Model

(Graen & Uhl-Bien, 1995)

Leader forms special relationships with all followers

Leader should offer each follower an opportunity for new roles/responsibilities

Leader should nurture high-quality exchanges with all followers

Rather than concentrating on differences, leader focuses on ways to build trust & respect with all followers, resulting in entire work group becoming an in-group

Prescriptively:

Strengths

LMX theory validates our experience of how people within organizations relate to one another and the leader

LMX theory is the only leadership approach that makes the dyadic relationship the centerpiece of the leadership process

LMX theory directs our attention to the importance of communication in leadership

Solid research foundation on how the practice of LMX theory is related to positive organizational outcomes

Criticisms

Inadvertently supports the development of privileged groups in the workplace; appears unfair and discriminatory

The basic theoretical ideas of LMX are not fully developed

How are high-quality leader–member exchanges created?

What are the means to achieve building trust, respect, and obligation? What are the guidelines?

Because of various scales and levels of analysis, measurement of leader–member exchanges is being questioned

Application

Applicable to all levels of management and different types of organizations

Directs managers to assess their leadership from a relationship perspective

Sensitizes managers to how in-groups and out-groups develop within their work units

Can be used to explain how CEOs strategically develop special relationships with select individuals in upper management

Can be used to explain how individuals create leadership networks at various levels throughout an organization

Can be applied in different types of organizations—volunteer, business, education, and government settings