THE INFLUENCE OF LEADER-MEMBER EXCHANGE RELATIONS ...

INTERNATIONAL JOURNAL OF ORGANIZATION THEORY AND BEHAVIOR, 16 (4), 465-493

WINTER 2013

THE INFLUENCE OF LEADER-MEMBER EXCHANGE RELATIONS ON EMPLOYEE ENGAGEMENT AND WORK ROLE PERFORMANCE Swati Chaurasia and Archana Shukla* ABSTRACT. The paper aims to establish the relationship between leader member exchange (LMX) relationship and work role performance through the dynamic process of employee engagement. The study outlines why and how leadership is important for employee engagement and effective work role performance. Adopting a survey based research design, a sample of 198 Indian working managers at different levels including various sectors has supported our hypotheses that employee engagement mediates the relations between LMX and work role performance. It provides empirical insights about how employee engagement process influences the LMX and work role performance relationships. The results also suggest that high quality relationship of employees with their leaders is positively related to employee engagement and their work role performance.

INTRODUCTION Employee engagement is described as the simultaneous investment of employees’ physical, emotional and cognitive energies into their work roles (Kahn, 1990; Rich, Lepine, & Crawford, 2010). Furthermore, employee engagement has been established in extant research as a psychological experience and its degree of existence is explained by the presence of an individual in his/her role (Kahn, 1990; May, Gilson, & Harter, 2004). Employee engagement has been a focus of research in the past decade because effective engagement ----------------------------* Swati Chaurasia, FPM, and Archana Shukla, Ph. D., are a Doctoral Student, and a Professor, respectively, Human Resource Management, Indian Institute of Management, Lucknow, India. Ms. Chaurasia’s research interests are in work related attitudes, job performance and leadership behaviors. Dr. Shukla’s research interests are organizational structure and design, team building and team performance.

Copyright © 2013 by Pracademics Press

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of employees is becoming challenging and demanding in the given dynamic business environment and uncertain global scenario. “Gallup Survey” (2012) indicates that only 8% Indians employees are engaged at work place compare to global figure of 11%, 60-62% Indian employees are not engaged in their work roles and 32 % employees are actively disengaged (“Indians Don’t Feel,” 2012). The Gallup terminology is defined as ‘engaged employees’ work with passion and feel a profound connection to their company. They drive innovation and move the organization forward. ‘Not engaged employees’ are essentially ‘checked out’. They’re sleepwalking through their workday, putting time – but not energy or passion – into their work. ‘Actively disengaged’ employees aren’t just unhappy at work while they’re busy acting out their unhappiness. Moreover, the figures are not in the favor of emerging economies like India where employees are the most important asset in any organization (“Indians Don’t Feel,” 2012). Although employee engagement resembles with work related attitudes as job involvement, job satisfaction and organizational commitment but researches have proved it a unique and distinct yet related construct (Hallberg & Schaufelli, 2006; Rich, Lepine, & Crawford, 2010). Employee engagement is influenced by various personal as well as work related factors (Alderfer, 1972). Employee-employer relationship is one of the most important work related factors. The dynamics of employee employer relationship is changed from the traditional view on management which believe that ‘the manager in control and employee being controlled’ (Randolph, 1995). Leaders used to influence rather than empowering their subordinates (Kark, Samir & Chen, 2003). It has become necessary to move from the traditional, position based leadership to more open and exchange relationship type of leadership, which encourage employees to engage in their work roles. Studies have proven that empowering leader behavior also helps employees to achieve psychological empowerment, job satisfaction and organizational commitment (Konczak, Stelly & Trusty, 2000; Schalkwyk et al., 2010; Mendes & Stander, 2011). However academic literature has not paid much attention how leaders influence the engagement level of their subordiates. There is very few

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the extant literature. A high quality relationshipwith leader develops trust with employee and facilitate them to express better on their work roles in turn made the followers more engaged and peerform better, probably because of feeling supported by their leaders in their capabilities and trusting not to punish them (Macey & Schneider, 2008; de Villiers & Stander, 2011). The high quality perceived exchange relationships lead to higher member satisfaction, commitment, better performance and lower intent to turnover (Gerstner & Day, 1997; Markham et al, 2010). Engaged employees shows positive behaviors in their work roles and gives better performance (Bindl & Parker, 2010), shows discretionary effort (Christian, Garza, & Slaughter, 2011; Bakker & Demerouti, 2008) and also gives competitive advantages to companies (Lakshmi, Srinivas, & Krishna, 2010; Kumar & Swetha, 2010). The present study, therefore aims to shed much needed light in this regard by assessing the linkage among exchange behavior through LMX, employee engagement and their performance. Moreover, we extend the role of leader’s behavior in employee engagement and their performance. In the following sections, we discuss LMX, employee engagement and their linkage to performance and extend the tenets of social exchange theory. Subsequently the research hypotheses are presented. THEORY AND HYPOTHESES

Leader Member Exchange The quality of relationship between employee (subordinate) and an employer (supervisor) can be better understand by leader member exchange theory which supports that leaders don’t interact with subordinates uniformly because supervisors have limited resources and time. Amongst various streams of leadership theory, LMX theory examines the quality of leader-member relationships and offers researchers a unique lens to study leadership (Graen & Uhl-Bien, 1995; Liden, Sparrowe, & Wayne, 1997; Schriesheim, Castro, & Cogliser, 1999; Sparrowe & Liden, 1997). The genesis of LMX theory is the idea of vertical dyad linkage, defined as the exchange relationship between leader and subordinate (Dansereau, Graen, & Haga, 1975; Graen & Cashman, 1975). High quality LMX (in-group) relationships are characterized by trust, information sharing and providing resources like desired tasks, training opportunities, two way

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communication and emotional support for employees (Liden & Maslyn, 1998; Masterson et al., 2000; Wayne, Shore, & Liden, 1997) while low quality LMX (outgroup) relationships tend to be limited and contractual type obligations (Dansereau, Graen, & Haga, 1975; Graen & Scandura, 1987; Graen & Uhl-Bien, 1995). LMX Relationship with Employee Engagement ‘Employee-employer relationship’ is an important aspect in organizational life which influences the behavioral outcomes as well as process of engagement (Rousseau, 1989).The quality of exchange relationship of employee and employer decides the degree of engagement of an employee in their work roles. Furthermore, this variation in the degree of engagement through quality of exchange behaviors can be better understand by Social exchange theory (Saks, 2004; Andrew & Sofian, 2011) which constitutes that when individuals receive economic and socioeconomic resources from their organization; they feel obliged to response in kind and repay the organization (Emerson, 1976) by their level of engagement (Cropanzano & Mitchell, 2005). High quality LMX relationship influences effective subordinate work behaviors through the intervening process of employee engagement (Walumbwa, Cropanzano, & Goldman, 2011). Workers are motivated to exert effort on behalf of their organizations which is based on the highquality exchange relationship between employer and employee (Walumbwa, Cropanzano, & Goldman, 2011, Cheung & Wu, 2012). The leader is assumed as the immediate supervisor, employer or team leader in the projects. Moreover, Leaders have been seen differently with their one subordinate to others within work units (Liden, Sparrowe, & Wayne, 1997). Hence, the degree of engagement of an employee is dependent on the perception of an employee towards the quality of leader member exchange behaviors. Since organizations can never force employees to engage while they can only facilitate by providing a good and trustworthy relationship with their employers. Therefore, employees with higher quality LMX relationships (in-group members) are more motivated and less stressed (Lagace, Castleberry & Ridnour, 1993) and positively related to job satisfaction (Grestner & Day, 1997; Graen, Novak & Sommerkamp, 1982). Therefore we hypothesize that H1: Leader member exchange relationship will be positively related to employee engagement.


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Relationship of Employee Engagement to Work Role Performance The driving force behind the popularity of employee engagement is that it has positive consequences for organizations (Saks, 2006; Harter, Schmidt, & Hayes, 2002). Engaged employee as the most important asset leading towards positive outcomes as increased discretionary efforts in behavior (Saks, 2006; Macey & Schneider, 2008; Markos, 2010; Bakker, 2011; Kelleher, 2011), organizational citizenship behavior (Whittington & Galpin, 2010; Masson et al,. 2008; Frank, Finnegan, & Taylor, 2004), personal initiatives (Sonnentag, 2003), proactive behaviors (Salanova et al., 2003), rational, emotional and intellectual commitments of employee towards organization (Shaw, 2005; Richman, 2006), task performance and contextual performance (Christian, Garza, & Slaughter, 2011), low turnover intentions (Demerouti et al., 2001; Salanova et al., 2000; Schaufeli & Bakker, 2004), reduced frequency of sickness absenteeism (Schaufeli et al., 2002; Bakker 2011) as well as business level outcomes in terms of higher productivity, increased customer satisfaction and loyalty increased profitability and shareholder value (Harter, Schmidt, & Hayes, 2002; Heger, 2007) and hence increased level of financial turnover (Schneider et al., 2009). The paper tries to explain how engaged employees perform in their work related roles (Griffin et al., 2007). In the extant literature performance is measured as whole performance domain from job specific to non-job specific (Campbell et al., 1993); task performance and contextual performance (Borman & Motowidlo, 1993); various work role behavior as job role, career role, innovator role, team role and organization role behavior (Welbourne, Johnson, & Erez, 1998); task performance, citizenship behavior and adaptive performance (Johnson, 2003; Borman et al., 2001) and proactive behavior (Frese & Fay, 2001; Crant, 2000; Parker, Williams, & Turner, 2006). Moreover, individual effectiveness depends on his/her involvement in their work role as a team member and organization member (Murphy & Jackson, 1999). Taking various work role performances into consideration, we have explored performance measures which include the total nine dimensions as individual proficiency, adaptivity and proactivity, team member proficiency, adaptivity and proactivity and organization member proficiency, adaptivity and proactivity (Griffin, Neal, & Parker, 2007). Individual task proficiency describes

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behaviors that can be formalized and are not embedded in a social context and closely related to concepts “task performance” (Borman & Motowidlo, 1993; Johnson, 2003) and “job role behavior” (Welbourne, Johnson, & Erez, 1998). Engaged employees leads to higher level of job performance, work performance and in role performance (Rich, Lepine, & Crawford, 2010; Bakker & Demerouti, 2007; Salanova et al., 2005; Whittington & Galpin, 2010; Ho, Wong, & Lee, 2011). Team member proficiency describes behaviors that can be formalized and are embedded in a team or group context and closely related to the concept “personal support” (Borman, Buck, Hanson, Motowidlo, Stark, & Drasgow, 2001), “helping behavior” (Podsakoff, MacKenzie, Paine, & Bachrach, 2000) and “team role behavior” (Welbourne, Johnson, & Erez, 1998). Organization member proficiency describes behaviors that reflect the degree to which an individual meets the expectations and requirements of his or her role as a member of an organization and is similar to the concepts “organizational support” (Borman et al., 2001; Johnson, 2003), “organizational loyalty and civic virtue” (Podsakoff et al., 2000) and “organization role behavior” (Welbourne, Johnson, & Erez, 1998). Engaged employees show higher level of organizational commitment and organizational citizenship behavior (Bhatnagar & Biswas, 2010; Saks, 2006; Rich, Lepine, & Crawford, 2010; Whittington & Galpin, 2010). Individual task adaptivity reflects the degree to which individuals cope with, respond to, and/or support changes that affect their roles as individuals. Team member adaptivity reflects the degree to which individuals cope with, respond to, and/or support changes that affect their roles as members of a team. Organization member adaptivity reflects the degree to which individuals cope with, respond to, and/or support changes that affect their roles as organization members. Individual task proactivity is the extent to which individuals engage in self-starting, future oriented behavior to change their individual work situations, their individual work roles, or themselves. Team member proactivity reflects the extent to which an individual engages in self-starting, future-directed behavior to change a team’s situation or the way the team works. Organization member proactivity reflects the extent to which an individual engages in self-starting, future-directed behavior to change her or his organization. Proactive behavior is an outcome of engaged employees (Salnova & Schaufeli, 2008). Hence our next hypothesis is


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H2(a): Employee engagement will be positively related to Individual member effectiveness H2(b): Employee engagement will be positively related to Team member effectiveness H2(c): Employee engagement will be positively related to Organization member effectiveness Mediating role of Employee Engagement Leadership behaviors have a strong influence on employee and organizational outcomes (Chen & Silverthorne, 2005), including work engagement and turnover intention (Mendes & Stander, 2011). Both qualitative reviews (Erdogan & Liden, 2002; Liden, Sparrowe, & Wayn, 1997) and meta-analyses (Gerstner & Day, 1997; Ilies, Nahrgang & Morgeson, 2007) of research in this area have shown that LMX is positively related to favorable outcomes for subordinates, such as job satisfaction and organizational citizenship behavior (Organ, 1988, 1990). A very few studies explores the indirect effect of LMX and employee engagement through psychological empowerment and found positively related (de Villiers & Stander, 2011; Mendes & Stander, 2011) but researches have not yet explored that how LMX directly influence employee engagement process. LMX exerts its benefits by creating social exchange relationships between leader as the immediate supervisor and employee as subordinate (Wayne, Shore, & Liden, 1997; Liden & Maslyn, 1998; Masterson et al., 2000; Wilson, Sin, & Conlon, 2010). The quality of supervisor and subordinate relationship (LMX) not only decides the level of engagement but also helps to improve the performance, organizational commitment and organizational citizenship behavior and reduces the turnover intention (Walumbwa, Cropanzano, & Goldman, 2011; Truckenbrodt, 2000; Hui and Law, 1999; Cheung & Wu, 2012). Since, LMX and employee engagement will be positively related to performance and high quality LMX also positively related to engagement process then there is a possibility that employee engagement mediates the relationship between LMX relationship and work role performance. Thus our next hypotheses are H3: Leader member exchange relationship will be positively related to work role performance.

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H4: Employee engagement mediates the relationship between leader member exchange relationship and work role performance Figure 1 shows the hypothesized model with all the dimensions of employee engagement and work role performance. Also it summarizes all the above hypotheses. FIGURE 1

Hypothesized Model H3

Leader membe

PE

H2

Employee Engagement

H1

EE

CE

Work Role H2

Performanc e

OE

IME

OME

TME

Legends: PE= Physical Engagement; EE= Emotional Engagement; CE= Cognitive Engagement; OE= Organization Engagement; IME= Individual member effectiveness; TME= Team member effectiveness; OME= Organization member effectiveness. METHOD

Research Setting and Participants The population for this study consisted of individuals from a heterogeneous sampling of organizations from various industries including manufacturing and service industries. The sample has covered IT industries, automobile sectors, textile industry, banking sector and pharmaceutical industry. The inclusion of many types of organizations has increased the external validity and generalizability of our research findings. The survey participants have an average age of 34 years and organizational tenure of 11 years. The sample includes 78% male and 22% female participants, representing different levels of management: 50% middle-management, 35%


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junior-management and 15% senior-managers. 46% of the respondents had an under-graduate degree, and 54% had graduate qualifications. Measures The following section details each of the survey battery instruments used in measuring each variable. Each scale is scored by aggregating the total scores for each item on a given measure and reporting the total score as the composite score for the measure. Both composite and individual scores from each item on a given measure are examined for significance. Instruments is scored and reported separately. Unless otherwise indicated, all the variables are measured by participant responses on a five-point Likert-type scale ranging from “strongly disagree” to “strongly agree.” The specific measures are described below, along with the results of calculation of Cronbach alpha coefficients for the various measures. When a measure is described as having dimensions, the dimensions (items averaged) are used as indicators for their construct in structural equation modeling. Otherwise, items are averaged into an overall scale score. Measures are completed by employees. Leader/Member Exchange Relationship The Leader-Member Exchange (LMX) scale (Graen & Uhl-Bien, 1995) is employed to measure the quality of exchange between supervisors and subordinates. This earlier version of the same scale is used in various studies including the studies of leader member exchange status (Liden & Graen, 1980; Scandura & Graen, 1984). This scale is composed of 7 items. Sample item to measure leader member exchange relationship included “how well do you feel that your immediate supervisor understands your problems and needs?” The responses were measured using a 4-point Likert scale ranging from “Not at all – (1)” to “Completely – (4)” by the employees. Employee Engagement Employee engagement is measured by Rich, Lepine, and Crawford (2010) job engagement including physical engagement, emotional engagement and cognitive engagement. To make a better measure of employee engagement we have added the organization engagement dimension given by Saks (2006). Sample item to

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measure job engagement included, “Sometimes I am so into my job that I lose track of time” and organization engagement included, “One of the most exciting things for me is getting involved with things happening in this organization.” The responses were measured using a five-point Likert scale ranging from (1) strongly disagree to (5) strongly agree. Work Role Performance Work role performance is measured by Griffin, Neal and Parker’ scale (2007) which includes three sub-dimensions of work role performance. The work role behavior contributes to effectiveness at individual, team and organization level in three different forms of behavior –proficiency, adaptivity and proactivity. Individual task behavior measures individual task proficiency, individual task adaptivity and individual task proactivity. The other two levels also measure three different behaviors. The scale includes 27 items to measure 9 sub dimensions of performance. This scale (Griffin, Neal, & Parker, 2007) was validated by three different samples including supervisors (n=491) and self-rated of employees (n1=1228, n2=927) and it is found that correlations among sub-dimensions tended to be higher in the supervisor sample than in the employee samples but there is no significant difference in all three samples of the study. Therefore, we have also considered self-ratings of performance measures of employees and also these items are likely to be based on greater familiarity with the full range of behaviors in a given work role (Lance, Teachout, & Donnelly, 1992). Control Variables Age, gender, education, organizational tenure, level of management and organization size are measured and included in subsequent analyses to control for their potentially spurious effects. Gender is taken as a control variable and assigned nominal scale (Female=0; Male=1); age is measured in an ordinal scale and assigned five categories of age in increasing order; organizational tenure is measured as a continuous scale measured in years; education is measured in nominal scale (Graduate=1; Post graduate=2; Doctoral degree=3); the level of management is taken in nominal scale (Junior level=1; Middle level=2 and Senior level=3); no. of employees is taken as a proxy for organization size. Organization size is measured in four categories based on no. of employees as


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small (less than 100), medium (100-1000), large (1000-10,000) and giant group (more than 10,000). Structural ownership of organization (public, private, MNC or family owned) also plays a significant role in engaging employees. Hence we have tried to cover these differences in various sectors through structural ownership and measured in nominal scale (Public sector=1; Private sector=2; MNC=3; Family owned= 4). DATA ANALYSIS AND RESULTS

Separate Confirmatory Factor Analysis: To assess the direct and indirect relationship among LMX, employee engagement and work role performance, we followed two step approach using confirmatory factor analysis and structural equation modeling based on LISREL 8.52 (Anderson & Gerbing, 1988; Jöreskog & Sörbom, 1993). We have conducted the separate confirmatory factor analysis for employee engagement and work role performance items, creating scale scores to indicate each of the four and three dimensions of engagement and performance. This confirmatory factor analysis for each construct, not only gives the separate dimensions but also convergent and discriminant validity of various dimensions of engagement and performance. For each of the confirmatory factor analysis reported we used the root mean square error of estimation (RMSEA) to assess whether the factor structure adequately fits the data. Table 1 shows the confirmatory factor analysis for LMX scale and suggests good support for the used scale as RMSEA=.058. We have reported the standardized weights or loadings (lamda). The unstandardized weights are highly sensitive to model constraints, whereas the standardized regression weights provide more intuitive information about the loadings. Standardized solutions are not printed by default in the output but can be recovered from the path diagram. Table 2 shows the confirmatory analyses for engagement and supports for four factors model of employee engagement. The RMSEA value reported was .056. Table 3 reports the confirmatory factor analysis for work role performance scale; 17 items indicating three factors were found to fit data, a pattern consistent with the scale theoretical underpinnings. The RMSEA value reported was .057.

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TABLE 1

Results of Confirmatory Factor Analysis for the LMX Scale Items Lamdas How well do you feel that your immediate supervisor 0.8 understands your problems and needs? How well do you feel that your immediate supervisor 0.71 recognizes your potential? Regardless of how much formal authority your immediate supervisor has built into his or her position, what are the 0.56 chances that he or she would be personally inclined to use power to help you solve problems in your work? Again, regardless of the amount of formal authority your immediate supervisor has, to what extent can you count on 0.56 him or her to "bail you out" at his or her expense when you really need it? I have enough confidence in my immediate supervisor that I would defend and justify his or her decisions if he or she 0.70 were not present to do so How would you characterize your working relationship with 0.81 your immediate supervisor? Notes: The lamdas reported are from the standardized solution. X² (chi Square)=13.25, (df=8), p