Home Business & Finance Distance Leadership in International Corporations: Why Organizations Struggle when Distances Grow
Conceptualization of relationship quality between individuals has mostly been reflected in an expression of the quality of leader-member exchange (Graen & Uhl- Bien, 1995). The review by Erdogan and Bauer (2014) provides reasonable evidence that the quality of relationship is indeed replicated in LMX literature that has found practical application in many research attempts. The term relationship quality is thus used synonymously with leader-member exchange in this work. An argument for viewing relationship quality as a part of distance is provided by Shamir (2013), on the one hand, who declares distance to be actively related to the leadership relation. On the other hand, Eichenberg (2007) used the reciprocal of LMX to determine relationship distance.
Fundamentals of relationship quality and the evolution of leader-member exchange
Some 40 years ago, leader-member exchange began revolutionizing leadership theory as it was one of the first concepts to concentrate on the dyadic relationship between two individuals within an organization (Graen & Uhl-Bien, 1995, p. 225). The relationship-based approach holds that leaders and direct reports possess the ability to form mature partnerships (Graen & Uhl-Bien, 1991a). Leader-member exchange theory evolved from vertical-dyadic linkage theory (Dansereau, Graen & Haga, 1975) and is estimated to be the foremost dyadic leadership theory in research (Erdogan & Liden, 2002). Hence, LMX is considered the key to understanding effects of dyadic relationships (Erdogan & Bauer, 2014, p. 407). It perceives relationships between leaders and subordinates as unequal due to limitations in time and social resources which manifest in either low or high quality relationships (Mayer, Keller, Leslie & Hanges, 2008). Since the 1970s, LMX has undergone investigations considering many different perspectives. From dyadic over group level to intra-group dyadic considerations, LMX has frequently been the subject of academic interest (Graen & Uhl-Bien, 1995).
Leader-member exchange postulates that in order for effective leadership to occur, leader and subordinates must develop mature partnerships. Research has shown that relationships may differ in terms of quality. Whereas supervisors’ relationships with some members manifest in high quality exchange, built on trust and respect, different individuals could be exposed to lower quality exchanges (Erdogan & Bauer, 2014; Zalesny & Graen, 1987). Low quality relationships are characterized by limited personal interaction with leader and follower appearing to be almost strangers to each other. Leadership is primarily existent because of the obligation by subordinates to comply, which in turn exhibits parallels to the exchange processes existent in transactional leadership (Bass, 1985; Graen & Uhl-Bien, 1995). Gouldner (1960) explains that trust evolves while the type of exchange moves from economic to social as favors are returned after a while by intrinsic motivation rather than formal obligation. In other words, individuals stop keeping count of the favors performed, resulting in a purely voluntary behavior (Erdogan & Bauer, 2014, p. 408).
Based on a series of studies Graen and Uhl-Bien (1991b) developed the “Life Cycle of Leadership Making” (Figure 3), which identifies stages of relationship formation, and provides suggestions on developing high quality leader-follower relations. Three stages are grounded on a life cycle model of leadership relationship maturity (Graen & Uhl-Bien, 1995, p. 231). The first stage, called stranger, amounts to the relationship-building phase. Individuals have their first interactions which occur on a formal basis. Exchanges are pursued adhering to contractual agreement. Leaders provide the information which followers need to perform; in return, followers behave as required. Social exchange is vital at that point in time for the relationship to move on. Leaders and followers may then reach the acquaintance stage which is characterized by limited relationships. Individuals begin to exchange social information beyond contractual agreement. Leaders and followers share information and resources, still limitedly though. As these relationships grow, leaders and followers enter the maturity stage. At this step, leader and subordinate have developed a mature partnership that is characterized by respect, obligation, and a high degree of mutual trust. Both partners should be able to benefit from reciprocal influence and by taking on supplementary responsibilities within the organization (Graen & Uhl- Bien, 1995).
Figure 3. The Life Cycle of Leadership Making
The key hypothesis of LMX is that individuals form differentiated relationships (Erdogan & Bauer, 2014, p. 408). Taking this into account, leader-member exchange may affect not only the relationship between leader and follower but also work-related outcomes. The potential influence of LMX appears realistic as followers could respond negatively to differentiation of individuals within groups as this might be perceived as unfair by followers (Uhl-Bien, Graen & Scandura, 2000). Perception of unfairness by followers was in turn found to predict performance negatively (Johnson, Truxillo, Erdogan, Bauer & Hammer, 2009). On the contrary, followers might develop a feeling of disappointment as their leader develops the same degree of relationship with each subordinate. This may be especially true for cases when contributions made by some followers to a project differ largely from those made by others (Sias & Jablin, 1995). Team members finding themselves in high quality LMX positions might attain the chance to grow personally and professionally in the first place as they receive more mentoring and coaching (Erdogan & Bauer, 2014; Law et al., 2000).
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