ASSESSMENT OF THE EFFECT OF LEADERS- MEMBER EXCHANGE ON EMPLOYEES PERFORMANCE.
CHAPTER 1: Introduction
Leader–member exchange theory was put forward firstly by Grean, Dansereau & Minami (1972), which has apparent advantage in explaining leader effect when compared with traditional balanced leadership theory. The theory thought that there exist differential exchange relationship between leader and member. High quality LMX relationship indicates that there are mutual trust, mutual respect, mutual influence and high quality information exchange and feedback between leader and member. On the other hand, low quality LMX relationship means that the exchange between leader and member is only limited to formal employment agreement (Chen, Lam, & Zhong, 2007). Numerous studies have demonstrated that leader–member exchange can apparently affect employee’s job performance (Harris, Wheeler, & Michele Kacmar, 2009; Law, Wang, & Hui, 2010; Chan & Mak, 2012).
Among the studies of organization, the explanations of interrelationship between leader–member exchange and employee’s job performance were mainly based on social exchange theory. In the process of leader– member exchange, as a response to the high quality of the exchange relationship, members will have better performance. However, as to the influencing process of leader behavior, the cognition and emotion of employees are important intermediary factors (Wang et al, 2009). Former studies of LMX relationship lacked of consideration for employee’s psychological intervention, which makes the action mechanism indefinite. Starting from this perspective and take employees’ cognitive psychological change as an intermediary, this paper can better reveal the cause of employees’ behavior and further reveal the internal mechanism on which LMX improves employee performance. According to the internal and external efficiency theory put forwarded by Eden (2001), self-efficacy refers to the confidence of successful completion of the task by using internal resources which reflects the self-knowledge dimension (Eden & Sulimani, 2002). Means efficacy refers to evaluation of effectiveness of available tools to complete tasks (Eden, Ganzach, Flumin-Granat, et al., 2010). It is perceptions of situational factors which can affect employees’ work
1.1 Background of the Study
The driving force behind the popularity of employee engagement is that it has positive consequences for organizations (Saks, 2006; Harter, Schmidt, & Hayes, 2002). Engaged employee as the most important asset leading towards positive outcomes as increased discretionary efforts in behavior (Saks, 2006; Macey & Schneider, 2008; Markos, 2010; Bakker, 2011; Kelleher, 2011), organizational citizenship behavior (Whittington & Galpin, 2010; Masson et al,.2008; Frank, Finnegan, & Taylor, 2004), personal initiatives (Sonnentag, 2003), proactive behaviors (Salanova et al., 2003), rational, emotional and intellectual commitments of employee towards organization (Shaw, 2005; Richman, 2006), task performance and contextual performance (Christian, Garza, & Slaughter, 2011), low turnover intentions (Demerouti et al., 2001; Salanova et al., 2000; Schaufeli & Bakker, 2004), reduced frequency of sickness absenteeism (Schaufeli et al., 2002; Bakker 2011) as well as business level outcomes in terms of higher productivity, increased customer satisfaction and loyalty increased profitability and shareholder value (Harter, Schmidt, & Hayes, 2002; Heger, 2007) and hence increased level of financial turnover (Schneider et al., 2009).
Research on leadership can be divided into three different domains: leader, follower and relationship (Graen & Uhl-Bien, 1995). The leadership domain contains for example research on the characteristics of a leader or leader behavior (Graen & Uhl-Bien, 1995). The follower domain includes research on follower characteristics or the behavior of followers to promote positive
Outcomes (Graen & Uhl-Bien, 1995). The relationship domain, however, “focuses on the dyadic relationship between the leader and the follower” (Graen & Uhl-Bien, 1995, p. 223). Research in the field of Leader Member Exchange (LMX) is an example of a “relationship-based approach to leadership” (Graen & Uhl-Bien, 1995, p. 225) and therefore belongs to the relationship domain. The basic idea of LMX is that effective leadership processes can only occur when leaders and followers develop mature leadership relationships; these relationships can yield a lot of benefits (Graen & Uhl-Bien, 1995). According to LMX theory a leader develops a relationship with each individual employee (Lunenburg, 2010). Each of these relationships can have a different quality, ranging from poor interpersonal relationships to open and trusting relationships (Lunenburg, 2010). Employees maintaining a qualitatively good relationship with their leader are said to belong to the leader’s in-group (Lunenburg, 2010). These employees benefit a lot from their relationships by taking part in decision makings and obtaining more responsibilities (Lunenburg, 2010). In-group employees repay this trust by putting a lot of time and effort in their work and committing to the organizational success (Lunenburg, 2010). Employees in the out-group, however, have a poor relationship with their leader (Lunenburg, 2010). These employees are “supervised within the narrow limits of their formal employment contract” (Lunenburg, 2010, p. 2). This however results in employees not doing more than they have to, based on their employment contract (Lunenburg, 2010). Because higher quality LMX relationships have a variety of positive outcomes for leaders,
Followers, work units and the organization as a whole (Graen & Uhl-Bien, 1995), an organization should support their leaders in building as many in-group relationships as possible. The leadership making model depicts the process of how a leader forms a qualitative LMX relationship with a subordinate. According to Liden & Maslyn (1998) LMX is a multidimensional concept consisting of: Affect, Loyalty, Contribution, and Professional Respect. Affect is characterized as “the mutual affection members of the dyad have for each other based primarily on interpersonal attraction, rather than work or professional values” (Liden & Maslyn, 1998, p. 50). This desire may for example result in friendship (Liden & Maslyn, 1998). Loyalty is characterized as being faithful to each other and expressing public support for the goals and character of the other member of the LMX dyad (Liden & Maslyn, 1998). Contribution is defined as the “perception of the current level of work-oriented activity each member puts forth toward the mutual goals (explicit or implicit) of the dyad” (Liden & Maslyn, 1998, p. 50). Finally, professional respect refers to “the perception of the degree to which each member of the dyad has built a reputation, within and/or outside the organization, of excelling at his or her line of work” (Liden & Maslyn, 1998, p. 50). Therefore, a good LMX relationship is characterized by mutual affection, loyalty, personal contribution on both sides and professional respect for each other. Madlock et al. (2007) found that subordinates who have high levels of communication apprehension tend to have lower quality LMX relationships. Wayne, Liden, and Sparrow (1994) reported that high quality exchange relationships are more likely to occur when leaders and members are the same gender. Fairhurst (1993) argued that when gender linked behavior is present or suspected, “there is an obligation to understand the construction of the LMX relationship through discourse in relation to gender” (p. 324).The research therefore seeks to investigate an assessment of the effect of leaders – member exchange on employee performance
1.2 Statement of the Problem
Employee-employer relationship is one of the most important work related factors. The dynamics of employee employer relationship is changed from the traditional view on management which believe that ‘the manager in control and employee being controlled’ (Randolph, 1995). Leaders used to influence rather than empowering their subordinates (Kark, Samir & Chen, 2003). It has become necessary to move from the traditional, position based leadership to more open and exchange relationship type of leadership, which encourage employees to engage in their work roles. Studies have proven that empowering leader behavior also helps employees to achieve psychological empowerment, job satisfaction and organizational commitment (Konczak, Stelly & Trusty, 2000; Schalkwyk et al., 2010; Mendes & Stander, 2011). However academic literature has not paid much attention how leaders influence the engagement level of their subordinates. There is very few the extant literature. A high quality relationship with leader develops trust with employee and facilitate them to express better on their work roles in turn made the followers more engaged and perform better, probably because of feeling supported by their leaders in their capabilities and trusting not to punish them (Macey & Schneider, 2008; de Villiers & Stander, 2011).The problem confronting this research therefore is to proffer an assessment of the effect of leaders – member exchange on employee performance.
1.3 Objective of the Study
1 To determine the nature of leaders –members exchange
2 To determine the nature of employee performance
3 To determine the effect of leaders – member exchange on employee performance
1.4 Research Questions
1 What is the nature of leader- member exchange?
2 What is the nature of employee performance?
3 What is the effect of leader- member exchange on employee performance
1.5 Significance of the Study
The study proffers a structural appraisal of the nature and effect of leaders-member exchange on employee performance as a framework for improving leader –employee relation towards the mutual attainment of the goals of the organization.
1.6 Statement of Hypothesis
1 Ho The level of employee performance is low
Hi The level of employee performance is high
2 Ho Leader- member exchange is low
Hi Leader – member exchange is high
3 Ho The effect of leaders- member exchange is low
Hi The effect of leaders – member exchange is high
1.7 Scope of the Study
The study focuses on the assessment of the effect of leaders – member exchange on employee performance.
1.8 Definition of Terms
LEADER- MEMBER EXCHANGE DEFINED
The basic idea of LMX is that effective leadership processes can only occur when leaders and followers develop mature leadership relationships; these relationships can yield a lot of benefits (Graen & Uhl-Bien, 1995). According to LMX theory a leader develops a relationship with each individual employee (Lunenburg, 2010). Each of these relationships can have a different quality, ranging from poor interpersonal relationships to open and trusting relationships (Lunenburg, 2010).
Efficacy is not the evaluation of oneself but the confidence people hold to accomplish tasks in different conditions. Based on this, Eden’s (2001) put forward the internal and external efficacy theory, including self-efficacy and means-efficacy.
Self-efficacy is internal efficiency awareness and refers to the confidence of successful completion of the task by using internal resources (Eden & Sulimani, 2002).
Means efficacy is external efficiency awareness and refers to evaluation of effectiveness of available tools to complete tasks.