This paper examines leadership as an influence-driven behavior rather than a formal role, arguing that effective leadership is fundamentally rooted in the quality of interpersonal relationships. Drawing on Leader–Member Exchange (LMX) theory, relational leadership perspectives, and organizational behavior research, the paper establishes that social capital generated through high-quality work relationships directly enhances individual and firm performance. It introduces the concepts of relational favorability, implicit relational theories (IRTs), and relational skills as key variables shaping how relationships develop and how leadership influence is generated. The paper concludes with propositions for broadening leadership development beyond managerial roles to include all organizational members.
The paper demonstrates theory extension — a graduate-level academic technique in which existing frameworks (here, LMX and ILT research) are critically examined, gaps are identified, and new constructs (IRTs and relational skills) are proposed to fill those gaps. This is supported by a series of formal propositions, a method common in organizational behavior and management theory papers to signal the empirically testable nature of the claims.
The paper opens with an organizational context section establishing the importance of social capital and work relationships. A problem statement section defines leadership through the lenses of change and influence. A literature review covers LMX theory and relationship quality outcomes. Subsequent sections move into original theoretical territory — LMX differentiation critique, implicit relational theories, and relational skills — before closing with practical recommendations for leadership development. Each section advances the central argument progressively.
As organizations continue to face challenges and demands from external environments, effective work relationships will no longer be optional but will instead be a critical source of competitive advantage (Luthans et al., 2008). This is largely due to the social capital that effective relationships generate. Social capital is derived through the social structure of the organization and facilitates the actions of individuals within the larger organizational framework (Nahapiet & Ghoshal, 1998). This capital generates resources through networks of mutual acquaintance and recognition (Luthans et al., 2008).
In contrast to human capital, which is a quality of individuals (e.g., KSAs: knowledge, skills, and abilities), social capital is a quality created among people. Social capital comes from the assets created and leveraged from interpersonal relationships developed through a history of interactions among individuals (Howe, 2002). Therefore, we cannot consider employees' knowledge, skills, and abilities as human capital until we recognize that their contributions to firm performance depend on how they interact with one another through interpersonal relationships.
Despite this, as a theoretical domain in the management literature, interpersonal work relationships have not established as much awareness as they should (Bass, 2005). Interpersonal relationships are often treated as variables in management research, but work relationships have not emerged as a dominant field of inquiry in organizational behavior study (Cox & Beale, 2008). In the human resource (HR) literature, relationships have hardly been mentioned at all. For example, Graen et al. (2010) argued that companies that methodically plan with their human resources in mind are most likely to increase competitive advantage by having "the correct people at the correct place at the right time" to create quality products efficiently. This focus on individuals, however, does not address the fact that within organizations people do not act in isolation. To more accurately reflect leadership and HR functioning, we must realign our focus toward the "right people at the right place at the right time with the right relationships."
The value of a relational focus is demonstrated by research examining the positive benefits of high-quality manager–subordinate relationships on work-related outcomes. House (2003) showed that performance is about 20% higher and satisfaction about 50% higher for subordinates who have higher-quality relationships with their supervisors than for those with lower-quality relationships. More importantly, low-quality relationships can present tremendous costs to organizations (Cox & Beale, 2008). Employees in lower-quality relationships tend to quit after approximately 12 months, costing the organization training and recruitment expenses (Mayfield & Mayfield, 1998), whereas employees in higher-quality relationships tend to move on through promotions within the same firm.
A focus on relationships, therefore, represents a largely untapped opportunity to improve firm performance. To understand how to capitalize on this opportunity, we must first understand what leadership is and how it is linked to relationships.
Although a vast number of leadership definitions have been offered over the years (Yukl, 1998), there appear to be two common denominators among these definitions: change and influence. Leadership is about managing change; it differs from management in that management is about coping with complexity (Kotter, 2001). According to Kotter (2001), the function of leadership is to produce change. Leadership behaviors involve looking for patterns, relationships, and linkages that help explain events in the environment, and then using these to develop and act upon visions and strategies for how to create change.
Leadership involves generating ideas for change (e.g., analyzing, recommending, creating vision) and acting successfully to get others to follow (e.g., motivating, inspiring, persuading). Being a leader means being a risk taker, both from the standpoint of making decisions in an ambiguous situation (risking being wrong) and taking a public stand (risking speaking out and going against the status quo).
Leadership also involves influence. House (2003) defined leadership as the incremental influence that gets people to go above and beyond mechanical conformity with routine directions of the group. This perspective emphasizes personal power rather than position power (Etzioni, 1961), such that followers are intrinsically motivated (Cox & Beale, 2008) and perform extra-role behaviors (Valle & Halling, 1989). The intent of this influence is to get people not just to comply with directives but also to act in ways not specified by their formal roles. Thus leaders differ from managers in that they gain personal influence with others to get them to do more than they would otherwise — that is, to create change.
Combining these two perspectives means that leadership is using influence to create change. Influence is the essence of leadership (House, 2003), as is creating change, since change results from the use of influence (Kotter, 2001). Contrary to a previous view that influence is a characteristic a leader may or may not have (Cox & Beale, 2008), the perspective presented here suggests that influence should be considered a defining element of leadership. When individuals engage in the use of influence to create change, they are engaging in leadership.
Assumption 1. Leadership happens when individuals use power to create change.
The value of this definition is that it views leadership as a behavior, not as a formal role. In this way, we gain a broader perspective on leadership and on how to develop leaders. By using this definition, anyone may act as a leader — not just those in formal roles — when they employ leadership behaviors (i.e., behaviors that use influence to create change) (Luthans et al., 2008). In other words, those individuals we typically consider followers (e.g., subordinates) may act as leaders even while in a subordinate role.
This perspective helps resolve problems in the literature that arise from using the terms leader and manager interchangeably, which assumes that by studying managers we are studying leaders, since managers are those in formal roles that require leadership. Similarly, it addresses problems of conflating the terms follower and subordinate, which assumes that followers are always subordinate — a hierarchical framing that limits thinking about what leadership and followership can be within organizations. This thinking also contributes to limited conceptualizations about leadership development that focus solely on those in formal managerial roles or those targeted for such roles in the future.
By thinking of leadership as a behavior rather than a formal role, we extend the capacity for leadership behaviors to all organizational members and call for a change in how we approach leadership development — one that should focus beyond managers or future managers to include everyone in the organization. Moreover, such a transition in LMX theory would move it from a managerial leadership theory to a relational leadership theory.
Assumption 2. Leadership is a behavior, not an official role; therefore, individuals not in official roles are leaders when they employ leadership behaviors.
Leadership is engaging in behaviors that create change, and creating change requires influence. To be leaders, therefore, individuals need to have and effectively use influence (Luthans et al., 2008). Influence is the power to affect others: the ability to produce outcomes due to some personal characteristic that gets others to follow (House, 2003).
By definition, influence is inherently interpersonal — it takes place within the context of interpersonal relationships. According to relational leadership theories, influence comes from relationships (Bass, 2005). Relational perspectives in leadership view leadership as generated through mutual influence that results from the development of trust, respect, and obligation among dyad members (Cox & Beale, 2008).
LMX theory describes this influence as being created through stages of relationship building (House, 2003). Individuals begin at a "stranger" stage, get to know one another through testing processes, and as a result of those processes either progress to an advanced stage of leadership development (e.g., partnership) or remain at lower levels of relationship development (e.g., acquaintance or stranger) (Cox & Beale, 2008).
Those who attain more advanced stages of relationship building — and thus develop more effective relationships with interdependent others (e.g., managers, higher-ups, subordinates, peers, clients, and external constituents) — are able to more effectively perform their roles. More effective, or high-quality, leader–member exchanges are described as leadership rather than merely supervisory relationships (Luthans, 1998). High-quality relationships are considered mature partnerships based on respect, trust, and mutual obligation (Luthans et al., 2008). These relationships go beyond the formal contract and generate personal power (i.e., influence given by the other), rather than position power or authority (Luthans et al., 2008). They are also characterized by willing followership, meaning employees are driven by intrinsic rather than extrinsic motivation (Steers et al., 1996). As a result, dyad partners act because they want to, not because they have to.
Research on LMX shows that more effectively developed relationships have significant positive associations with performance, organizational commitment, employee citizenship behavior (i.e., extra-role behavior), job satisfaction, delegation, participation in decision making, and enhanced career development opportunities (Luthans et al., 2008). These relationships are negatively related to turnover, job problems, and role conflict and ambiguity (House, 2003).
The benefits of high-quality relationships come from the relational resources they create (Wright et al., 2005). Such resources include durable obligations (arising from feelings of gratitude, respect, and friendship), network contacts and connections (including privileged access to information and opportunities, social status, and the reputation of influential others), and the ability to have open information exchanges with those around them (Valle & Halling, 1989).
Relationships that do not develop well are considered lower quality. These relationships are not as beneficial for the individuals involved or for the organization as a whole (Gerstner & Day, 1997; Liden et al., 1997). Lower-quality relationships are described as contractually defined, formal exchanges based on limited trust and in-role interactions (Luthans, 1998). These types of relationships generate management rather than leadership. They are characterized by a lack of mutual respect, formal downward communications, little mutual understanding, limited support and commitment for one another, and no mutual obligation — in essence, a "stranger" relationship (Graen & Uhl-Bien, 1991a). Findings have shown that lower-quality relationships are negatively related to satisfaction, organizational citizenship behaviors, and commitment, and are positively related to turnover (Gerstner & Day, 1997). Uhl-Bien and Maslyn (2003) found evidence of an even more extreme case of low-quality relationships, characterized by negative reciprocity, or an exchange of injuries (i.e., negative social exchange; Ruehlman & Karoly, 1991).
Thus, based on relational leadership theory, effective relationships may generate mutual influence and understanding that allow leaders to more effectively perform their roles.
Assumption 3. Leadership influence to create change is enabled by effective relationships.
Yet, despite the value of high-quality relationships for organizations, not all relationships are high quality. Given the findings from LMX theory, we know that low-quality relationships are not beneficial in terms of many aspects of organizational functioning, so they are not desirable in organizations — but they remain prevalent (Gerstner & Day, 1997). Moreover, in some cases organizations may have negative, or dysfunctional, relationships (Uhl-Bien & Maslyn, in press). Why is this the case, and what can be done about it (Bass, 2005)?
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