Leadership Theories, LMX, and Relational Skills at Work

Introduction: Social Capital and Work Relationships

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.

Leadership Defined: Influence and Change

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.