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In this module, you explored the difference between Transformational and Leader-Member Exchange Theories. In this assignment, you will examine the connections between the Leader-Member Exchange Theory and in-group and out-group linkages. You will analyze how the linkages and leadership style impact each other. Lastly, you will provide examples of two kinds of linkages from your current work environment.
Based on the readings and your research, in a minimum of 400 words, respond to the following points:
- Using the Leader-Member Exchange Theory, discuss the dynamics between the leader and the in-group and out-group members. How does the in-group and out-group concept impact the leader-subordinate relationship?
- Identify and describe examples of in-group and out-group roles within your current or previous organizations. How did the in-group and out-group dynamics impact the organization?
Module 5 Overview
Some leadership theories portray leadership as the relationship between a leader and his or her team members. These theories argue that leaders who have better work relationships with their team members and support them in challenging times receive their team members’ support and loyalty. This module examines two such theories: the Leader-Member Exchange (LMX) Theory and the Transformational Leadership Theory.
The Leader-Member Exchange Theory explains how leaders’ relationships with different team members develop differently. Leader-member exchanges are based on the assumption that social interaction represents a form of exchange. The Transformational Leadership Theory suggests that strong work ethics are built upon trust relationships. This theory provides followers with a new vision that instills true commitment.
In addition to the Leader-Member Exchange Theory, this module discusses Transformational Leadership Theory. In recent years, Transformation Leadership has received a lot of attention from academics as well as practitioners alike. Focused on organizational change, Transformational Leadership seeks to empower employees to excel and achieve goals. Driven by the leader at the top, Transformational Leadership seeks to create a shared vision and a workforce that is motivated by intrinsic rewards.
Exploring the theoretical leadership models discussed above will enhance your knowledge of effective communications in multiple contexts. It will help you encourage successful interpersonal and group relations, and promote “big picture” systems thinking.
Through this module’s assignments, specifically the first mandatory assignment, you will analyze current literature sources relevant to leadership. You will compare the leadership practices discussed in this literature with the leadership practices discussed in Northouse (2013).
Northouse, P. G. (2013). Leadership: Theory and practice (6th ed.). Thousand Oaks, CA: Sage.
Leader-Member Exchange (LMX) Theory
Originally introduced in 1975, the Leader-Member Exchange Theory is also known as the Vertical Dyad Linkage Theory. The Leader-Member Exchange Theory focuses on the relationship between leaders and team members. The theory argues that social interactions, including leader-member interactions, are a form of exchange. Members contribute at a cost to self, and benefit at a cost to the group. These mutually acknowledged roles satisfy everyone’s expectations.
Most leaders have just one leadership style, but treat different team members differently. Based on their leaders’ treatment, team members or subordinates fall into two different categories: in-group and out-group. Leaders will frequently have special relationships with an in-group of assistants and subordinates, who get high levels of responsibility and access to resources. Characteristics of the in-group often include empathy, patience, sensitivity, and responsibility. In-group employees work harder, are more committed to task objectives, and share more administrative functions. In return, they are expected to be completely committed and loyal to their leader. They are mostly considered the trusted associations of the leader.
Alternatively, the other category of subordinates is the out-group. The out-group employees are given little choice or influence; they typically comply with the leader’s formal role but lack the special relationship provided to the in-group. Membership to the in-group or out-group is often based on bias or perceived similarities rather than valid information.
Leader-Member Exchange Theory Continued
According to the Leader-Member Exchange Theory, leaders should use a participative and consultative style with in-group members, and a directive style with out-group members.
In-group and out-group relationships start very early—immediately after a person joins a team—and evolve across three phases:
- Role-taking: The member first joins the team and the leader evaluates his or her abilities and talents. During this time, the leader and the member develop an understanding of how the other views and desires respect.
- Role-making: The leader and member now take part in an informal negotiation to create the member’s role. In this phase, trust develops so the leader and the member can further extend their relationship based on the promise of benefit and power in return for dedication and loyalty. Trust building is very important in this phase, as the leader and the follower must develop an understanding of each other’s influence over their attitudes and behaviors. During this phase, any indication of betrayal by the follower may result in the member being demoted to the out-group.
- Role-routinization: In this phase, the social exchange pattern between the leader and the member becomes established and routine. During this phase, the member as well as the leader work hard at building trust and respect.
Though the three phases discussed above suggest that in-group and out-group relationships are based on perceived competence, dependability, and personal compatibility and develop early on in the leader-follower relationship, later theories propose that leader-member relationships follow a “life cycle” model, and, like most relationships, fluctuate up and down.
Leader-Member Exchange Theory Advantage
Within the leader-member relationship, both a leader and subordinates mutually gain personal power because of reciprocal trust and respect. Some researchers suggest that subordinates who have a positive exchange relationship with a leader are more prone to have a positive exchange relationship with their direct reports as well.
Researchers George Graen and Mary Uhl-Bien (1995) say that leaders who desire to be effective strive to create special exchange relationships with all their followers. Graen and Uhl-Bien (1995) argued that while it is not necessary to treat all subordinates exactly the same way, leaders should cultivate relationships of mutual supportiveness, respect, and trust with all subordinates. Their belief emphasizes the importance of respecting followers.
The main advantage of the Leader-Member Exchange Theory is that team members can become a part of the in-group and gain power and influence. They can then share this power and influence with their subordinates. The theory’s primary limitation is that there is little research suggesting that specific leader behaviors promote superior relationships. At best, the theory simply implies generalities about the importance of showing trust, respect, openness, and autonomy.
Graen, G. B., & Uhl-Bien, M. (1995). Relationship-based approach to leadership: Development of leader-member exchange (LMX) theory of leadership over 25 years: Applying a multi-level multi-domain perspective: Special issue: Leadership: The multiple-level approaches (Part 1). Leadership Quarterly, 6(1), 219–247.
Transformational leadership aims to bring about organizational change. According to Jim Collins (2001), an author and lecturer on organizational sustainability and growth, organizational transformation is best achieved through a transformational building process in three main disciplines—disciplined people, disciplined thoughts, and disciplined action. Good leaders have personal humility and professional will; they may not necessarily have high-profile personalities. Such leaders build teams with the right people in the right places. Good-to-great leaders confront their brutal realities with the faith and discipline needed to prevail. They identify their organizations’ core strengths and build their businesses around those strengths. Disciplined people naturally create good organizational culture with disciplined thoughts that combine culture with an ethic of entrepreneurship and disciplined actions (Collins, 2001).
Leaders use the Transformational Theory to bring about organizational change through employee empowerment. The characteristics of transformational leadership include:
- Influencing followers through a vision for a better future
- Inspiring followers instead of controlling them
- Leading by example through role modeling
- Contributing to subordinates’ intellectual stimulation
- Enhancing the meaningfulness of goals and behaviors
- Fulfilling followers’ self-actualization needs
- Empowering followers through intrinsic motivation
- Exhibiting confidence in subordinates’ ability to attain higher levels of achievement
- Enhancing collective identity (Aronson, 2011, para. 12)
Transformational leaders who exhibit the above characteristics can effectively bring about change in their organizations.
Aronson, E. (2001). Integrating leadership styles and ethical perspectives. Canadian Journal of Administrative Sciences, 18(4), 244–256.
Collins, J. (2001). Level 5 leadership: The triumph of humility and fierce resolve. Harvard Business Review, 79(1), 67–76.
Transformational Theory Continued
Let’s examine how transformational leaders can bring the characteristics of Transformational Leadership into practice.
Transformational leaders should use persuasion, not coercion, to influence others. They must strive toward collaborative relationships with followers to bring about meaningful change based on mutual objectives. Transformational leaders should respect their followers and be sensitive to the needs, attitudes, personal growth, and professional development of their subordinates. They should strive to raise the moral standards of their subordinates, recognize the value of committed employees, and treat them as valuable assets. They must avoid being transactional. Transformational leaders must allow their followers to create, maintain, and enhance a collective identity within the group. They should strive to link the group’s collective goals to the followers’ identity and thus make group goals meaningful to the followers.
Transformational leaders should role model the behaviors, attitudes, and values that they expect their subordinates to follow. They must endeavor to consciously control the destructive tendencies of arrogance, Machiavellianism, narcissism, and authoritarianism. They should empower followers through intrinsic motivation. They must help their employees commit to organizational performance, get them to participate in the process of change, and encourage them to identify and solve problems on their own. Transformational leaders should believe that their followers can achieve higher levels of performance and convince their followers of their vision’s correctness thereby facilitating the followers to assume responsibility for realizing the vision. This will help them eliminate the need to use rewards and dictates and enable followers to experience a higher level of self-worth and accomplishment.
Transformational leaders who translate the characteristics of transformational leadership into practice strengthen their relationships with their followers and ultimately substantiate their leadership effectiveness with their ability to adapt to change and influence others. Transformational Leadership offers many advantages, including improvement in subordinate satisfaction, increased organizational commitment from subordinates, and enhanced subordinate job satisfaction. Some researchers believe that transformational leaders elicit exceptional performance from their subordinates.
Leader-Member Exchange vs. Transformational Theory
You examined the concepts of the Leader-Member Exchange Theory and the Transformational Theory. Now let’s examine their advantages and disadvantages.
The Transformational Leadership Theory has attracted considerable attention from leadership researchers. Transformational Leadership enables leaders to win subordinates’ trust and respect, to inspire subordinates to achieve organizational goals, to empower subordinates, and to focus on their professional development. Transformational leaders respond to their subordinates’ individual needs, enabling them to become an integral part of the organization.
By contrast, the leader-member exchange relationship is a transactional form of leadership. It uses a performance-based system where leaders reward or discipline subordinates on the basis of their performance. In the leader-member exchange relationship, leaders satisfy followers’ needs in exchange for fulfillment of performance expectations. Leaders initiate structure, clarify roles, and distribute rewards to motivate their subordinates. The Leader-Member Exchange Theory focuses on subordinates’ behavior, organizational goals, structures, and processes. In leader-member exchange, leaders believe in themselves and their subordinates and expect subordinates to perform beyond the call of duty.
Opponents of the Leader-Member Exchange Theory argue that differences in power between leaders and followers may be the basis of exchange and that followers may simply obey a leader due to his or her authority, to get rewards, or to avoid disciplinary action. This can hamper followers’ development, as they can limit their focus to just immediate needs, feelings, and interpersonal connections
Module 5 Summary
In this module, you examined and compared the key aspects of the Leader-Member Exchange Theory and Transformational Theory. This provided you with an opportunity to think strategically and comprehensively about leadership. It also helped you analyze how leadership skills impact vision, organizational effectiveness, and strategy.
Here are the key points you covered in this module:
- The Leader-Member Exchange Theory focuses on the relationship between leaders and team members. In a leader-member exchange, both the leader and the subordinates mutually gain personal power because of reciprocal trust and respect for each other.
- According to the Leader-Member Exchange Theory, team members belong to either the in-group or the out-group. In-group and out-group relationships evolve across three phases—role-taking, role making, and role-routinization. In-group and out-group membership is based on perceived competence, dependability, and personal compatibility.
- The advantage of leader-member exchange is that team members can become part of the in-group and gain power and influence, which they can then share with future subordinates. The disadvantage is that followers must obey the leader to get rewards or avoid disciplinary action.
- Transformational leadership aims to bring about organizational change and enhance organizational performance.
- Transformational leaders try to influence followers through a vision for a better future, inspire followers instead of controlling them, lead by example through role modeling, contribute to subordinates’ intellectual stimulation, enhance the meaningfulness of goals and behaviors, fulfill followers’ self-actualization needs, empower followers through intrinsic motivation, exhibit confidence in subordinates’ ability to attain higher levels of achievement, and enhance collective identity.
- The advantages of transformational leadership are improved subordinate satisfaction, increased organizational commitment from subordinates, enhanced job satisfaction, and exceptional performance.