Introduction
Organizational leadership is the most fundamental factor that influences all aspects of companies. Leadership is a managerial function instrumental in directing resources for organizations to enhance efficiency and accomplishment of set goals and objectives. Therefore, leaders strive to provide their followers with clarity of purpose, guide, and motivate them to realize particular missions. Various leadership theories explain why and how some people become leaders and the approaches they adopt to establish interactions with their juniors. The leader-member exchange (LMX) theory is one of the perspectives that address specific aspects of the leadership process. LMX focuses on the association between leaders and very subordinates in the pursuit of organizational goals. Although leaders provide particular benefits, such as rewards, followers reciprocate through commitment, cooperation, good performance, respect, and others. Organizations’ managers apply the LMX perspective of leadership to ensure productive interaction with their subordinates. Evaluating the way LMX theory develops and its social-emotional and economic relationship aspects is vital in understanding how it impacts individual and organizational performance.
The LMX theory of leadership is a relationship-based approach to the management of organizations. According to Martin, Thomas, Legood, and Dello Russo (2017), LMX develops through four evolutionary stages that influence the level and quality of leader-member interaction. The first stage of LMX involves vertical dyad linkage and work socialization. The organizations’ managerial processes transpire on a dyadic basis, where leaders establish segregated interactions with their subordinates. Therefore, the working relations’ inputs, processes, and output can result in high-quality (in-group) or low-quality (out-group) exchanges (Howell & Wanasika, 2019). While the former is characterized by intensified respect, mutual trust, and obligation, the features are significantly low in the latter. Notably, the limited social resources and time managers have allowed them to develop only a few high-quality exchange interactions.
The second stage of LMX theory is referred to as the leader-member exchange. This phase of LMX development explains the differentiated relationships that develop and their consequences on organizational functioning. Like any other form of interaction between individuals, the LMX relationships’ growth is impacted by impacted my leaders’ and members’ behaviors and characteristics (Martin et al., 2017). For instance, an ambitious leader is more likely to establish a high-quality exchange with creative and conscientious workers. This stage also acknowledges that the rule-making process contributes considerably to LMX development. Additionally, leaders, followers, departments, and companies benefit from high-quality LMX interactions.
The third stage is about leadership-making, which emphasizes going beyond the formation of differentiated working relationships within organizations. The fundamental focus is to produce an effective leadership process by establishing productive associations. The phase adopts a leadership-making model to offer a practically imperative approach to leadership development (Martin et al., 2017). The model accentuates the importance of creating and maintaining high-quality relationships within organizations. The performance of individual followers or members who seize the opportunity of forming a high-quality LMX improves significantly. Such an interaction goes through a stranger, acquaintance, and mature partnership exchange levels.
The last stage of LMX development is about team-making within companies. The phase explains how the differentiated dyadic relations come together to create large network systems. The latter defines the leadership structure or leadership relationship pattern among employees throughout organizations. The mutual dependencies among individuals and the network of relationships that develop as members execute their roles and responsibilities play a significant role in the emergence of the leadership structure (Martin et al., 2017). Therefore, the differentiated connections between leaders and their juniors can impact the parties and the entire organizational leadership structure.
Socioemotional and Economic Relationship Aspects of LMX Theory
The relations formed between leaders and members can be categorized into two: socioemotional and economic relationships. Most people measure the LMX along the high-to-low-quality continuum, capturing only socioemotional potentials. Each level of LMX evaluated reflects the absence of characteristics that are features of the other, overlooking the role of economic qualities in LMX relationships. According to Andersen, Buch, and Kuvaas (2020), the key characteristics that define the socioemotional LMX relationships include high-degree of trust and long-term investment. The former and the latter create diffuse responsibilities, a sense of one individual being cared for by another, and anticipated mutual exchanges. This aspect is about how much every involved party benefits from the interaction.
Trust is one of the most imperative elements that affect relationships between employees and managers and among workers. The leaders do all that they can within their capacity to gain the trust of the workers. They focus on ensuring that their subordinates have adequate confidence in their capability to lead them toward accomplishing personal and organizational goals. Thus, leaders strive to understand and meet the social needs of their followers. For instance, managers provide training, emotional support, and other benefits to employees. As a result, they create mutual trust, respect, and commitment. However, the level of socioemotional LMX interaction varies from one individual to another depending on various factors, such as personal characteristics (Andersen et al., 2020). The relationships that employees have with their leaders involve exchanging multiple types of resources necessary for the achievement of set goals and objectives.
The LMX relationships between supervisors or managers and workers can be defined by workflow and friendship ties, which significantly impact performance. While workflow relations encompass specified interdependencies between employees that are vital to completing tasks, attitude similarity, mutual liking, and personal choice lead to friendship networks within organizations (Regts, Molleman & van de Brake, 2018). The level of LMX relationships influences job performance through resources exchanged between leaders and their followers. Examples of resources that leaders can provide to their followers are training opportunities, incentives, rewards, empowerment, participation in the decision-making process, and social support (Andersen et al., 2020). These resources have a direct positive impact that enhances employees’ performance since they gain knowledge and become more committed to their work. Andersen et al. (2020) add that workers who perceive strong social exchange feel a more significant obligation to reciprocate the support and benefits through engagement that sometimes exceeds minimum employment requirements. Therefore, a high-quality socioemotional LMX interaction is instrumental in improving individual and organizational performance.
Unlike the socioemotional LMX, economic LMX relationships in organizations are more formal and instrumental. Consequently, there is little interpersonal trust that guarantees future reciprocation of obligations. Andersen et al. (2020) note that workers with strong economic LMX perceptions consider their relationships with their leaders as encompassing a set of tangible and financial obligations in exchange for the execution of duties and responsibilities. This type of interaction between leaders and their subordinates is not long-term and is characterized by minimal involvement. Andersen et al. (2020) add that the economic LMX relationship is consistently related to unfavorable follower outcomes. They note that economic LMX has a moderately negative association with intrinsic motivation, affective commitment, and the need for competence, relatedness, and autonomy. These aspects have an undesirable influence on employees’ or followers’ performance. Thus, leaders must pursue both social and economic LMX to ensure enhanced performance at individual, departmental, and organizational levels. The level of LMX relationships affects the way employees, both managers and subordinates, share work-related knowledge.
LMX Influences Knowledge Sharing
The leadership within organizations influences the interaction between management and the workers and among the employees. The relationships are vital since they determine how well people can share knowledge to enhance productivity. Hao, Shi, and Yang (2019) indicate that LMX theory can explain organizational members’ behavior of sharing knowledge. The different levels of LMX can influence the way employees to share information and knowledge. For instance, if a leader establishes a relationship that focuses on empowering workers, it can effectively facilitate and promote knowledge-sharing behavior. This can happen because the approach has a positive impact on the employees’ attitude towards sharing information that is instrumental in enhancing one’s expertise. As a result, the workers become more committed toward perceived team goals, enhancing individual, departmental, and organizational productivity. Conversely, abusive managers and supervisors contribute to negative relationships, hurting the employees’ ability and willingness to share knowledge. Therefore, the establishment and maintenance of high-quality LMX or in-group relationships between organizational leaders and employees are important in promoting companies’ growth.
Although it is evident that high-quality LMX is beneficial at individual and organizational levels, LMX theory does not address the ambiguity related to the nature of relationships. According to Hao et al. (2019), the theory does not explain the in-between psychological processes fundamental to the interactions. For example, psychological processes such as learning, perception, motivation, and emotion can determine the level of association between frontrunners and their followers. Motivated employees who are willing to learn from their leaders are more likely to establish and maintain a high-quality LMX than those who do not. Although high-quality LMX promotes encouraging social context for the workers, diverse individuals can assess the situation differently due to contextual factors and personal characteristics that influence behaviors (Hao et al., 2019). Further, some approaches adopted by leaders to develop and maintain high-quality LMX may not work equally across cultures. For instance, the Chinese culture has workplace guanxi, defining specific duties and expectations and impacting the exchange of information and personal resources (Hao et al., 2019). Thus, personal and cultural factors can determine the level of effects LMX has on knowledge sharing among employees.
Summary and Conclusion
Organizational leadership is a fundamental factor that influences all aspects of companies. Leaders strive to provide their followers with clarity of purpose and guide and motivate them to realize particular missions. LMX theory is one of the perspectives that address specific aspects of the leadership process, focusing on the relationship between leaders and their followers. LMX develops through four evolutionary stages that influence the level and quality of leader-member interaction. The first stage of LMX involves vertical dyad linkage and work socialization. Although the second phase of LMX theory is about leader-member exchange, the third one focuses on leadership-making, emphasizing going beyond the formation of differentiated working relationships within firms. The last stage of LMX development explains team-making within companies. The socio-emotional and economic relationship aspects of LMX influence knowledge sharing among employees and performance. Indeed, LMX theory helps in understanding the interactions that exist between leaders and their followers. Organizational leaders need to capitalize on ensuring high-quality LMX to ensure enhanced productivity and all levels. Therefore, they need to devise strategies to overcome factors, such as attitudes, that may hinder the establishment and maintenance of in-group interactions.
References
Andersen, I., Buch, R., & Kuvaas, B. (2020). A literature review of social and economic leader–member exchange. Frontiers in Psychology, 11(1474), 1-12.
Hao, Q., Shi, Y., & Yang, W. (2019). How leader-member exchange affects knowledge sharing behavior: Understanding the effects of commitment and employee characteristics. Frontiers in Psychology, 10(2768), 1-13.
Howell, J., & Wanasika, I. (2019). Snapshots of great leadership (2nd ed.). New York: Routledge.
Martin, R., Thomas, G., Legood, A., & Dello Russo, S. (2017). Leader–member exchange (LMX) differentiation and work outcomes: Conceptual clarification and critical review. Journal of Organizational Behavior, 39(2), 151-168.
Regts, G., Molleman, E., & van de Brake, H. (2018). The impact of leader‒member exchange on follower performance in light of the larger social network. Human Relations, 72(8), 1265-1291.