Chapter 7 Leader-Member Exchange TheoryPeter G. Northouse, .docx

Chapter 7: Leader-Member Exchange Theory
Peter G. Northouse, Leadership: Theory and Practice, Seventh
Edition. © 2016 SAGE Publications, Inc.
1
Overview
LMX Theory Description
LMX Theory Perspective
Early Studies
Later Studies
Phases in Leadership Making
How Does the LMX Approach Work?
2
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.
3
Dimensions of Leadership
LMX theory makes the dyadic relationship between leaders and
followers the focal point of the leadership process
4
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
5
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
6
Early Studies
Leader’s work unit as a whole was viewed as a series of vertical
dyads; leader forms unique relationship with each follower

7
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
8
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
9
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
S
Out-Group
Leader
In-Group

F
F
F
F
F
F
F
F
F
F
F
F
F
F
F
10
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
11
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

12
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
(c) mature partnership phase

14
Scripted
One Way
Low Quality
Self
15
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
16
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
17
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

18
How Does the LMX Theory Approach Work?
Focus of LMX Theory
Strengths
Criticisms
Application
19
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

20
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:
21
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

22
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
23
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
24
Chapter 7: Leader-Member Exchange Theory
1
Overview
LMX Theory Perspective
Early Studies
Later Studies
Phases in Leadership Making
How Does the LMX Approach Work?
2

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.
3
Dimensions of Leadership
LMX theory makes the dyadic relationship between leaders and
followers the focal point of the leadership process
4

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
5
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

6
Early Studies
Leader’s work unit as a whole was viewed as a series of vertical
dyads; leader forms unique relationship with each follower
7
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

8
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
9
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
S

Out-Group
Leader
In-Group
F
F
F
F
F
F
F
F
F
F
F
F
F
F

F
10
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
11
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
12
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.
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
(c) mature partnership phase
14
Scripted
One Way
Low Quality
Self
15
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

16
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
17
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
18
How Does the LMX Theory Approach Work?
Focus of LMX Theory
Strengths
Criticisms
Application
19
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
20
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:
21

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
22
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
23

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
24
Chapter 6: Path-Goal Theory
Click to edit Master title style
1
Path–Goal Theory Perspective
Conditions of Leadership Motivation
Leader Behaviors & Follower Characteristics
Task Characteristics

How Does PGT Work?
Overview
2
Path–goal theory centers on how leaders motivate followers to
accomplish designated goals
Emphasizes the relationship between
the leader’s style
the characteristics of the followers
the work setting
Definition
Path–Goal Theory (House, 1971) Description
3
Goal - To enhance employee performance and satisfaction by
focusing on employee motivation
Motivational Principles (based on Expectancy Theory) -
Followers will be motivated if they believe
they are capable of performing their work
that their efforts will result in a certain outcome
that the payoffs for doing their work are worthwhile
Perspective

4
Challenge to Leader
Use a leadership style that best meets followers’ motivational
needs
choose behaviors that complement or supplement what is
missing in the work setting
enhance goal attainment by providing information or rewards
provide followers with the elements they need to reach their
goals
5
It increases the number and kinds of payoffs followers receive
from their work
Makes the path to the goal clear and easy to travel through with
coaching and direction
Removes obstacles and roadblocks to attaining the goal
Makes the work itself more personally satisfying
Leadership generates motivation when

6
7
8
Leader Behaviors
Directive Leadership
Leader who gives followers task instruction including:
What is expected of them
How task is to be done
Timeline for task completion
Clear standards of performance
Clear rules & regulations

9
Supportive Leadership
Leader who is friendly and approachable:
Attending to well-being & human needs of followers
Using supportive behavior to make work environment pleasant
Treating followers as equals & giving them respect for their
status
Leader Behaviors
10
Participative Leadership
Leader who invites followers to share in the decision making:
Consults with followers
Seeks their ideas & opinions
Integrates their input into group/organizational decisions
Leader Behaviors
11
Achievement-Oriented Leadership
Leader who challenges followers to perform work at the highest
level possible:
Establishes a high standard of excellence for subordinates

Seeks continuous improvement
Demonstrates a high degree of confidence in followers’ ability
to establish & achieve challenging goals
Leader Behaviors
12
Follower Characteristics
Strong need for affiliation
Friendly and concerned leadership is a source of satisfaction
Preference for Structure
Dogmatic & authoritarian
Leadership provides psychological structure, task clarity, &
greater sense of certainty in work setting
13
Desire for Control
Internal locus of control
Leadership that allows followers to feel in charge of their work
& makes them an integral part of the decision-making process
External locus of control

Leadership that parallels followers’ feelings that outside forces
control their circumstances
14
Perception of their own ability – specific task
As perception of ability and competence goes up, need for
highly directive leadership goes down
Directive leadership may become redundant, possibly
excessively controlling
15
Design of followers’ task
Organization’s formal authority system
Primary work group of followers
Components

16
Unclear and ambiguous - Leader needs to provide structure
Highly repetitive - Leader needs to provide support to maintain
follower motivation
Weak formal authority - If formal authority system is weak, the
leader needs to assist followers by making rules and work
requirements clear
Nonsupportive/weak group norms - Leader needs to help build
cohesiveness and role responsibility
Task Situations Requiring Leader Involvement
17
Anything in the work setting that gets in the way of followers
They create excessive uncertainties, frustrations, or threats for
followers
Leader’s responsibility is to help followers by
Removing the obstacles
Helping followers around them
Assisting with obstacles will increase
Followers’ expectations to complete the task
Their sense of job satisfaction
Obstacles

18
How Does the Path–Goal Theory Work?
Focus of Path–Goal Theory
Strengths
Criticisms
Application
19
The leader’s job is to help followers reach their goals by
directing, guiding, and coaching them along the way
Leaders must evaluate task and follower characteristics and
adapt leadership style to these
The theory suggests which style is most appropriate for
specific characteristics
20
Path–Goal Theory Approach

Path–goal theory is a complex but also pragmatic approach
Leaders should choose a leadership style that best fits the needs
of followers and their work
Path–goal theory provides a set of assumptions about how
different leadership styles will interact with follower
characteristics and the work situation to affect employee
motivation
Focus
Overall Scope
21
22
Strengths
Useful theoretical framework. Path–goal theory is a useful
theoretical framework for understanding how various leadership
behaviors affect the satisfaction of followers and their work
performance.
Integrates motivation. Path–goal theory attempts to integrate
the motivation principles of expectancy theory into a theory of
leadership.
Practical model. Path–goal theory provides a practical model
that underscores and highlights the important ways leaders help
followers.

23
Criticisms
Interpreting the meaning of the theory can be confusing because
it is so complex and incorporates so many different aspects of
leadership; consequently, it is difficult to implement.
Empirical research studies have demonstrated only partial
support for path–goal theory.
It fails to adequately explain the relationship between
leadership behavior and worker motivation.
The path–goal theory approach treats leadership as a one-way
event in which the leader affects the follower.
24
Application
PGT offers valuable insights that can be applied in ongoing
settings to improve one’s leadership.
Informs leaders about when to be directive, supportive,
participative, or achievement oriented.
The principles of PGT can be employed by leaders at all
organizational levels and for all types of tasks.

25
Chapter 6: Path-Goal Theory
1
Path–Goal Theory Perspective
Leader Behaviors & Follower Characteristics
How Does PGT Work?
Overview
2
Path–goal theory centers on how leaders motivate followers to
accomplish designated goals
Emphasizes the relationship between
the leader’s style
the characteristics of the followers
the work setting
Definition

3
Goal - To enhance employee performance and satisfaction by
focusing on employee motivation
Motivational Principles (based on Expectancy Theory) -
Followers will be motivated if they believe
they are capable of performing their work
that their efforts will result in a certain outcome
that the payoffs for doing their work are worthwhile
Perspective
4
Challenge to Leader
Use a leadership style that best meets followers’ motivational
needs
choose behaviors that complement or supplement what is
missing in the work setting
enhance goal attainment by providing information or rewards
provide followers with the elements they need to reach their
goals

5
It increases the number and kinds of payoffs followers receive
from their work
Makes the path to the goal clear and easy to travel through with
coaching and direction
Removes obstacles and roadblocks to attaining the goal
Makes the work itself more personally satisfying
Leadership generates motivation when
6
7

8
Leader Behaviors
Leader who gives followers task instruction including:
What is expected of them
How task is to be done
Timeline for task completion
Clear standards of performance
Clear rules & regulations
9
Leader who is friendly and approachable:
Attending to well-being & human needs of followers
Using supportive behavior to make work environment pleasant
Treating followers as equals & giving them respect for their
status
Leader Behaviors
10

Leader who invites followers to share in the decision making:
Consults with followers
Seeks their ideas & opinions
Integrates their input into group/organizational decisions
Leader Behaviors
11
Achievement-Oriented Leadership
Leader who challenges followers to perform work at the highest
level possible:
Establishes a high standard of excellence for subordinates
Seeks continuous improvement
Demonstrates a high degree of confidence in followers’ ability
to establish & achieve challenging goals
Leader Behaviors
12
Strong need for affiliation
Friendly and concerned leadership is a source of satisfaction
Preference for Structure
Dogmatic & authoritarian

Leadership provides psychological structure, task clarity, &
greater sense of certainty in work setting
13
Desire for Control
Internal locus of control
Leadership that allows followers to feel in charge of their work
& makes them an integral part of the decision-making process
External locus of control
Leadership that parallels followers’ feelings that outside forces
control their circumstances
14
Perception of their own ability – specific task
As perception of ability and competence goes up, need for
highly directive leadership goes down
Directive leadership may become redundant, possibly
excessively controlling

15
Design of followers’ task
Organization’s formal authority system
Primary work group of followers
Components
16
Unclear and ambiguous - Leader needs to provide structure
Highly repetitive - Leader needs to provide support to maintain
follower motivation
Weak formal authority - If formal authority system is weak, the
leader needs to assist followers by making rules and work
requirements clear
Nonsupportive/weak group norms - Leader needs to help build
cohesiveness and role responsibility
Task Situations Requiring Leader Involvement

17
Anything in the work setting that gets in the way of followers
They create excessive uncertainties, frustrations, or threats for
followers
Leader’s responsibility is to help followers by
Removing the obstacles
Helping followers around them
Assisting with obstacles will increase
Followers’ expectations to complete the task
Their sense of job satisfaction
Obstacles
18
Focus of Path–Goal Theory
Strengths
Criticisms
Application
19

The leader’s job is to help followers reach their goals by
directing, guiding, and coaching them along the way
Leaders must evaluate task and follower characteristics and
adapt leadership style to these
The theory suggests which style is most appropriate for
specific characteristics
20
Path–Goal Theory Approach
Path–goal theory is a complex but also pragmatic approach
Leaders should choose a leadership style that best fits the needs
of followers and their work
Path–goal theory provides a set of assumptions about how
different leadership styles will interact with follower
characteristics and the work situation to affect employee
motivation
Focus
Overall Scope
21

22
Strengths
Useful theoretical framework. Path–goal theory is a useful
theoretical framework for understanding how various leadership
behaviors affect the satisfaction of followers and their work
performance.
Integrates motivation. Path–goal theory attempts to integrate
the motivation principles of expectancy theory into a theory of
leadership.
Practical model. Path–goal theory provides a practical model
that underscores and highlights the important ways leaders help
followers.
23
Criticisms
Interpreting the meaning of the theory can be confusing because
it is so complex and incorporates so many different aspects of
leadership; consequently, it is difficult to implement.
Empirical research studies have demonstrated only partial
support for path–goal theory.
It fails to adequately explain the relationship between
leadership behavior and worker motivation.
The path–goal theory approach treats leadership as a one-way
event in which the leader affects the follower.

24
Application
PGT offers valuable insights that can be applied in ongoing
settings to improve one’s leadership.
Informs leaders about when to be directive, supportive,
participative, or achievement oriented.
The principles of PGT can be employed by leaders at all
organizational levels and for all types of tasks.
25

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