ORGANIZATIONAL BEHAVIOUR TERM PAPER LEADER MEMBER EXCHANGE THEORY (LME)

MADE BY: ABHISHEK RANA (01) PALLAVI BHARTI (19) VISHAL MAHAJAN (39)

LEADER MEMBER EXCHANGE THEORY (LME)

Leader-member Exchange (LME) flows from literature on transformational leadership, extant in the 1970s. A number of fundamental concepts are quite old, such as rewards for supporting leadership being as old as political philosophies from Classical Greek days. The formalization of LME stems from the term "Vertical Dyad Linkage (VDL), a concept developed by Dansereau, Graen, and Haga in 1975, with their paper, "A Vertical Dyad approach to leadership within formal organizations". Leadership is one of the primary areas of study, research, and practice in organizational behavior. Leaders often develop relationships with each member of the group that they lead, and Leader-Member Exchange Theory explains how those relationships with various members can develop in unique ways. The leader-member exchange theory of leadership focuses on the two-way relationship between supervisors and subordinates. These are not the only 2. Also known as LME, LMET or Vertical Dyad Linkage Theory, leader-member exchange focuses on increasing organizational success by creating positive relations between the leader and subordinate. In particular, leaders usually have special relationships with an inner circle of assistants and advisors, who often get high levels of responsibility and access to resources. This is often called the in-group, and their position can come with a price. These employees work harder, are more committed to task objectives, and share more administrative duties. They are also expected to be totally committed and loyal to their leader. Conversely, subordinates in the out-group" are given low levels of choice or influence and put constraints on the leader. These relationships start very soon after a person joins a team and follows these three stages: 1. Role-taking: The member joins the team and the leader evaluates his or her abilities and talents. Based on this, the leader may offer opportunities to demonstrate capabilities.

2. Role-making: In the second phase, the leader and member take part in an unstructured and informal negotiation whereby a role is created for the member and the unspoken promise of benefit and power in return for dedication and loyalty takes place. Trust-building is very important in this stage, and any feelings of betrayal, especially by the leader, can result in the member being demoted to the out-group. This negotiation includes relationship factors as well as pure workrelated ones, and a member who is similar to the leader in various ways is more likely to succeed. This perhaps explains why mixed gender relationships regularly are less successful than same gender ones. The same effect also applies to cultural and racial differences. 3. Routinization: In this phase, a pattern of ongoing social exchange between the leader and the member becomes established. Being a successful or in-group member usually includes being similar in many ways to the leader. The members work hard at building and sustaining trust and respect. The members are often empathetic, patient, reasonable, sensitive, and are good at seeing the viewpoint of other people, especially their leader. Aggression, sarcasm and a self-centered view are qualities seen in the out-group. The quality of the LME relationship varies. It is better when the challenge of the job is extremely high or extremely low. The size of the group, financial resource availability and the overall workload are also important. The theory can also work upwards as well. The leader can gain power by being a member of his or her manager's inner circle, which the leader can then share with subordinates. The main limitation of leader-member exchange research is that it is not particularly helpful in describing the specific leader behaviors that promote high quality relationships. At best it only implies generalities about the need for leaders to show trust, respect, openness, autonomy and discretion.

Every leader and follower are unique and work differently in different situations. Leadership is a relationship between leaders and followers, and building this relationship requires an appreciation for the personal values of those who would be willing to give their energy and talents to accomplish shared objectives. Various leadership theories evolved to define the leadership characteristics, traits & styles. The Leader-Member Exchange theory (shortly LMX theory) occupies a unique position among leadership theories because of its focus on the dyadic relationship between leader and follower. LMX theory was originally called Vertical Dyad Linkage (VDL) theory by Dansereau, Graen & Haga in 1975. You may have noticed your team leader or manager have more interactions with some of the team members. Also, they have tendency to give more responsibilities to these team members & consider them at first place for rewards and recognition. This tendency is central to LMX theory. According to LMX Theory, in most leadership situations not every follower is treated the same by the leader. Leaders and followers develop dyadic relationships and leaders treat each follower differently, resulting in two groups of followers an in-group and an out-group. The in-group consists of a few trusted followers with whom the leader usually establishes a special higher quality exchange relationship. The out-group includes the followers with whom the relationship of the leader remains more formal.

LMX is the only leadership approach to consider the dyadic relationship of leader and follower and the exchanges that determine organizational effectiveness. LMX theory asserts that leaders do not interact with subordinates uniformly because supervisors have limited time and resources. One of the implications of this theory is that the nature of the exchange is determined by the leader based on some presumed characteristics of the follower.

Followers get into one of these two groups based on: * How well they work with the leader

* How well the leader works with them

* Their personalities

* Role responsibilities they assume

* Followers competencies and accomplishments

In-group followers do their jobs in accordance with the employment contracts and can be counted on by the supervisor to perform unstructured tasks, to volunteer for extra work, and to take on additional responsibilities. Supervisors exchange personal and positional resources (inside information, influence in decisionmaking, task assignment, job latitude, support, and attention) in return for subordinates performance on unstructured tasks.

As a result of high LMX relationship, we can achieve increased 4

* Mutual trust,

* Confidence,

* Job satisfaction,

* Organizational commitment,

* Common bonds,

* Open communication,

* Independence,

* Respect, rewards & recognition In contrast, followers who perform only in accordance with the prescribed employment contract are characterized as out-group with limited reciprocal trust and support, and few rewards from their supervisors. Subordinates in the OutGroup may be new to an organization. When leaders and followers have good exchanges, they feel better, accomplish more, and the organization prospers Northouse

High-quality exchanges bring positive organizational outcomes such as innovation, empowerment, positive job climate, and organizational citizenship behavior. So, a 5

leader should look for ways to build trust and respect with all of their subordinates, thus making the entire work unit an in-group. When the relationships between leaders and subordinates are all high-quality, the goals of the leader, the followers, and the organization are all advanced Success factors Successful members are thus similar in many ways to the leader (which perhaps explains why many senior teams are all white, male, middle-class and middleaged). They work hard at building and sustaining trust and respect. To help this, they are empathetic, patient, reasonable, sensitive, and are good at seeing the viewpoint of other people (especially the leader). Aggression, sarcasm and an egocentric view are keys to the out-group wash-room. The overall quality of the LME relationship varies with several factors. Curiously, it is better when the challenge of the job is extremely high or extremely low. The size of the group, financial resource availability and the overall workload are also important. Onwards and upwards The principle works upwards as well. The leader also gains power by being a member of their manager's inner circle, which then can then share on downwards. People at the bottom of an organization with unusual power may get it from an unbroken chain of circles up to the hierarchy. Using it When you join a team, work hard to also join the inner circle. Take on more than your share of administrative and other tasks. Demonstrate unswerving loyalty. See your leader's point of view. Be reasonable and supportive in your challenges to them, and pick your moments carefully. As a leader, pick your inner circle with care. Reward them for their loyalty and hard work, whilst being careful about maintaining commitment of other people. Defending If you want to be an 'ordinary' member of a team, play your part carefully. There will be others with more power. If you want to lead an equal team, beware of those who curry favor. 6

Pros and Cons of Leader Member Exchange Theory

Pros
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LME is intuitive. It is what can be expected from a leader-group structure.

The theory points to what people could do to strengthen or weaken the leadership dynamics.

The theory explains the dynamic of age-old problems of cronyism, the mechanics of loyalty to a leader and corruption and provides a structure for not only modeling specific situations but solutions to problems.

Cons

The LME theory does not account for leadership personalities very well.

LME is so intuitive that it appears to be obvious. One asks, "What really is new and what is left out?" It leaves the reader with a sense of emptiness.

How values affect the group dynamics is left out.

Discussion
Q-How a leader maintains leadership through working with her or his supporters, those entrusted with responsibility and advisers defines the
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Leader-member Exchange theory as a method for exerting and maintaining leadership?

ANS-Leaders must garner and maintain their leadership position and the Leadermember Exchange theory states that such persons work with associates, supporters, trusted persons with responsibility, advisers and other "inner circle" to maintain her or his position. Another name for the theory is the "Vertical Dyad Linkage Theory". The word "dyad" means "two", and the two refers to the leader and the others with whom she or he works. "Linkage" defines the type of relationship; it is a connection that is maintained in the dyad. Leaders assume their role by getting adherents. "VDL" refers specifically to a leader regarding followers differently according to the degree of support they give. The more support a person gives to a leader, the more she or he will become part of the leader's "inner circle". These adherents, of course, support the leader, and it is this loyalty that the leader seeks to cultivate further. To reward this support, the leader dispenses favors in the form of jobs, recognition, money, and access to opportunities. Over time, roles may become formalized and the supporter may be brought into a formal role with more power. However, the leader-subordinate relationship is preserved. At some point, there may be a conflict of power, if the subordinate reaches a level of equal power. There may be conflicts concerning power distribution and philosophies of leadership that can lead to a challenge to the leader. If there is disaffection with the leader, often the subordinate is relegated to a lower status and in extreme cases is ousted from the leadership circle. The strength of the relationship between the leader and members of the "inner circle" varies with the nature of tasks faced, qualities of the members, integrity of the organization, support for the organization, and so forth. The more those of the leadership circle work to support the leader, often the more support, rank and responsibility they get. Each case has to be evaluated on its own merit. The range of leaders can be from a person leading a small discussion group or a supervisor of a work crew, to heads of countries or empires. The more complex the task and organization, the more factors enter into the organizational dynamics. Stages of Development Formally, one can identify at least three stages of development in the Leadermember Exchange relationship. First, there is the organizational stage, where a person rises from a group for various reasons. There usually is a task that needs to 9

be performed and the approaches of doing it range from anarchy to a single person directing everything. This person rising from the rest of the crowd may have charisma, intelligence or some quality that others recognize and see as desirable or essential for accomplishing the task. There may be, of course, situations where there is no real task but persons are attracted to another and are desirous to follow. In this case, the will to socialize for a sense of belonging or companionship are prime motivators. Whatever the case, the leader-rest of the group forms. A second stage of LME occurs with role development. There are many origins, depending upon why the group was formed. Group members may simply be mimicking other groups. Tasks usually define the types of roles. Roles can be invented as rewards for favors done for the leader. The need for a division of labor creates the need for roles, as a leader cannot do every aspect of a task. Here, a balance has to be achieved between a leader's direct involvement in decision making and delegating work to others. An excess in either direction can result in the micro management or dispersal of authority to the extent that a leader can lose his or her leadership role. For the former, group members will chafe at being told what to do in the minutiae of everyday life. If authority is delegated too much in quantity or too widely, challenges to authority will arise, leadership will be diluted, and authority vaporizes. Once a leader-led relationship is established, it becomes settled, and this is deemed the third stage of development of the LME. A number of factors can affix this relationship, as the expression "good old boy network" adequately describes. Culture, social mores, economy, charisma, enormity of tasks an average individual cannot handle are just some of the factors that can solidify leader-led relationship and maintain them over time. Familiarity breeds contempt, and the more egregious routinized systems get challenged. In extreme situations at the nation-state level, there are revolutions. Critique Absent from the Leader-member Exchange theory is a consideration of leadership personalities. We are entreated with a general list of qualities that are helpful in maintaining a relationship with the group, such as trust, integrity, and willingness to delegate power, openness, and so forth. Would LME break down, let's say, if a particularly charismatic leader were to assume power? How would this affect delegation of authority and attendant loyalty? Another fault with LME theory is values clarification. How do values affect the relationship between the leader and 10

group? What of conflicting values or a change of values as roles are assumed? How does the philosophy of leadership influence various situations? What philosophies shape what relationships? LME seems to describe what nature occurs between a leader and a group, and one must ask what really is new about the theory. Have not the contents of the theory been known for a long time? Future of theory Game theory, such as that of John von Neumann can be coupled with Leadermember Exchange theory. What is the optimum way of achieving objectives? Cooperation has been found to be the most efficacious way of obtaining an objective. Various political philosophies can be coupled with LME theory. First, however, there needs to be studies that correlate those philosophies with results. For example, does a philosophy that is more democratically-oriented and entrusting that people are good and competent result in a stronger leader-led bond? Further work might address systems analysis models, such as those presented by David Easton (A Systems Analysis of Political Life) and Walter Buckley. It is not farfetched to think of research in the field modeling and simulation that addresses Leader-member Exchange theory. However, the concepts in the theory would have to be quantified. While there are three stages of the LME theory, one can perceive of others. In the routinization stage, what if the relationships become so ossified and nonresponsive to a population. One of the necessary factors for a participatory society to survive is participation. In reputed democracies, power relationships are routine, but in many cases people have not participated to the extent that there are good old boy networks, corruption sets in, and authority becomes oppressive. Here, we can point to a terminal stage in some cases, where is challenge to the routine. In systems theory, either a system adapts or it can fail, and for a theory to be more complete, it should at least acknowledge that Leader-member Exchange theory can transform, if not end.

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INTERNATIONAL JOURNAL OF MANAGEMENT, BUSINESS, AND ADMINISTRATION VOLUME 13, NUMBER 1, 2010

Leader-Member Exchange Theory: Another Perspective on the Leadership Process Fred C. Lunenburg Sam Houston State University
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ABSTRACT The basic idea behind the leader-member exchange (LMX) theory is that leaders form two groups, an in-group and an out-group, of followers. In-group members are given greater responsibilities, more rewards, and more attention. The leader allows these members some latitude in their roles. They work within the leaders inner circle of communication. In contrast, out-group members are outside the leaders inner circle, receive less attention and fewer rewards, and are managed by formal rules and policies. In this article, I discuss how the leader-member exchange theory works; research findings; managerial implications of the theory; and how to build high-quality leader-member exchange relationships with all employees. Many theories of leadership assume that the superior behaves in essentially the same manner toward all members of his or her work group. In fact, however, leaders often act very differently toward different subordinates, and develop contrasting kinds of relationships with them. This perspective on the leadership process is provided by the leader-member exchange theory (LMX) (Graen & UhlBien, 1995).

How the Leader-Member Exchange Theory Works

The LMX theory focuses on a dyad, that is, the relationship between a leader and each subordinate considered independently, rather than on the relationship between the superior and the group. Each linkage, or relationship, is likely to differ in quality. Thus, the same leader may have poor interpersonal relations with some subordinates and open and trusting relations with others. The relationships within these pairings, or dyads, may be of a predominantly in-group or out-group nature. A leader initiates either an in-group or an out-group exchange with a member of 13

the organization early in the life of the dyadic relationship. Members of the ingroup are invited to participate in decision making and are given added responsibility. The leader allows these members some latitude in their roles; in effect, the leader and key subordinates negotiate the latters responsibilities in a non-contractual exchange relationship. In essence, an in-group member is elevated to the unofficial role of trusted lieutenant. In-group members, in many respects, enjoy the benefits of job latitude (influence in decision making, open communications, and confidence in and consideration for the member). The subordinate typically reciprocates with greater than required expenditures of time and effort, the assumption of greater responsibility, and commitment to the success of the organization. In contrast, members of the out-group are supervised within the narrow limits of their formal employment contract. Authority is legitimated by the implicit contract between the member and the organization. The leader will provide support, consideration, and assistance mandated by duty but will not go beyond such limits. In effect, the leader is practicing a contractual exchange with such members; they are hired hands, who are being influenced by legitimate authority rather than true leadership. In return, out-group members will do what they have to do and little beyond that. Research Findings Research on the LMX theory is supportive. Specifically, the research supporting the LMX theory indicates that leaders do differentiate among followers and that these differences are not random. Followers exhibiting higher levels of selfefficacy were more likely to form in-group relationships with leaders, who perceived the followers to be more likable and to be more similar in personality to the leader (Murphy & Ensher, 1999). Furthermore, perceived similarities between the leader and the follower, implicit theories, and self-schemas led to greater liking of subordinates and higher quality leader- member exchanges (Engle & Lord, 1997). The perception of similarity seems to be a more important factor than the actual demographic similarities (age, gender, ethnicity) (Murphy & Ensher, 1999). Research further suggests that a sharp distinction between the in-group and the out-group may not be desirable, because subordinates in the out-group might resent their relatively inferior status and differential treatment (McClane, 1991; Yukl, 2010). There is evidence that members of the in-group (those who report a highquality relationship with the leader) assume greater job responsibility, contribute more to the organization, and are rated higher in performance than members of the out-group (those who report a low-quality relationship with the leader) (Schreisheim, Neider, & Scandura, 1998). And, the type of stress varies by the 14

group to which a subordinate belongs. In-group members stress emanates from the additional responsibilities given to them by the leader, whereas out-group members stress emanates from being left out of the communication loop (Nelson, Basu, & Purdie, 1998). Results from a recent meta-analysis of 50 studies involving 9,324 subjects revealed a moderately strong, positive relationship between subordinates with in-group status and engagement in more helping or citizenship behaviors at work (Ilies, Nahrgang, & Morgeson, 2007). In another study, followers with in-group status with their leaders had higher performance ratings and reported greater satisfaction with the leader (Chen, Lamb, & Zhong, 2007). These positive research findings for in-group members should not be surprising, considering our knowledge of the self-fulfilling prophesy. Leaders invest their resources in those they expect to perform well. Moreover, leaders Believe that in-group members are the most competent and, therefore, they treat them as such fulfilling the self-fulfilling prophesy (Eden, 1992). Managerial Implications An important implication of the leader-member exchange theory is that the quality of the relationship between the leader and each group member has important job consequences. Specifically, the research supporting the LMX theory indicates that subordinates with in-group status with their leaders will have higher productivity and job satisfaction, improved motivation, and engage in more citizenship behaviors at work (Ilies, Nahrgang, & Morgeson, 2007; Chen, Lam, & Zhong, 2007). Leaders invest more resources in those they expect to perform well (i.e., those they have designated as in- group members); and they treat them differently than they do out-group members. Therefore, it is suggested that leaders develop high-quality relationships with as many subordinates as possible. They should have as large an in-group and as small an out- group as possible (George & Jones, 2008). How to Build High-Quality Leader-Member Exchange Relationships As noted above, the better the leader-member exchange relationship between leader and follower, the higher the productivity, job satisfaction, motivation, and citizenship behavior of the follower. Following are some tips that may help to build high-quality leader-member exchange relationships (Schermerhorn, Hunt, & Osborn, 2011). 15

Stage 1. Meet separately with your employees in the initial stage to help each of you evaluate each others motives, attitudes, and potential resources to be exchanged, and establish mutual role expectations. Stage 2. For those where the initial meeting was most promising, work toward refining the original exchange relationship and developing mutual trust, loyalty, and respect for these in-group members. Stage 3. Some of these relationships will advance to a third (mature) stage where exchange based on self-interest is transformed into mutual commitment to the vision, mission, and objectives of the work unit. Stage 4. Reward these second and third stage in-group members with greater status, influence, and benefits in return for extra attention from them, and remain responsive to their needs with strong reliance on persuasion and consultation. Stage 5. Follow up with day-to-day observations and discussions and work toward increasing the number of in-group members. The relationship between a leader and his or her own supervisor is also a dyad that can be classified as an in-group or out-group relationship. Leaders who have high- quality relationships with their own supervisors are more likely to develop high-quality relationships with their subordinates (George & Jones, 2008). Following are some tips for improving the quality of leader member exchanges between the leader and his or her supervisor (Kreitner & Kinicki, 2010). Stay focused on your departments goals and remains positive about your ability to accomplish your goals. An unsupportive boss is just another obstacle to be overcome. Do not fall prey to feeling powerless, and empower yourself to get things done. Exercise the power you have by focusing on circumstances you can control and avoid dwelling on circumstances you cannot control. 16

 Work on improving your relationship with your manager. Begin by examining the level of trust between the two of you, and then try to improve it by frequently and effectively communicating. You can increase trust by following through on your commitments and achieving your goals. Use an authentic, respectful, and assertive approach to resolve differences with your manager. It is useful also to use a problem-solving approach when disagreements arise.

Conclusion The basic idea behind the leader-member exchange (LMX) theory is that leaders form two groups, an in-group and an out-group, of followers. In-group members are given greater responsibilities, more rewards, and more attention. The leader allows these members some latitude in their roles. They work within the leaders inner circle of communication. In contrast, out-group members are outside the leaders inner circle, receive less attention and fewer rewards, and are managed by formal rules and policies. As a result, in-group members have higher productivity, job satisfaction, motivation, and engage in more citizenship behaviors than outgroup members. Therefore, leaders should develop high-quality relationships with as many subordinates as possible. Their in-group should be as large as their outgroup.

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Leader-member exchange (LME) Theory of leadership and HRD

Development of units of theory and laws of interaction Dae-seok Kang
College of Business Administration, Inha University, Incheon, Republic of Korea, and

Jim Stewart
Nottingham Business School, Nottingham Trent University, Nottingham, UK

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Abstract Purpose The purpose of this paper is to examine the relationship between leadermember exchange (LME) and human resource development (HRD) to gain a better understanding of the LME-performance relationship through connecting LME and HRD theory. Design/methodology/approach Dubins framework is used for the purpose of linking LME with HRD. Except that the last three steps (empirical indicators of key terms, hypotheses, testing) involved conducting empirical research, the authors employ steps 1 through 5 to build an HRD-based LME model, i.e. the first step specifies that the units of the theory be identified; the second step involves establishing the laws of interaction applicable to the units of the theory. The third and fourth steps define boundaries for an HRD-based LME model and suggest propositions for future empirical research. In addition, to lessen the likelihood of some redundancy the system states are included with the laws of interaction. Findings LME and HRD (as represented by identified outcomes) theories are linked by at least three key factors: trust, empowerment, and performance. A theoretical model linking LME and HRD also describes the contributions of trust, empowerment, and performance to LME theory of leadership with the help of two specific HRD interventions trust building and empowerment facilitation. Research limitations/implications The confirmation of the theoretical model through empirical research is still required. Practical implications In the aspect of relational performance, this paper proposes a basis for designing and implementing strategic HRD activities and recommends the conceptual model as an intervention technique for organizational change. Originality/value This paper illuminates the base of LME leadership theory and seeks to develop new practical insights of the theory. In so doing, it aims to contribute to reducing the tension between leadership theorists and leadership development practitioners, described as validity versus usefulness. Keywords Trust, Empowerment, Performance management, Human resource development. 19

As a multidisciplinary field that creates its own discipline from a variety of theories, one view of human resource development (HRD) is that it is a process that focuses on both personal and organizational outcomes on the basis of learning and performance. Hence, HRD continuously works for a more enlightened, ethical, and skills-focused change management for both successes of individuals and organizations through a proactive and system-wide intervention. In this view, the main focus of HRD is to enhance the knowledge and skills of individuals, both severally and collectively, to enable them to perform current and future goals and optimize individual and organizational growth and effectiveness. While this understanding of HRD is not without controversy or challenge it reflects a widely held and established conception that influences both research and practice. In a similar vein, leader-member exchange (LME) is also an ongoing value-added process aimed at better performance of individuals and organizations through the diagnosis of leader-follower interactions. LME theory of leadership focuses on the degree of emotional support and exchange of valued resources between the leader and members. Thus, LME leadership theorys main focus is to diagnose this relationship so a higher quality can be developed in this relationship, enabling improved performance. These developmental features suggest a linkage between HRD, conceived as performative and LME theory. HRD contributes to this linkage through its multi- or interdisciplinary nature, providing a common boundary in pursuing performance. Unlike traditional theories that seek to explain leadership as a function of leaders personal characteristics, features of the situation, or interaction between the two, LME leadership theory has evolved into a dyadic approach to understanding leader-follower relationships. According to the vertical dyad linkage approach, leaders and followers develop dyadic relationships and leaders treat individual followers differently, resulting in two groups of followers: an in-group and an out-group. The in-group consists of a number of trusted followers who are derived from expanded and negotiated role responsibilities with the leader. The out-group includes the remaining followers with whom the relationship of the leader remains more formal. A higher quality relationship results when leaders and followers exchange greater physical resources, information and enjoyable tasks. This reflects the assumption that leaders have limited time and energy and associated inability to give equal attention to all followers. Since, the early formulation of LME theory a number of additional studies have established antecedents and outcomes of high quality relationships using survey instruments and measurement scales. The antecedents of LME identified by empirical research 20

are mostly leader and follower characteristics that exist prior to the exchange, or their behaviors that occur during the LME. The outcomes are associated with followers work related attitudes and behaviors such as increased commitment, satisfaction, performance and organizational citizenship behavior (OCB). The results of empirical studies of LME have commonly shown that followers in high quality LME relations have more positive job attitudes and engage in more positive behaviors than those in low quality relationships. According to Gerstner and Days (1997) meta-analytic review on LME, however, there is surprisingly little agreement on what LME is and how it operates in relation to performance. In particular, although the LME model highlights the importance of the role and type of reciprocity, it does not explain how these concepts interact to build mature partnerships. Whether LME diagnosis can actually improve performance is further questioned, considering that it may support the need for development among privileged groups in the workplace. Yu and Liang (2004) even doubted the previously well-accepted positive relationship between high quality LME and organizational performance found in previous studies. In short, although empirical research has supported the validity of the LME theory of leadership, explanations of LME processes are still speculative, brief, and primarily descriptive. Therefore, this paper seeks to address this theoretical deficiency and to propose a conceptual solution to explain the LMEperformance relationship more effectively, and to suggest better ways to apply LME in real organizational settings through practical applications of chosen HRD interventions.

Research purpose and research questions The overall purpose of this paper is to examine the relationship between LME and HRD to gain a better understanding of the LME-performance relationship through connecting LME and HRD theory. On the basis of the development attributes of LME theory, this paper addresses two questions: RQ1. How is LME linked with HRD? Are there common units of theory between LME and HRD which are necessary for theory building?

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RQ2. If LME and HRD have common units for theory building, how do their common units of theory operate together to improve the LME-performance relationship? Despite the high level of scholarly interest in LME theory development, researchers have not yet approached the phenomenon through the lens of HRD interventions such as individual training and development and organization development (OD). We suggest that this is a significant reason that the LMEperformance process in the LME literature has been descriptive and even vague. Accordingly, through theory building between LME and HRD, we try to illuminate the base of LME leadership theory and to develop new practical insights of the theory. In so doing, we aim to contribute to reducing the tension between leadership theorists and leadership development practitioners, described as validity versus usefulness.

Review of LME theory of leadership Understanding of organizational outcomes through leadership research has progressed from consideration of leader attributes to recognition of the importance of the relationships that leaders have within a situation or with subordinates. The former viewpoint would be best exemplified by theories of transformational leadership and the latter approach is the basis of LME. However, this dichotomy within the study of leadership may be less significant than generally accepted since transformational leadership is conceptually similar to the process of developing a unique LME. There is emerging support for the claim that LME may be transformational leadership at certain times and under certain conditions. Thus, a review of two-way, reciprocal exchanges between leader and follower is not only helpful in understanding the essence of organizational leadership but it also provides a foundation for the LME-HRD linkage model to be proposed later in this paper.

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LME is defined as follows: Leader-member exchange is (a) A system of components and their relationships. (b) Involving both members of a dyad. (c) Involving interdependent patterns of behavior and (d) Sharing mutual outcome instrumentalities and (e) Producing conceptions of environments, cause maps and value Leaders in high quality LME relationships rely heavily on followers to act in their stead and encourage them to undertake more responsible activities. Followers in such relationships interact frequently with their leaders and have their leaders support, confidence, encouragement, and consideration. Followers take on added duties or expend extra effort to achieve work group goals beyond contractual or transactional expectations. LME development Dyadic relationship development is theoretically grounded in role theory and social exchange theory. Both theories help to explain how LMEs form. Role theory Role theory makes a significant contribution to understanding the role of leaders and members. The role expectations of a supervisor and the extent to which the subordinate meets these expectations make up the relational context of the exchange process. Graen and Scandura (1987) suggested a three-phase model of LME development including role taking, role making, and role routinisation. For example, supervisors test subordinates with various work assignments in a series of role-making episodes. In this process, the degree to which subordinates comply with task demands and demonstrate a worthiness to be trusted influences the type of LME relationship they form. In turn, the type of LME determines the extent to which the leader reciprocates with work-related resources such as information, challenging task assignments and autonomy. In this way, leaders and followers develop a role relationship based on mutual dependencies within assigned and accepted roles and followers performance in the role plays a major part in this role-making process. In addition, it is noteworthy that this role-making process is 23

one in which an individual has role episodes not only with a formally designated leader, but also with an entire role set of others, including other members, who communicate important role information. Social exchange theory Rather than focusing on the role of leaders and members, social exchange theory focuses on the exchange between them. Social exchange theory describes how power and influence among leaders and subordinates are conditioned by the availability of alternative exchange partners from whom these leaders and subordinates can obtain valued resources. Based on this perspective, Liden et al. (1997) described leader-member relationship development as a series of steps that begins with the initial interaction between the members of a dyad. This initial interaction is followed by a sequence of exchanges in which individuals test one another to determine whether they can build the relational components of trust, respect and obligation necessary for high quality exchanges to develop. If reception of an exchange behavior is positive and the party initiating the exchange is satisfied with the response, the individuals continue the exchanges. If the response to an exchange is not positive or if the exchange never occurs, opportunities to develop high quality exchanges are limited and relationships will likely remain at lower levels of LME development. That is, LME development is conditioned by the expectation of the exchange and satisfaction with the exchange behaviors. Multidimensionality of LME While the majority of the LME studies have shown consensus on the nature of the phenomenon as being the quality of exchange relationship between leader and follower, inconsistencies regarding the sub-dimensions continue to exist. Of those sub-dimensions, mutual support, trust, liking, loyalty, and latitude appear to be predominant in the majority of studies. Graen and Uhl-Bien proposed that LME is comprised of three dimensions: mutual respect of each others capabilities; a deepening sense of reciprocal trust; and a strong sense of obligation to one another in the working relationship. These dimensions are focused mostly on the formal job relationship. However, LME is not based solely on job-related elements; it can also include socially-related currencies. For example, some people may value professional capability in a relationship whereas others value a dyadic partner they can regard as a friend. Liden and Maslyn proposed four dimensions of LME relationships, labeled contribution, affect, loyalty, and professional respect. While the contribution dimension belongs to work-related currency, the affect, loyalty, 24

and professional respect dimensions are more social currencies. With a basis of the multidimensional character of roles and exchange materials, they proposed that LMEs are developed and endured in a number of ways, including non-work focused or related interactions. Since, the multidimensional perspective of LME assumes variability within exchange types, the different dimensions could be affected by different factors. This complex nature of LME may be partially responsible for the lack of universal agreement on what leader-member exchange is. However, understanding this multidimensionality could provide insight into the dynamic development and maintenance of LME relationships that result in differential predictions of outcomes according to the chosen currencies of exchange. Along with the developmental attribution of LME, this multidimensional nature of LME may be a characteristic that potentially allows an examination of linkage between LME and HRD. This linkage is built on the performative assumptions of LME and the performative view of HRD. As indicated earlier, we accept that alternative analyses of HRD exist. However, LME itself is firmly derived from performative analyses of organization functioning and so the performative analysis of HRD is argued here to be most appropriate for examining potential linkages. Linkage between LME and HRD LME theory may be better understood through the outcomes of effective HRD, for example through interpersonal trust and empowerment. Trust building is a learning process of testing and developing trust in another. As part of HRD, trust is recognized as the most important component for team development and overall performance effectiveness (Stoner and Hartman, 1993; Stewart, 1996). This is because interpersonal trust facilitates informal cooperation and reduces unnecessary monitoring costs (Macauley, 1963; Powell, 1990). In the perspective of HRD, empowerment is also a means of enhancing effectiveness at work. Empowerment facilitation is a direct attempt to solve various organizational problems in order to improve work performance. A core assumption of empowerment facilitation is that it releases motivation, initiative, implicit knowledge, flexibility, involvement, and commitment required from employees to respond to increasingly competitive conditions. These two HRD interventions of trust building and empowerment provide a useful illustration of the HRD-LME theory link as an explanation of the relationship between LME theory and performance, and of the potential for more effective application of LME theory in organizational settings. In this analysis, these two HRD interventions are enablers linking LME with performance and in a way which guides organization action. To develop the LME-performance linkage, this paper explores the contributions of 25

trust, empowerment, and performance to LME theory of leadership with the help of two specific HRD interventions trust building and empowerment facilitation. Conclusions This paper has described the relationship between LME theory of leadership and HRD through the perspective of theory building. This approach suggests that the concepts most centrally underlying LME and HRD are the common notion of learning and development processes. As a result, the linkage of HRD and LME theory that is established on the three key units of trust, empowerment, and performance suggests potential for each domain to play a role in realizing goals in and improving each domain. That is, HRD can be a solution to improving LME as an ongoing value-added process for better performance of individuals, groups, and the organization, while LME can be a useful approach to promoting two goals of HRD personal and organizational development. The more the quality of relationships within LME is seen as a HRD process and developed through HRD in organizational contexts, rather than seeing it as an individualized leadership theory, the more the LME theory of leadership becomes a useful implement of both individual and OD for performance. According to the Dubins quantitative theorybuilding approach, however, the confirmation of the theoretical model through empirical research is still required. With this in mind, future research first needs to carefully investigate the conceptual framework with a notion that leader and follower LME are separate constructs. This attention could be particularly important when researchers identify empirical indicators to specify hypotheses and HRD interventions are selected for a better LME-performance progression in the conceptual model. Second, arising from the conceptual framework, future research needs to employ further possible theoretical units and develop their potential system states allowing for the multidimensional nature of LME sub-dimensions. Under the system approach, focusing on the diverse units and their dynamic interactions will not only be critical to advancing of existing knowledge of LME but also to facilitating the practical application of the framework. Third, future research needs to deal with specific HRD interventions affecting each phase of the conceptual framework to improve the frameworks utility in dealing with real organizational phenomenon. Along with various units and their extended system states, if each HRD intervention relevant to specific phases could be further elaborated then the HRD-based LME model would be a more relevant prescriptive solution for organization or leadership development as well as higher quality relationships. According to Burns and Otte, organizational leadership theory can be 26

useful to HRD practitioners in designing leadership development, management, and supervisory development, succession planning and managerial coaching or attempting to solve performance issues in a work group. That being the case, the conceptual framework specifying LME-HRD linkages suggested here has potential benefits for HRD practitioners conducting broader activities which involve leadership or OD. Thus, the framework can be said to have use value. However, the validity of the framework will only be established through the empirical studies detailed in the propositions.

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