Leader-member exchange based relative deprivation and employee outcomes

Abstract

Leader-member exchange (LMX) theory, based on the premise that a leader forms differentiated social exchange relationships with each follower, holds an important place in research for almost 40 years. The main aim of this research is exploring an under-researched topic of the effect of LMX on discrete employee emotions, and understanding the influence of this mediated effect on employee work attitudes, behaviors and performance. By collecting data from 320 employees and their 80 immediate team leaders, the effect of LMX evaluations on employee’s feeling of relative deprivation is obtained directly by employee’s own cognitive and affective state while the effect of this negative feeling on employee’s work performance and behavior is validated by getting the leader’s observation of employee performance and behavior. In contrast to ongoing approach of evaluating LMX as a separate dyadic relationship between a leader and a follower, by utilizing social comparison theory this study points to the importance of investigating LMX relationships being embedded in a broader context of work group. In this respect, the comparative effects of absolute and relative LMX evaluations on employee’s attitudes, behaviors and performance through a cognitive and affective process of relative deprivation is tested by two separate structural equation models. The results show that employees’ evaluations of relative LMX have more negative influence on their attitudes, behaviors and performance compared to absolute LMX through an affective mediating process. Individual’s self-construal shapes the level of emotional reactions to LMX evaluations. The findings exhibit the importance of perceived organizational support and peer support, as well as positive future job expectations in mitigating the negative effects of LMX based relative deprivation feeling on work outcomes. For future research, this study provides the empirical evidence for the significance of investigating the effects of LMX on different employee emotions, as well as, the urgency in exploring solutions to mitigate the destructive effects of dark side of LMX, which has been overlooked up to date.