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Leader-Member Exchange Theory

Theory development.

Leader-member exchange (LMX) is a social relationship-based approach to understanding how supervisors and subordinates accomplish organizational tasks together; this concept replaced average leadership style in organizational leadership thinking (Graen & Uhl-Bien, 1995). An individualized relationship is built between the leader and member in order to work together towards organizational goals rather than the leader having one style for everyone, even if in appearance the leader does treat everyone in the same manner. Studies in this area did not find support for the Ohio State and Michigan studies on supervisory behavior that states supervisory relationships are uniform; rather there was differentiation within work-units on how supervisors related to subordinates (Henderson, Liden, Glibkowski, & Chaudhry, 2009). LMX theory is a relationship-based approach to understanding how vertical dyads consisting of a leader (supervisor) and a member (subordinate) accomplish organizational tasks together (O’Donnell et al., 2012).

Social relationships on which LMX theory is based develop over time and pass through phases named stranger, acquaintance, and maturity in LMX literature (Notgrass, 2014). The relationship develops depending on inputs from the supervisor and receptivity of the subordinate as well as subordinate actions to affect leader perception. The phases moved from transactional to transformational, that is from self-interest motivations to reciprocity and team-building based on intrinsic values (Graen & Uhl-Bien, 1995; Liden & Maslyn, 1998; Martin et al., 2015).

Empirical evidence showed a positive relationship between high LMX and high leadership effectiveness. Leaders who wanted appropriate results would develop high LMX relationships with each subordinate one dyad at a time. Subordinates would respond and produce outcomes; desirable outcomes improved LMX quality while undesired outcomes would act to maintain or lower current LMX quality (Gerstner & Day, 1997; Henderson et al., 2009; Sun et al., 2013). Researchers focused on antecedents to LMX quality in order to understand the independent variables affecting the dependent variable of LMX quality resulting in greater or lesser leader behaviors such as delegation or consulting (Yukl & Fu, 1999). LMX is thus viewed from the three levels of leader, relationship, and follower, with particular attention on leader perceptions of the relationship as related to utilization of appropriate management techniques associated with high LMX quality.

Graen and Scandura (1987) approached the dyadic relationship as a psychological question to model how a leader and a member (manager and subordinate) create a relationship in order to organize work to accomplish unstructured tasks. They described the relationship of having three phases, namely role taking, role making, and role routinization; failure at a later phase causes a return to the next earlier phase. In role taking, the leader provides structure to the unstructured task and the member reacts. How the member acts upon the role offered by the leader is important to the dyadic relationship development as the leader is observing the member’s actions judging if these actions build the trust required to move to role making.

Role making develops from sufficient interactions working together on unstructured tasks in the role taking phase to evolve how the two will interact on future tasks. The development is not necessarily explicit or discussed, rather it is the trust relationship that allows both the leader and member to anticipate the manner each will act towards the tasks, exchanging valuable resources (e.g. time, money, training, internal support) to accomplish the tasks set before the dyad. Graen and Scandura (1987) based much of their theory on the findings that rewards from the leader are part of the role development, formal rewards are not necessarily the most important rewards a leader can bestow for relationship development (Graen & Scandura, 1987). Informal rewards such as better work environment or assignments, mentoring from their leader, exhibitions of loyalty by the leader affect LMX role development (Martin et al., 2015), showing that both transformational behaviors as well as transactional behaviors affect LMX quality (O’Donnell et al., 2012).

Role routinization develops as time has presented sufficient role development opportunities. There is implicit agreement between leader and member of how the dyad will approach and accomplish unstructured tasks. This is an agreement built on trust developed from observation that models behaviors for both the leader and member so that they now can anticipate what needs to be done, what resources are needed, and which participant in the dyad will do which parts of the total task. They trust that the other will act as expected (Martin et al., 2015).

LMX quality was first considered as a unidimensional construct measuring the level of quality in the social exchange relationship. LMX-7 is an instrument developed by Graen and Uhl-Bien in 1995 as a seven item questionnaire scored on a five point Likert scale resulting in a single score of LMX quality. LMX-7 was designed to score the relationship between the leader and member from both points of view rather than a single focus on the leader and leadership style. LMX-7 has Cronbach’s alpha consistently in the 80%-90% range for internal consistency indicating a high degree of reliability that the seven items are testing for the same quality (O’Donnell et al., 2012).

 Leader-member Exchange – Multidimensional (LMX-MDM) (Liden & Maslyn, 1998) is another measure of leader-member exchange. LMX-MDM was developed to capture a greater range of follower psychological perceptions of leader behaviors and attributes than LMX-7 due to a developing body of work indicating LMX quality as multi-dimensional rather than unidimensional (Liden & Maslyn, 1998). The construct consists of four dimensions namely affect, loyalty, contribution, and professional respect (Liden & Maslyn. 1998). The multi-dimensional view of LMX quality reflects the research suggesting LMX quality can be developed not only through the tasks worked by the dyad (comprising the contribution dimension), but may also develop based on mutual liking (affect), whether the leader and member are loyal to each other (loyalty), or having member respect regarding their leader’s professional expertise, competence, actions, and standing (professional respect) (Liden & Maslyn, 1998). Thorough item development, testing, and analysis showed that LMX is multi-dimensional in that the four dimensions described do contribute to the total LMX quality and can be separated for deeper analysis of the dyadic relationship (Liden & Masly, 1998). This has been confirmed in studies that were interested in the multi-dimensional qualities such as which dimension of LMX quality is related to organizational citizenship in order to better understand of how LMX quality develops (Martin et al., 2015).

The dyadic social exchange relationship basis of LMX theory requires researcher as a multi-level examination of both participants and also the relationship they have together developed. Approaching leadership studies from a multi-level approach was motivated by the inability to easily classify emerging leadership theories based on concepts such as exchange relationships and empowerment (Graen & Uhl-Bien, 1995). Leader behaviors are constructs examined at the leader level of LMX quality. Some behaviors have direct effects on LMX quality while others do not (O’Donnell et al., 2012).

Recently (Buch, 2015), work regarding LMX has distinguished two subscales of LMX quality, those of social and economic exchange, SLMX and ELMX respectively. This conceptualization of two distinct measures contributing to LMX measurement proceeded from the discussion that these two aspects represent two different qualities in a leader-member relationship. SLMX refers to the affective dimensions of a relationship where the leader and member find a mutually agreed on level of commitment through loyalty and respect. ELMX refers to the transactional aspects of this relationship, the quid pro quo where the leader and member agree on what is to be done and what the reward is. ELMX describes a developing exchange relationship, but differs from the long-term nature of SLMX based relationships with an ELMX relationship developing potentially much faster and of shorter duration (Buch, 2015). This duality does echo the multi-dimensionality of LMX-MDM, but is being utilized not to describe LMX quality, but utilized to examine relationships along these two dimensions separately (Kuvaas, Buch, Dysvik & Haerem, 2012).

Graen and Uhl-Bien (1995) discussed multi-dimensionality, but rejected the call to follow this path because their findings were that the four dimensions are so highly correlated allowing for an overall single-factor measurement of the manifestation of LMX quality (Erdogan & Enders, 2007; Holliday, Martin, & Martin, 2010; Liden, Erdogan, Wayne, & Sparrowe, 2006; O’Donnell et al., 2012). LMX-7 and LMX-MDM have been shown to be interchangeable when used as a composite score of LMX quality (Martin et al., 2015; O’Donnell et al., 2012). This study utilizes LMX quality as unidimensional. LMX is also applicable in non-business settings. For example the LMX-7 scale was modified to test the social-relationship between coaches and players; the modification was validated as reliable (Caliskan, 2015).

Antecedents.

      Since LMX theory suggests appropriate leadership style, follower receptivity, and organizational structures would improve LMX quality, the natural question is “What are the antecedents to LMX?” Since organizational behavior theory studies how all elements including individuals, workgroups, and organizational structures work together to accomplish the organization’s goals, how to affect LMX quality is important to this area of study (Robbins & Judge, 2015). The antecedents to LMX quality are numerous and act alone or in concert; not all have been identified, nor have the interactions all been described. However, there have been significant findings regarding antecedents to LMX. A meta-analysis found twenty-one antecedents studied in the previous forty years (Dulebohn et al., 2012). The following discussion will be limited primarily to antecedents studied recently as variables affecting LMX quality.

      Personal wisdom is a leader trait combining the three traits of leader’s affective capacity for followers, cognitive ability, and reflection. Personal wisdom was shown to have a direct positive effect on LMX quality and also as mediated through individualized consideration, a construct from transformational leadership theory describing the degree of attention a leader gives to an individual’s needs such as mentoring (Zacher, Pearce, Rooney & McKenna, 2014). This finding added to LMX theory by relating a leader characteristic directly to improving LMX quality and also explaining the result via a transformational leadership theory component. A wise leader acts in ways to build the trusted relationship. Follower personality traits play an antecedent role in LMX development including agreeableness, conscientiousness, and extraversion. These three member personality traits have been shown to have a positive relationship to LMX quality and are mediated by the member behavior of impression management, a set of member behaviors employed with the goal of influencing their leader for rewards (Weng & Chang, 2015). The positive relationship and the mediation illustrate how LMX quality can be managed by the follower if they exhibit these personality traits and implement impression management. Improving LMX quality can be a conscious member effort beyond doing a good job to build the trust relationship underlying LMX quality. Another follower attribute shown to be positively related to LMX quality is goal orientation. Goals are generally shared responsibilities of the leader and the follower so that they must work together to accomplish these tasks. Goal orientation studied regarding LMX focused on three aspects: learning goal orientation, performance goal orientation, and avoidance (don’t make mistakes) goal orientation (Van Dam, 2015). High goal orientation leading to high LMX quality makes sense given the description of both areas: if a follower is paying attention to those areas that matter to the leader and accomplishing them, the LMX relationship will develop through the stages to high quality.

      Not all studies hypothesize positive relationships with LMX quality as is shown by a study in demographics and how certain demographic characteristics affect LMX quality. It was found that as the difference in age increased between the leader and member LMX quality decreased. As gender difference increased (albeit from no difference to complete difference) LMX quality decreased. Tenure as a variable was measured in terms of whether the member had more tenure than the leader, and as the difference increased LMX quality decreased (Malangwasira, 2013). An interesting question here would be to change the question to reflect the leader having more tenure: one of the components of LMX quality is professional respect and greater tenure difference might improve LMX quality in this case. Education level followed the other variables in that the greater the difference in education level, with the member having the higher education level, the lower the LMX quality (Malangwasira, 2013).

      Personality traits of leaders and how these traits exhibit in management style play a role in developing LMX relationships (Tzinerr & Barsheshet-Picke, 2014). For example, gender role identity as a personality trait is exhibited as androgynous or non-androgynous on a continuum. Gender management is described as communal or agentic also on a continuum. Gender is a demographic characteristic of both leader and follower. LMX quality differs depending on the combinations and the congruence of gender role and gender management style. Among other findings, LMX quality was found to be higher in the combination of female leader, androgynous role identity, and a combined management style than managers not perceived as having that combination whether reported from the leader or follower level (Tzinerr & Barsheshet-Picke, 2014).

      It has been only recently that specific identifiable leader behaviors and traits have been extracted from composite constructs such as emotional intelligence, servant leadership, and transformational leadership in order to identify relationships between these simpler unidimensional antecedent behavior and trait constructs and LMX quality (Mahsud et al., 2010; O’Donnell et al., 2012). By separating out constructs from the composite, direct and mediating relationships were found. For example, leader empathy acting together with ethical leadership as mediated by leader relations-oriented behaviors, explained the majority of the variance in LMX quality in a study done with fully employed individuals who were also night-school business students (Yukl, Mahsud, Hassan & Prussia, 2013). The importance of this type of study is that the results can inform specific HRD practices including leader development strategies in order to specifically affect LMX quality. It is good to say one should have high emotional intelligence, but it is useful to learn to act ethically, show empathy, and act in trustful way by delegating, consulting, and so forth. Delegation and consultation are forms of empowerment, and while LMX research was not based on transformational leadership, empowerment is a critical element of leader behavior in the transformational leadership model (Ismael, Mohammed, Sulaiman, Mohamad, & Yusif, 2011). It comes as no surprise, then, that transformational leadership is the preferred leadership style for followers with high LMX quality relationships (Notgrass, 2014).

Outcomes.

      LMX is at the heart of getting work done. The relationship between a supervisor and subordinate is a large factor in determining success, not only of the work-task, but also team and organizational performance (Dulebohn et al., 2012). While LMX quality in and of itself is an interesting concept to study, of more importance is how it relates to outcomes. This field is actively studied and important to organizational leadership theory and organizational behavior theory. The meta-analysis completed in 2012 (Dulebohn et al.) found sixteen outcomes (called consequences in the study) of LMX quality. As LMX quality as the independent variable changed, so did the studied dependent variable constructs including personal, team, and organization level constructs.

      The practical importance of studying LMX quality has in part the purpose of understanding how to affect outcomes beyond the task orientation. For example, innovative behavior in the appropriate work role is an outcome of various antecedents with LMX quality being one (Stoffers, Heijden, & Notelaers, 2014). Taking into account a fuller view of the context in which LMX develops, the study of innovative behavior found an interplay of high LMX quality relationships further developing through resources provided to the follower and follower behavior as high organizational citizenship (Stoffers et al., 2014). This is an indication that LMX relationships continue to develop even if the relationship is high quality through the social exchange contract mechanism underlying LMX akin to a positive feedback system.

      Outcomes may result from complex relationships among several constructs including LMX. In a study of academic professional researchers, LMX quality was found to be positively related to the outcome of creativity, but not always and not always at the same strength (Olsson, Hemlin & Pousette, 2012). Olsson et al. (2012) found that the tenure of the dyadic relationship was important with longer tenure affording greater creativity in an academic research environment, but less so in a commercial research environment indicating the work environment moderates the outcome. This complex relationship also includes job autonomy as affecting creativity as a moderator variable; more job autonomy resulted in more creativity if LMX quality was high, but low job autonomy changed the relationship of LMX to creativity such that there was no effect on creativity by LMX if job autonomy was low (Volmer, Spurk, & Niessen, 2012).

      Successful attainment of larger organizational goals is related to higher LMX quality. For example, job safety is an important goal with workplace accidents costing millions of dollars per year and terrible effects on lives (Jallon, Imbeau, & De Marcellis-Warin, 2011). Workplace safety has been shown to be degraded as job insecurity by individuals and as a group increase, so lowering job insecurity could result in cost savings due to fewer workplace accidents. LMX quality attenuates job insecurity so that better quality LMX relationships should support workplace safety as an organizational goal (Probst, Jiang & Graso, 2015). Another goal affected by LMX quality is team performance. When employees are highly engaged in their work team performance is enhanced (Afacan-Findikli, 2015). LMX quality is additive to team performance, meaning highly engaged employees who also have developed high quality LMX relationships are members of teams of even higher performance. Regarding valuable employees quitting their jobs, LMX quality is inversely related to VET (DeConinck, 2011).

LMX as a moderating or mediating variable.

      Moderating variables affect relationships between two or more other variables including the strength and direction of the relationship (Dawson, 2013). Regarding LMX quality as a moderator, for example, LMX quality modifies the effect of despotic leadership style on job performance such that low LMX quality is related to better job performance in the presence of despotic leadership, while the reverse is true, performance degrades if LMX quality is high in the presence of despotic leadership (Naseer, Raja, Syed, Donia, & Darr, 2015). A possible explanation would be that followers who have a trusted relationship with a dysfunctional leader are less insulated from the leader behaviors that degrade job performance, while those followers with a low quality relationship are still in the transactional task orientation phase of the relationship and thus the despotic leader behaviors have less of an effect on member job performance.

      Mediating variables are found in between an independent and dependent variable such that the mediating variable explains all or in part how the independent variable acts to affect the dependent variable (Fiedler, Schott, & Meiser, 2011). For example, LMX is found to mediate relationships between simple and complex constructs (DeConinck, 2011; O’Donnell et al., 2012). The importance of understanding how LMX mediates these relationships is to understand the fuller complexity of how independent variables in organizational leadership theory are related to outcomes, both desirable and not desirable. For example, the psychological driver of power motivation has been shown to positively affect creativity (Zhang, Fan, & Zhang, 2015), but understanding how this result manifests is important for theory building; as the complex relationships are described other relationships are revealed. Zhang et al. (2015) exemplified this by describing how power motivation relates to creativity, how power motivation relates to LMX, how LMX relates to creativity, and then how LMX mediates the relationship between power motivation and creativity. This effort of going beyond the simple positive relationship between power motivation and creativity provided multiple opportunities to discuss why these relationships exist rather than just that they do. Power motivation in an individual follower drives them to obtain the powerful position that exists in a high quality LMX relationship with their leader (Zhang et al., 2015). From the leader level view, the LMX relationship would be more likely to develop into a high quality relationship as leaders value those individuals whose high power motivation motivate them to behave in ways of value to the relationship including self-management and mastery of tasks and therefore provide the support that describes a high quality LMX relationship (Li, Liang, & Crant, 2010). LMX quality and creativity are related in a complex manner (Olsson et al., 2012; Volmer et al., 2012), and within that complexity lies the explanation in part of how power motivation as the independent variable acts on creativity as the dependent variable.

      Mediation by LMX is important in understanding the relationships between leadership styles and outcomes other than LMX. LMX quality acts as a mediator in a relationship between the complex leadership style construct servant leadership (SL) and a follower outcome of helping behavior (Zou, Tian, & Liu, 2015). SL theory emphasizes altruistic leader characteristics such as leader’s considering the importance of the organization over the individual, considering their own needs as leaders as less important than the needs of followers, and caring about positive results for all stakeholders (Barbuto & Hayden, 2011; Reed, Vidaver-Cohen, & Colwell, 2011). The servant leader leads by example rather than dictatorial edict (Zou, Tian, & Liu, 2015). That LMX quality was found to be positively related to SL is not surprising given the composition of SL; components include altruistic calling, emotional healing, wisdom, persuasive mapping, and organizational stewardship (Barbuto & Hayden, 2011). Altruistic leaders will put others interest first, a trait that would build the trust that is foundational to LMX quality. Leaders who have the ability to help followers heal should likewise have a strong positive reciprocal relationship with those followers. A wise leader is able to perceive the needs of others and anticipate how they might help their followers through mentorship and providing of resources, activities directly related to LMX quality. Leaders who use persuasion rather than authority are also able to build the teamwork relationship of LMX that strengthens the dyad’s ability to accomplish unstructured tasks. Ethical behavior and the desire to make a strong contribution to society are the basis of organizational stewardship and provide additional strength to followers with congruent traits. The strong relationship of SL to LMX quality is the basis for LMX’s mediating role explaining follower behavior outcomes from SL such as helping behavior. Each of the components of SL are related positively to LMX, and the sum of the components, that is the SL construct as a complex leadership style accounted for 63% of the variance in Barbuto and Hayden’s 2011 study.

      The complex leadership style of transformational leadership (TL) and outcomes of this style are also mediated by LMX quality. For example, TL is negatively related to VTI and positively related to LMX quality (Tse et al., 2013). LMX quality had no mediating role in explaining that negative relationship of TL with VTI. However, a less direct relationship was found for LMX to have mediating effects in that affective commitment (AC) was found to mediate between TL and VET with LMX mediating the relationship between AC and VTI and VTI mediating the relationship between LMX and VET (Tse et al., 2013). In this way it can be inferred that LMX does mediate TL and VTI, but the data has not been structured for an analysis to support that conclusion. The pathway from leader behaviors to turnover requires broad studies in order to explain how the relationships work, not just that there are relationships found or inferred. Understanding the individual constructs within the pathway can then be used to understand the “why” behind the “how”.


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