Overview of LMX Theory
Graen and UhlBien (1995) developed a Leader-Member-Exchange (LMX) hypothesis that focuses on the interaction between leaders and members. The central belief in LMX theory is that leaders engage in various forms of commutation relations with their followers, and the quality of these relationships influences the impact of these exchanges between leaders and members on outcomes (Yang Xue & Jae-Seung Moon, 2019). As a result, LMX theory states that leadership is born when leaders and followers can build effective connections that influence each other.
The objective of this paper is to examine the uses and implications of LMX theory in an organisation that impact on the leadership activities and workplace environment that helps a leader to build innovative environment in an organisation. this theory is based on effective relations exchange between content and process among subordinate and leader, this relation helps in managing trust helpful to gain success for their organisation. This paper will define the impact of using LMX theory on IBM organisation with analysing its outcomes on the organisation.
The purpose of LMX theory is to explain how leadership affects individuals, teams, and organizations. Leaders build strong relationships of trust, emotion, and respect with some members of the team, but not with others. It is possible to improve human interaction. According to LMX theory, leaders do not treat all subordinates equally. The work-related insolences and actions of these subordinates are influenced by how their boss treats them. To understand the nature of the relationship between the quality of LMX and its consequences, researchers often rely on explanations based on social exchange (Xie et al., 2020). The exchange of valuable resources means a quality relationship. Leaders provide support, development opportunities, mentoring, and other benefits to employees in these relationships.
Members are motivated to repay leaders by demonstrating actions such as increasing the level of loyalty and volunteering when such resources become available. In other words, the link between the quality of LMX and the behaviour of managers and, in some cases, the behaviour of the organization is often seen as a sense of commitment to the manager and a high level of commitment (Yang Xue & Jae-Seung Moon, 2019).
Gerstner turn out to be CEO of IBM in 1993, the company reported a $ 8.1 billion stock market loss. This is one of the biggest losses in US history. Gerstner faced a daunting task as IBM was quickly dismissed as a “slow elephant” by stock market commentators, and as a result IBM employees were unable to embrace change. Gerstner’s first task was to find out what was wrong with IBM. Despite his devoted workforce, cutting-edge technology, and solid strategy, he found IBM struggling with its own success over the years (Wang et al., 2016). Her own success was that she was lethargic and introspective, so she brought her back. Organizationally, it has evolved into a decentralized “kingdom” where business units do not communicate with each other.
Gerstner understood that he needed to lead this large organization based on cultural alteration to save the organisation. changing the attitude and behaviours of people is critical and challenging and this can bring issues to the management. Management could not change the organizational culture with words and policies alone. Leaders like Gerstner required to generate circumstances for change and encourage employees to be proactive (Wang et al., 2016). IBM has a long history of internal promotion. In fact, Gerstner was the first CEO to be hired from outside the company and this affected the development of change in organisation (Soeprapto, 2020). the implementing LMX theory in leadership is a significant aspect. Leadership can be defined as an activity that includes multiple issues. One is the aptitude to impact and encourage others to achieve common goals, such as obligatory variations in IBM. This needs a change in leadership that fosters relationships, but it also transports with it the ethical burden and responsibilities that accompany changes in people, which can affect not only the lives of people at work, but also the lives of those around them. Therefore, trust is essential to building relationships with employees during the change management process (Soeprapto, 2020).
Impact of LMX Theory on IBM Organization
LMX theory discovers how leaders and managers form relations with the members of team, and how these partnerships can help people grow, expand, or retain in the situation of leadership. Trust is described in LMX theory as the leader’s genuine behaviour, the leader’s credible behaviour, and how it integrates into everyday behaviour. These are important parts of the LMX exchange helped the IBM CEO to identify impact of leading with strategic planning and gaining effective outcomes (Park & Kim, 2014).
Leader-Member Exchange Theory (LMX) is a leadership theory depending on alternative relationships. Unlike the transformative, genuine, serving, or empowering leadership theory that emphases on leader behaviour, LMX theory involves leaders working within a group (called members) and through the quality of their relationships with leaders this is based on the statement that it will be formed. World (Wang et al., 2016). Trust, empathy, true respect and loyalty are the hallmarks of quality relationships. One of the preliminary discoveries of LMX theory is that leaders establish relationships with subordinates of various qualities, and this differentiation characterizes the popular of the workgroups studied. According to a review by Hiller et al. (2011), 83% of all LMX surveys captured employee perspectives between 1985 and 2009. When testing LMX from a member-manager perspective, the correlation is usually low (Martin et al., 2017).
There are different results to determine if LMX was successful in implementing the theory. Intention to dismiss, actual turnover, overall organizational civic behaviour, emotional organizational participation, employ faithfulness, general work gratification, supervisor satisfaction, salary fulfilment, delivery and procedures, there are reciprocal justice, empowerment, political awareness, role ambiguity, role conflicts, etc. with measurable results (Carnevale et al., 2017). LMX has been shown to reduce turnover intent and actual turnover, as well as role ambiguity and conflict. LMX improves other indicators, especially awareness and attitude scores (Islam et al., 2013).
LMX is connected with developed performance ratings, improved goal attainment, advanced complete satisfaction, higher manager satisfaction, greater organizational commitment, and gratitude of more meaningful roles. A meta-analysis of Gerstner and Day examined LMX agreements across 79 studies. Their research found a correlation between LMX member prejudgments and the president’s assessment of their performance (Soeprapto, 2020). There is a stronger optimistic association among manager prejudice against LMX and the assessment of members’ ability to perform their duties. Indeed, for some supervisors, Gerstner and Day clarify that a positive LMX relationship can lead to supervisors evaluating their employees more favourably. They also find that LMX awareness can lead leaders to positive or unfavourable expectations for employees, which can actually affect employee productivity as well as performance evaluation (Erdogan & Bauer, 2015).
There are four important stages important in developing the LMX theory important for the leaders to create and contribute effective results for leading and developing practices of development.
The first stage is vertical Dayad Linkage including validation of differentiation withing the working units. According to Graen and Uhl Bien, research on leader-member exchange initiated with research on key socialization of work and vertical bilateral collaboration. It turns out that many of the organization’s management processes run alternatives, creating relationships that distinguish managers from their subordinates (Park & Kim, 2014). A longitudinal study of the management team was conducted, asking managers and their subordinates to explain the relationship between their work and professionals in terms of inputs, processes, and results. Employee presented perspectives about their manager’s behaviour although the person was same but their experiences were different. Some represented high-quality relations with high trust, respect and obligation. Some employees represented low-quality relations with poor trust and emphasis on relations (Dilshani, 2019).
Leadership and Cultural Change in IBM
The second stage is Leader-member exchange in this stage the term moved from vertical diadrinkage to Graen and Uhl Bien, following the VDL study, “How these relationships evolved beyond the description of differentiated relationships within a work unit, and relationships have an organization.” This study examined specific properties of the LMX relationship, while other studies examined the relationship between LMX and tissue results / results (Martin et al., 2017).
The third stage of the theory is leadership-making, according to Graen and Uhl Bien, the third phase of the study focused on creating effective leadership processes through building efficient leadership relationships, going beyond “in-group” and “out-of-group”. According to Graen and Uhl Bien, the main difference in this phase is the availability and access to high quality LMX partnerships, rather than having managers have identifiable relationships between employees, as explained in the VDL approach. This phase uses a leadership development model to provide a more descriptive and hands-on model of leadership training (Carnevale et al., 2017).
The fourth stage of the model is team-making. Graen and Uhl Bien suggest to use a systematic approach to study how identifiable fourth-level diadic partnerships can be integrated into larger network schemes. These networks make up an organization’s “management structure” as defined as “patterns of management relationships between individuals throughout the organization.” According to Graen and Uhl Bien, governance structures result from a system of relationships and interdependencies that arise when members of an organization perform roles and perform tasks (Islam et al., 2013). This phase of the investigation examines the context of the task and the nature of the relationships that result from these interactions. The purpose of this study is to clarify where more effective leadership relationships have a significant impact on task accomplishment, and how unique partnerships influence each other and affect the overall leadership structure (BAKER, 2019).
The quality of LMX has led to professional success. This is related to supervisor ratings, actual wage trends, and the quality of work of those who use high quality LMX, which are used in many applications. Members with a high LMX score are more likely to succeed. This can be the result of at least two mechanisms (Dilshani, 2019). Higher LMX members have a higher performance rating. This is not surprising given that these ratings are from the supervisor. In addition, high-level LMX members may be more “sponsored” by the manager. Managers are senior LMX members by introducing other influential members, providing progress guidance, and educating senior LMX members about influential and visible opportunities within the organization plays an important role in the professional success of working environment and organisational culture (Babis, 2017).
Ssome experiential studies show that there is a positive link between innovation and performance. Innovation is one of the most important drivers of long-term business success, especially in volatile markets, as it allows companies to cope with the disorder of the external environment. Innovation is important, especially in the construction industry, to support the effectiveness and efficiency of method / work processes, competitive means, growth, and shorten project cycles (Erdogan & Bauer, 2015). In addition, the construction industry contributes 10% to gross domestic product (GDP) in many countries, including Indonesia, as this contribution grows through the multiplier effect of infrastructure such as roads, bridges and buildings. Innovation is very important. Irrigation, harbours, etc. are being developed. Initially, a high LMX makes it easier for managers to recognise and identify issues with employees and allocate resources and privileges to resolve work-related issues. Employees with high LMX receive more work-related feedback and guidance than employees with low LMX to help improve their work skills (ARAPO?LU, 2019).
Conclusion
The impact of LMX on creative presentation can be divided into two categories: emotions and supportive work properties. In terms of emotions, high relationships can create an environment of employee well-being and trust. High LMX specifies a partnership among manager and employee. Both parties are positive and have mutual trust, respect and empathy. These features encourage a relaxed and reliable environment. In adding, applying creativity requires deviating from the status quo, stimulating traditional approaches, and accepting unfamiliar behaviour, and employees must accept the risk of failure.
References
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