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.