Leadership Theories: LMX and Transformational Models

Introduction to Leadership Theories

For any company or organization to function smoothly, there must be an elaborate management system in place. Proper leadership focuses on guiding the company or organization through teamwork and is essential for keeping everyone motivated and committed, regardless of the challenges encountered. Understanding leadership concepts and the various leadership theories makes those in charge more effective leaders. Some of the most notable theories include the Leader-Member Exchange (LMX) theory, the situational, path-goal, contingency, and behavioral theories.

Leader-Member Exchange (LMX) Theory

The LMX theory focuses on building individual, one-on-one relationships between the leader and every employee on the team, rather than leading the team as a whole (Lunenburg, 2010). Because each relationship will naturally vary in quality, the leader will generally maintain positive relationships with the majority of the team even when a small number of relationships are more difficult. These relationships — commonly referred to as dyads — give the leader better control over the organization and can be either in-group or out-group in nature (Lunenburg, 2010).

To begin the dyadic relationship, the leader must initiate an in-group or out-group relationship with one or more members of the organization early on. In-group members are involved in decision-making and carry additional responsibilities (Lunenburg, 2010). By granting these members a degree of advantage, the leader allows higher-level subordinates to handle portions of his or her responsibilities in a non-contractual setting.

Of all the leadership theories currently in use, none fails to acknowledge the power of roles in management. The leader's ability to motivate and inspire commitment from followers has a direct impact on the effective management of all human resources within the company (Komives & Dugan, 2011). Additional theories that follow this school of thought include the situational, path-goal, contingency, and behavioral theories (Komives & Dugan, 2011).

Case Analysis: LMX in Practice

According to the article "Leadership: A Key Factor to a Successful Organization," a good leader must be a master strategist with the ability to direct, organize, and persuade employees to work together toward a common goal (Vacar & Miricescua, 2013). The article further argues that a good leader should convert followers into leaders and leaders into agents of change — evidence that leadership motivation is a gradual, ongoing process that should never stop.

It is the leader's responsibility to encourage all employees to generate new ideas, and to motivate them to implement those ideas and bring about meaningful change within the organization. This resonates with what leadership theory identifies as the essence of true leadership (Vacar & Miricescua, 2013).

A Romanian study involving 102 managers — 55% of whom were women — found that a significant proportion of leadership roles were held by females. Most managers fell between the ages of 20 and 30 (61%), and the majority were mid-tier managers responsible for other teams. Although this represents an attempt to create an in-group cycle, the study participants still demonstrated difficulty in forming direct one-on-one relationships with individual employees.

While the LMX theory promotes stronger relationships between in-group subordinates and their leaders, a bottleneck in productivity can occur if those subordinates do not translate the same relational approach to the groups under their own supervision (Lunenburg, 2010).

Furthermore, a large portion of the study's participants admitted that they practice leadership in a conventional sense rather than using their position to mobilize and motivate employees. Approximately 68% subscribed to decision-making approaches that use involvement and rewards to drive productivity, while around 32% relied on strict rules to compel employees to perform (Vacar & Miricescua, 2013).

The fact that out-group members are governed only by the minimal obligations of their contracts runs counter to the LMX proposal. The leader provides support only as stipulated by the contract and cannot go beyond that limit to make the employee feel more valued and willing to work harder (Lunenburg, 2010). This arrangement creates the perception that out-group employees are merely hired hands with no genuine stake in the organization — a dynamic that negatively affects true leadership by undermining employees' desire to perform at a higher level (Lunenburg, 2010).

Transformational Leadership Theory

Being a leader is not sufficient in itself. Evoking a sense of belonging and encouraging self-driven motivation in employees is essential. Addressing each employee's basic needs and making him or her feel valued increases the willpower to work harder and longer. This is what differentiates true leaders from managers — and it is the foundation of transformational leadership.

According to transformational leadership theory, a leader should focus on appealing to employees' needs for achievement, self-esteem, and self-actualization (Malloch, 2014). Transformational leadership is oriented toward improving both the leader's and the follower's motivation on an ongoing basis.

Such leaders attend to individuals, provide intellectual stimulation, and offer inspiration that helps employees achieve seemingly extraordinary goals. These leaders can be understood as calculated risk-takers willing to explore new approaches, and they consistently view errors as opportunities for growth. Moreover, they are morally upright individuals who can look beyond self-interest toward the common good (Malloch, 2014).