Examine the connections between the Leader-Member Exchange Theory and in-group and out-group linkages. Analyze how the linkages and leadership style impact each other.

Examine the connections between the Leader-Member Exchange Theory and in-group and out-group linkages. Analyze how the linkages and leadership style impact each other.
Assignment 1: Discussion 1

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.

Tasks:

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?
Articles:

Den, H., Deanne. N., & Belschak, F. D. (2012). When does transformational leadership enhance employee proactive behavior? The role of autonomy and role breadth self-efficacy. Journal of Applied Psychology, 97(1), 194–202. doi: 10.1037/a0024903. (ProQuest document ID) Retrieved from http://search.proquest.com.libproxy.edmc.edu/docview/884117273?accountid=34899

de Poel, F. M., Stoker, J. I., & van der Zee, K. I. (2012). Climate control? The relationship between leadership, climate for change, and work outcomes. International Journal Of Human Resource Management, 23(3), 694-713. doi:10.1080/09585192.2011.561228. Retrieved from http://www.thecampuscommon.com/library/ezproxy/ticketdemocs.asp?sch=auo&turl= http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=70230606&site=ehost-live

Rode, J. & Wang, P. (2010). Transformational leadership and follower creativity: The moderating effects of identification with leader and org
9 Transformational Leadership
DESCRIPTION
One of the current and most popular approaches to leadership that has been the focus of much research since the early 1980s is the transformational approach. Transformational leadership is part of the “New Leadership” paradigm (Bryman, 1992), which gives more attention to the charismatic and affective elements of leadership. In a content analysis of articles published in Leadership Quarterly, Lowe and Gardner (2001) found that one third of the research was about transformational or charismatic leadership. Similarly, Antonakis (2012) found that the number of papers and citations in the field have grown at an increasing rate, not only in traditional fields like management and social psychology, but in other disciplines such as nursing, education, and industrial engineering. Bass and Riggio (2006) suggested that transformational leadership’s popularity might be due to its emphasis on intrinsic motivation and follower development, which fits the needs of today’s work groups, who want to be inspired and empowered to succeed in times of uncertainty. Clearly, many scholars are studying transformational leadership, and it occupies a central place in leadership research.

As its name implies, transformational leadership is a process that changes and transforms people. It is concerned with emotions, values, ethics, standards, and long-term goals. It includes assessing followers” motives, satisfying their needs, and treating them as full human beings. Transformational leadership involves an exceptional form of influence that moves followers to accomplish more than what is usually expected of them. It is a process that often incorporates charismatic and visionary leadership.

9.1 Transformational Leadership
An encompassing approach, transformational leadership can be used to describe a wide range of leadership, from very specific attempts to influence followers on a one-to-one level, to very broad attempts to influence whole organizations and even entire cultures. Although the transformational leader plays a pivotal role in precipitating change, followers and leaders are inextricably bound together in the transformation process.

Transformational Leadership Defined
The term transformational leadership was first coined by Downton (1973). Its emergence as an important approach to leadership began with a classic work by political sociologist James MacGregor Burns titled Leadership (1978). In his work, Burns attempted to link the roles of leadership and followership. He wrote of leaders as people who tap the motives of followers in order to better reach the goals of leaders and followers (p. 18). For Burns, leadership is quite different from power because it is inseparable from followers” needs.

Burns distinguished between two types of leadership: transactional and transformational. Transactional leadership refers to the bulk of leadership models, which focus on the exchanges that occur between leaders and their followers. Politicians who win votes by promising “no new taxes” are demonstrating transactional leadership. Similarly, managers who offer promotions to employees who surpass their goals are exhibiting transactional leadership. In the classroom, teachers are being transactional when they give students a grade for work completed. The exchange dimension of transactional leadership is very common and can be observed at many levels throughout all types of organizations.

In contrast to transactional leadership, transformational leadership is the process whereby a person engages with others and creates a connection that raises the level of motivation and morality in both the leader and the follower. This type of leader is attentive to the needs and motives of followers and tries to help followers reach their fullest potential. Burns points to Mohandas Gandhi as a classic example of transformational leadership. Gandhi raised the hopes and demands of millions of his people, and, in the process, was changed himself.

Another good example of transformational leadership can be observed in the life of Ryan White. This teenager raised the American people’s awareness about AIDS and in the process became a spokesperson for increasing government support of AIDS research. In the organizational world, an example of transformational leadership would be a manager who attempts to change his or her company’s corporate values to reflect a more humane standard of fairness and justice. In the process, both the manager and the followers may emerge with a stronger and higher set of moral values.

9.1 James MacGregor Burns
Because the conceptualization of transformational leadership set forth by Burns (1978) includes raising the level of morality in others, it is difficult to use this term when describing leaders such as Adolf Hitler and Saddam Hussein, who were transforming but in a negative way. To deal with this problem Bass (1998) coined the term pseudotransformational leadership. This term refers to leaders who are self-consumed, exploitive, and power oriented, with warped moral values (Bass & Riggio, 2006). Pseudotransformational leadership is considered personalized leadership, which focuses on the leader’s own interests rather than on the interests of others (Bass & Steidlmeier, 1999). Authentic transformational leadership is socialized leadership, which is concerned with the collective good. Socialized transformational leaders transcend their own interests for the sake of others (Howell & Avolio, 1993).

To sort out the complexities related to the “moral uplifting” component of authentic transformational leadership, Zhu, Avolio, Riggio, and Sosik (2011) proposed a theoretical model examining how authentic transformational leadership influences the ethics of individual followers and groups. The authors hypothesize that authentic transformational leadership positively affects followers” moral identities and moral emotions (e.g., empathy and guilt) and this, in turn, leads to moral decision making and moral action by the followers. Furthermore, the authors theorize that authentic transformational leadership is positively associated with group ethical climate, decision making, and moral action. In the future, research is needed to test the validity of the assumptions laid out in this model.

Leader–Member Exchange Theory

DESCRIPTION
Most of the leadership theories discussed thus far in this book have emphasized leadership from the point of view of the leader (e.g., trait approach, skills approach, and style approach) or the follower and the context (e.g., situational leadership, contingency theory, and path–goal theory). Leader–member exchange (LMX) theory takes still another approach and conceptualizes leadership as a process that is centered on the interactions between leaders and followers. As Figure 8.1 illustrates, LMX theory makes the dyadic relationship between leaders and followers the focal point of the leadership process.

Before LMX theory, researchers treated leadership as something leaders did toward all of their followers. This assumption implied that leaders treated followers in a collective way, as a group, using an average leadership style. LMX theory challenged this assumption and directed researchers” attention to the differences that might exist between the leader and each of the leader’s followers.

Early Studies
In the first studies of exchange theory, which was then called vertical dyad linkage (VDL) theory, researchers focused on the nature of the vertical linkages leaders formed with each of their followers (Figure 8.2). A leader’s relationship to the work unit as a whole was viewed as a series of vertical dyads (Figure 8.3). In assessing the characteristics of these vertical dyads, researchers found two general types of linkages (or relationships): those that were based on expanded and negotiated role responsibilities (extra-roles), which were called the in-group, and those that were based on the formal employment contract (defined roles), which were called the out-group (Figure 8.4).

Figure 8.1 Dimensions of Leadership
SOURCE: Reprinted from Leadership Quarterly, 6(2), G. B. Graen & M. Uhl-Bien, “Relationship-Based Approach to Leadership: Development of Leader–Member Exchange (LMX) Theory of Leadership Over 25 Years: Applying a Multi-Level, Multi-Domain Perspective” (pp. 219–247), Copyright © 1995, with permission from Elsevier.

NOTE: LMX theory was first described 28 years ago in the works of Dansereau, Graen, and Haga (1975), Graen (1976), and Graen and Cashman (1975). Since it first appeared, it has undergone several revisions, and it continues to be of interest to researchers who study the leadership process.

Figure 8.2 The Vertical Dyad
NOTE: The leader (L) forms an individualized working relationship with each of his or her subordinates (S). The exchanges (both content and process) between the leader and subordinate define their dyadic relationship.

8.1 Relationships
Figure 8.3 Vertical Dyads
NOTE: The leader (L) forms special relationships with all of his or her subordinates (S). Each of these relationships is special and has its own unique characteristics.

Within an organizational work unit, subordinates become a part of the in-group or the out-group based on how well they work with the leader and how well the leader works with them. Personality and other personal characteristics are related to this process (Dansereau et al., 1975). In addition, membership in one group or the other is based on how subordinates involve themselves in expanding their role responsibilities with the leader (Graen, 1976). Subordinates who are interested in negotiating with the leader what they are willing to do for the group can become a part of the in-group. These negotiations involve exchanges in which subordinates do certain activities that go beyond their formal job descriptions, and the leader, in turn, does more for these subordinates. If subordinates are not interested in taking on new and different job responsibilities, they become a part of the out-group.

Subordinates in the in-group receive more information, influence, confidence, and concern from their leaders than do out-group subordinates (Dansereau et al., 1975). In addition, they are more dependable, more highly involved, and more communicative than out-group subordinates (Dansereau et al., 1975). Whereas in-group members do extra things for the leader and the leader does the same for them, subordinates in the out-group are less compatible with the leader and usually just come to work, do their job, and go home.

8.2 Attributional Biases
8.1 In and Out Functions
Figure 8.4 In-Groups and Out-Groups
NOTE: A leader (L) and his or her subordinates (S) form unique relationships. Relationships within the in-group are marked by mutual trust, respect, liking, and reciprocal influence. Relationships within the out-group are marked by formal communication based on job descriptions. Plus 3 is a high-quality relationship, and zero is a stranger.

Later Studies
After the first set of studies, there was a shift in the focus of LMX theory. Whereas the initial studies of this theory addressed primarily the nature of the differences between in-groups and out-groups, a subsequent line of research addressed how LMX theory was related to organizational effectiveness.

Specifically, these studies focus on how the quality of leader–member exchanges was related to positive outcomes for leaders, followers, groups, and the organization in general (Graen & Uhl-Bien, 1995).

Researchers found that high-quality leader–member exchanges produced 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, and faster career progress over 25 years (Graen & Uhl-Bien, 1995; Liden, Wayne, & Stilwell, 1993).

8.2 In-Groups and Out-Groups
Based on a review of 130 studies of LMX research conducted since 2002, Anand, Hu, Liden, and Vidyarthi (2011) found that interest in studying leader–member exchange has not diminished. A large majority of these studies (70%) examined the antecedents and outcomes of leader–member exchange. The research trends show increased attention to the context surrounding LMX relationships (e.g., group dynamics), analyzing leader–member exchange from individual and group levels, and studying leader–member exchange with non-U.S. samples.

For example, using a sample of employees in a variety of jobs in Israeli organizations, Atwater and Carmeli (2009) examined the connection between employees” perceptions of leader–member exchange and their energy and creativity at work. They found that perceived high-quality leader–member exchange was positively related to feelings of energy in employees, which, in turn, was related to greater involvement in creative work. LMX theory was not directly associated with creativity, but it served as a mechanism to nurture people’s feelings, which then enhanced their creativity.

Researchers have also studied how LMX theory is related to empowerment. Harris, Wheeler, and Kacmar (2009) explored how empowerment moderates the impact of leader–member exchange on job outcomes such as job satisfaction, turnover, job performance, and organizational citizenship behaviors. Based on two samples of college alumni, they found that empowerment and leader–member exchange quality had a slight synergistic effect on job outcomes. The quality of leader–member exchange mattered most for employees who felt little empowerment. For these employees, high-quality leader–member exchange appeared to compensate for the drawbacks of not being empowered.

In essence, the aforementioned findings clearly illustrate that organizations stand to gain much from having leaders who can create good working relationships. When leaders and followers have good exchanges, they feel better and accomplish more, and the organization prospers.

Leadership Making
Research of LMX theory has also begun to focus on how exchanges between leaders and subordinates can be used for leadership making (Graen & Uhl-Bien, 1991). Leadership making is a prescriptive approach to leadership emphasizing that a leader should develop high-quality exchanges with all of the leader’s subordinates rather than just a few. It attempts to make every subordinate feel as if he or she is a part of the in-group and, by so doing, avoids the inequities and negative implications of being in an out-group. In general, leadership making promotes partnerships in which the leader tries to build effective dyads with all employees in the work unit (Graen & Uhl-Bien, 1995). In addition, leadership making suggests that leaders can create networks of partnerships throughout the organization, which will benefit the organization’s goals and the leader’s own career progress.

8.1 Supervisor-Subordinate Relationships
Graen and Uhl-Bien (1991) suggested that leadership making develops progressively over time in three phases: (1) the stranger phase, (2) the acquaintance phase, and (3) the mature partnership phase (Table 8.1). During Phase 1, the stranger phase, the interactions in the leader–subordinate dyad generally are rule bound, relying heavily on contractual relationships. Leaders and subordinates relate to each other within prescribed organizational roles. They have lower-quality exchanges, similar to those of out-group members discussed earlier in the chapter. The subordinate complies with the formal leader, who has hierarchical status for the purpose of achieving the economic rewards the leader controls. The motives of the subordinate during the stranger phase are directed toward self-interest rather than toward the good of the group (Graen & Uhl-Bien, 1995).

In a study of the early stages of leader-member relationship development, Nahrang, Morgeson, and Ilies (2009) found that leaders look for followers who exhibit enthusiasm, participation, gregariousness, and extraversion. In contrast, followers look for leaders who are pleasant, trusting, cooperative, and agreeable. Leader extraversion did not influence relationship quality for the followers, and follower agreeableness did not influence relationship quality for the leaders. A key predictor of relationship quality for both leaders and followers was behaviors such as performance.

Table 8.1 Phases in Leadership Making
SOURCE: Adapted from “Relationship-Based Approach to Leadership: Development of Leader–Member Exchange (LMX) Theory of Leadership Over 25 Years: Applying a Multi-Level, Multi-Domain Perspective,” by G. B. Graen and M. Uhl-Bien, 1995, Leadership Quarterly, 6(2), 231.

8.1 Changing Relationships
Phase 2, the acquaintance phase, begins with an offer by the leader or the subordinate for improved career-oriented social exchanges, which involve sharing more resources and personal or work-related information. It is a testing period for both the leader and the subordinate to assess whether the subordinate is interested in taking on more roles and responsibilities and to assess whether the leader is willing to provide new challenges for subordinates. During this time, dyads shift away from interactions that are governed strictly by job descriptions and defined roles and move toward new ways of relating. As measured by LMX theory, it could be said that the quality of their exchanges has improved to medium quality. Successful dyads in the acquaintance phase begin to develop greater trust and respect for each other. They also tend to focus less on their own self-interests and more on the purposes and goals of the group.

Phase 3, mature partnership, is marked by high-quality leader–member exchanges. People who have progressed to this stage in their relationships experience a high degree of mutual trust, respect, and obligation toward each other. They have tested their relationship and found that they can depend on each other. In mature partnerships, there is a high degree of reciprocity between leaders and subordinates: Each affects and is affected by the other. For example, in a study of 75 bank managers and 58 engineering managers, Schriesheim, Castro, Zhou, and Yammarino (2001) found that good leader–member relations were more egalitarian and that influence and control were more evenly balanced between the supervisor and the subordinate. In addition, during Phase 3, members may depend on each other for favors and special assistance. For example, leaders may rely on subordinates to do extra assignments, and subordinates may rely on leaders for needed support or encouragement. The point is that leaders and subordinates are tied together in productive ways that go well beyond a traditional hierarchically defined work relationship. They have developed an extremely effective way of relating that produces positive outcomes for themselves and the organization. In effect, partnerships are transformational in that they assist leaders and followers in moving beyond their own self-interests to accomplish the greater good of the team and organization (see Chapter 9).

8.2 Empowering Employees
The benefits for employees who develop high-quality leader–member relationships include preferential treatment, increased job-related communication, ample access to supervisors, and increased performance-related feedback (Harris et al., 2009). The disadvantages for those with low-quality leader–member relationships include limited trust and support from supervisors and few benefits outside the employment contract (Harris et al., 2009). To evaluate leader–member exchanges, researchers typically use a brief questionnaire that asks leaders and followers to report on the effectiveness of their working relationships. The questionnaire assesses the degree to which respondents express respect, trust, and obligation in their exchanges with others. At the end of this chapter, a version of the LMX questionnaire is provided for you to take for the purpose of analyzing some of your own leader–member relationships.

HOW DOES LMX THEORY WORK?
LMX theory works in two ways: It describes leadership, and it prescribes leadership. In both instances, the central concept is the dyadic relationship that a leader forms with each of the leader’s subordinates. Descriptively, LMX theory suggests that it is important to recognize the existence of in-groups and out-groups within a group or an organization.

The differences in how goals are accomplished by in-groups and out-groups are substantial. Working with an in-group allows a leader to accomplish more work in a more effective manner than he or she can accomplish working without one. In-group members are willing to do more than is required in their job description and look for innovative ways to advance the group’s goals. In response to their extra effort and devotion, leaders give them more responsibilities and more opportunities. Leaders also give in-group members more of their time and support.

Out-group members act quite differently than in-group members. Rather than trying to do extra work, out-group members operate strictly within their prescribed organizational roles. They do what is required of them but nothing more. Leaders treat out-group members fairly and according to the formal contract, but they do not give them special attention. For their efforts, out-group members receive the standard benefits as defined in the job description.

Prescriptively, LMX theory is best understood within the leadership-making model of Graen and Uhl-Bien (1991). Graen and Uhl-Bien advocated that leaders should create a special relationship with all subordinates, similar to the relationships described as in-group relationships. Leaders should offer each subordinate the opportunity to take on new roles and responsibilities. Furthermore, leaders should nurture high-quality exchanges with their subordinates. Rather than focusing on the differences between in-group and out-group members, the leadership-making model suggests that leaders should look for ways to build trust and respect with all of their subordinates, thus making the entire work unit an in-group. In addition, leaders should look beyond their own work unit and create high-quality partnerships with people throughout the organization.

8.2 NGO Leadership
Whether descriptive or prescriptive, LMX theory works by focusing our attention on the special, unique relationship that leaders can create with others. When these relationships are of high quality, the goals of the leader, the followers, and the organization are all advanced.

STRENGTHS
LMX theory makes several positive contributions to our understanding of the leadership process. First, it is a strong descriptive theory. Intuitively, it makes sense to describe work units in terms of those who contribute more and those who contribute less (or the bare minimum) to the organization. Anyone who has ever worked in an organization has felt the presence of in-groups and out-groups. Despite the potential harm of out-groups, we all know that leaders have special relationships with certain people who do more and get more. We may not like this because it seems unfair, but it is a reality, and the LMX theory has accurately described this situation. LMX theory validates our experience of how people within organizations relate to each other and the leader. Some contribute more and receive more; others contribute less and get less.

Second, LMX theory is unique because it is the only leadership approach that makes the concept of the dyadic relationship the centerpiece of the leadership process. Other approaches emphasize the characteristics of leaders, followers, contexts, or a combination of these, but none of them addresses the specific relationships between the leader and each subordinate. LMX theory underscores that effective leadership is contingent on effective leader–member exchanges.

Third, LMX theory is noteworthy because it directs our attention to the importance of communication in leadership. The high-quality exchanges advocated in LMX theory are inextricably bound to effective communication. Communication is the vehicle through which leaders and subordinates create, nurture, and sustain useful exchanges. Effective leadership occurs when the communication of leaders and subordinates is characterized by mutual trust, respect, and commitment.

8.4 Empowerment Through LMX
Fourth, LMX theory provides an important alert for leaders. It warns leaders to avoid letting their conscious or unconscious biases influence who is invited into the in-group (e.g., biases regarding race, gender, ethnicity, religion, or age). The principles outlined in LMX theory serve as a good reminder for leaders to be fair and equal in how they approach each of their subordinates.

Finally, a large body of research substantiates how the practice of LMX theory is related to positive organizational outcomes. In a review of this research, Graen and Uhl-Bien (1995) pointed out that leader–member exchange is related to performance, organizational commitment, job climate, innovation, organizational citizenship behavior, empowerment, procedural and distributive justice, career progress, and many other important organizational variables. By linking the use of LMX theory to real outcomes, researchers have been able to validate the theory and increase its practical value.

CRITICISMS
LMX theory also has some limitations. First, on the surface, leader–member exchange in its initial formulation (vertical dyad linkage theory) runs counter to the basic human value of fairness. Throughout our lives, beginning when we are very young, we are taught to try to get along with everyone and to treat everyone equally. We have been taught that it is wrong to form in-groups or cliques because they are harmful to those who cannot be a part of them. Because LMX theory divides the work unit into two groups and one group receives special attention, it gives the appearance of discrimination against the out-group.

Our culture is replete with examples of people of different genders, ages, cultures, and abilities who have been discriminated against. Although LMX theory was not designed to do so, it supports the development of privileged groups in the workplace. In so doing, it appears unfair and discriminatory. Furthermore, as reported by McClane (1991), the existence of in-groups and out-groups may have undesirable effects on the group as a whole.

Whether LMX theory actually creates inequalities is questionable (cf. Harter & Evanecky, 2002; Scandura, 1999). If a leader does not intentionally keep out-group members “out,” and if they are free to become members of the in-group, then LMX theory may not create inequalities. However, the theory does not elaborate on strategies for how one gains access to the in-group if one chooses to do so.

Furthermore, LMX theory does not address other fairness issues, such as subordinates” perceptions of the fairness of pay increases and promotion opportunities (distributive justice), decision-making rules (procedural justice), or communication of issues within the organization (interactional justice) (Scandura, 1999). There is a need for further research on how these types of fairness issues affect the development and maintenance of LMX relationships.

A second criticism of LMX theory is that the basic ideas of the theory are not fully developed. For example, the theory does not fully explain how high-quality leader–member exchanges are created (Anand et al., 2011). In the early studies, it was implied that they were formed when a leader found certain subordinates more compatible in regard to personality, interpersonal skills, or job competencies, but these studies never described the relative importance of these factors or how this process worked (Yukl, 1994). Research has suggested that leaders should work to create high-quality exchanges with all subordinates, but the guidelines for how this is done are not clearly spelled out. For example, the model on leadership making highlights the importance of role making, incremental influence, and type of reciprocity (see Table 8.1), but it does not explain how these concepts function to build mature partnerships. Similarly, the model strongly promotes building trust, respect, and obligation in leader–subordinate relationships, but it does not describe the means by which these factors are developed in relationships.

Based on an examination of 147 studies of leader–member exchange, Schriesheim, Castro, and Cogliser (1999) concluded that improved theorization about leader–member exchange and its basic processes is needed. Similarly, in a review of the research on relational leadership, Uhl-Bien, Maslyn, and Ospina (2012) point to the need for further understanding of how high-and low-quality relationships develop in leader–member exchange. Although many studies have been conducted on leader–member exchange, these studies have not resulted in a clear, refined set of definitions, concepts, and propositions about the theory.

A third criticism of the theory is that researchers have not adequately explained the contextual factors that may have an impact on LMX relationships (Anand et al., 2011). Since leader–member exchange is often studied in isolation, researchers have not examined the potential impact of other variables on LMX dyads. For example, workplace norms and other organizational culture variables are likely to influence leader–member exchange. There is a need to explore how the surrounding constellations of social networks influence specific LMX relationships and the individuals in those relationships.

Finally, questions have been raised about the measurement of leader–member exchanges in LMX theory (Graen & Uhl-Bien, 1995; Schriesheim, Castro, & Cogliser, 1999; Schriesheim, Castro, Zhou, et al., 2001). For example, no empirical studies have used dyadic measures to analyze the LMX process (Schriesheim, Castro, Zhou, et al., 2001). In addition, leader–member exchanges have been measured with different versions of leader–member exchange scales and with different levels of analysis, so the results are not always directly comparable. Furthermore, the content validity and dimensionality of the scales have been questioned (Graen & Uhl-Bien, 1995; Schriesheim, Castro, Zhou, et al., 2001).

APPLICATION
Although LMX theory has not been packaged in a way to be used in standard management training and development programs, it offers many insights that managers could use to improve their own leadership behavior. Foremost, LMX theory directs managers to assess their leadership from a relationship perspective. This assessment will sensitize managers to how in-groups and out-groups develop within their own work unit. In addition, LMX theory suggests ways in which managers can improve their work unit by building strong leader–member exchanges with all of their subordinates.

The ideas set forth in LMX theory can be used by managers at all levels within an organization. For example, LMX theory could be used to explain how chief executive officers develop special relationships with select individuals in upper management to develop new strategic and tactical corporate goals. Likewise, it could be used to explain how line managers in a plant use a select few workers to accomplish the production quotas of their work unit. The point is that the ideas presented in LMX theory are applicable throughout organizations.

In addition, the ideas of LMX theory can be used to explain how individuals create leadership networks throughout an organization to help them accomplish work more effectively (Graen & Scandura, 1987). A person with a network of high-quality partnerships can call on many people to help solve problems and advance the goals of the organization.

LMX theory can also be applied in different types of organizations. It applies in volunteer settings as well as traditional business, education, and government settings. Imagine a community leader who heads a volunteer program that assists older adults. To run the program effectively, the leader depends on a few of the volunteers who are more dependable and committed than the rest of the volunteers. This process of working closely with a small cadre of trusted volunteers is explained by the principles of LMX theory. Similarly, a manager of a traditional business setting might use certain individuals to achieve a major change in the company’s policies and procedures. The way the manager goes about this process is explicated in LMX theory.

In summary, LMX theory tells us to be aware of how we relate to our subordinates. It tells us to be sensitive to whether some subordinates receive special attention and some subordinates do not. In addition, it tells us to be fair to all employees and allow each of them to become as involved in the work of the unit as they want to be. LMX theory tells us to be respectful and to build trusting relationships with all of our subordinates, recognizing that each employee is unique and wants to relate to us in a special way.

Transformational Leadership and Charisma
At about the same time Burns’s book was published, House (1976) published a theory of charismatic leadership. Since its publication, charismatic leadership has received a great deal of attention by researchers (e.g., Conger, 1999; Hunt & Conger, 1999). It is often described in ways that make it similar to, if not synonymous with, transformational leadership.

9.1 Transformational Leadership
The word charisma was first used to describe a special gift that certain individuals possess that gives them the capacity to do extraordinary things. Weber (1947) provided the most well-known definition of charisma as a special personality characteristic that gives a person superhuman or exceptional powers and is reserved for a few, is of divine origin, and results in the person being treated as a leader. Despite Weber’s emphasis on charisma as a personality characteristic, he also recognized the important role played by followers in validating charisma in these leaders (Bryman, 1992; House, 1976).

In his theory of charismatic leadership, House suggested that charismatic leaders act in unique ways that have specific charismatic effects on their followers (Table 9.1). For House, the personality characteristics of a charismatic leader include being dominant, having a strong desire to influence others, being self-confident, and having a strong sense of one’s own moral values.

In addition to displaying certain personality characteristics, charismatic leaders also demonstrate specific types of behaviors. First, they are strong role models for the beliefs and values they want their followers to adopt. For example, Gandhi advocated nonviolence and was an exemplary role model of civil disobedience. Second, charismatic leaders appear competent to followers. Third, they articulate ideological goals that have moral overtones. Martin Luther King, Jr.’anizational climate. Human Relations, 63(8), p. 1105–1128.

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