14-3: Contemporary Theories in Leadership

As leadership research matured, researchers began developing more sophisticated theories that better captured the complexity of leadership relationships and processes. Three theories have received considerable research attention over the past 25 years: Leader-Member Exchange, Implicit Leadership Theory, and Transformational Leadership Theory.

Four common characteristics of new leadership theories:

1. Explain how leaders can take organizations to new heights
2. Explain how certain leaders achieve extraordinary levels of motivation, commitment, and dedication
3. Stress emotionally appealing behaviors such as empowering, developing vision, and role modeling
4. Result in increased follower satisfaction and identification with leader values

Leader-Member Exchange (LMX) Theory

Leader-Member Exchange (LMX) Theory revolutionized leadership thinking by focusing on individual relationships between leaders and specific followers rather than average leadership styles applied uniformly across groups. This approach recognizes that leaders develop different relationships with different followers, creating varied leadership experiences within the same work unit.

Leaders adopt different behaviors with individual subordinates; the particular behavior pattern develops over time and depends largely on the quality of the leader-subordinate relationship. This refutes the idea of “average leadership style” – leaders can be good in some relationships and bad in others. A boss can be good for employee A but bad for employee B.

In-group versus out-group relationships

In-group versus out-group relationships represent the core distinction in LMX theory:

In-group members:

• Develop high-quality relationships characterized by trust, mutual respect, and expanded roles
• Go beyond formal job requirements
• Get interesting assignments, developmental opportunities, and the leader’s trust and support
• Have high latitude for negotiating their work roles
• Experience relationships based on trust, shared responsibility, and support

Out-group members:

• Experience low-quality relationships limited to formal job descriptions and contractual exchanges
• Do their jobs as defined and receive standard supervision
• Don’t develop close working relationships
• Have little latitude for negotiating work roles
• Leaders rely more on formal power and authority to influence their behavior

Relationship Development

In more recent versions of LMX theory, the leader drives the relationship from a tentative first-stage relationship to a deeper, more meaningful one. All relationships begin as low-quality and should be driven to high-quality levels by the leader. Subordinates who experience the evolved relationship become in-group members, while those who remain stuck at the first phase become out-group members.

A measure of leader success might be the percentage of high-quality subordinate relationships that a leader has.

Factors Influencing LMX Quality

Both demographic and organizational factors affect LMX development:

• Gender similarity
• Number of subordinates
• Employee workload
• Available resources
• Competence perceptions
• Interpersonal compatibility

Consequences of LMX Quality

High-quality LMX relationships predict:

• Higher job satisfaction
• Organizational commitment
• Performance
• Career advancement
• Frequency of communication

Low-quality relationships often result in minimal effort and eventual turnover.

Measurement Challenges

Interestingly, leaders and followers often disagree about relationship quality, with leaders typically rating relationships more positively than followers. While a leader might characterize a relationship as high quality, the subordinate often disagrees and considers it low quality. This suggests that perceptions may be more important than objective relationship characteristics (Gerstner & Day, 1997).

Implicit Leadership Theory

Implicit Leadership Theory emphasizes the role of follower perceptions in determining leadership effectiveness. This cognitive approach suggests that leadership exists primarily in the minds of followers through mental representations or prototypes of what effective leaders should look like and how they should behave.

Subordinate perceptions of leader behavior significantly affect the ability to lead. Leadership is the outcome of a perceptual process involving both leaders and subordinates. It matters less what a leader does and matters more how leader actions are perceived by subordinates.

Leadership Prototypes

Leadership prototypes represent mental models that individuals use to categorize and evaluate leader behavior. These schemas develop through experience, socialization, and cultural influences, creating expectations that shape how followers interpret leader actions and effectiveness.

An employee has a prototype of a good leader, which involves certain behaviors. If a boss is labeled a good boss, all of the boss’s behaviors will be judged positively. If a boss is labeled a bad boss, all of the boss’s behaviors will be judged negatively.

Categorization Processes

Categorization involves comparing observed leader behavior with mental prototypes to determine whether individuals should be viewed as effective leaders. Leaders who match follower prototypes are more likely to be perceived as effective, regardless of their actual performance or contributions.

Phillips and Lord (1981) demonstrated that people develop global impressions of leader effectiveness based on the extent to which a particular leader matches their prototype. Even more important is the finding that people use that global impression to describe the leader and recall leader behaviors and traits – often making errors in the process.

Cultural Variations

Cultural variations in leadership prototypes create challenges for global organizations where leaders must work with followers from different cultural backgrounds. Leadership prototypes vary across cultures – no single trait emerges in the top 5 across all countries. However, categorizing cultures by Western or Eastern provides some consistency:

• Western cultures: “Determined” is highly prototypical
• Eastern cultures: “Intelligence” is highly prototypical

Traits and behaviors valued in one culture may be less important or even counterproductive in other cultural contexts.

Transformational Leadership Theory

Transformational Leadership Theory distinguishes between transactional and transformational approaches to leadership, with transformational leaders achieving extraordinary results by inspiring followers to transcend self-interest for collective goals.

Two Main Types of Leadership Styles:

Transactional Leadership

• Operates through contingent exchanges where leaders monitor performance and provide rewards or punishments based on results
• Based on contingent reinforcement such that the relationship between leader and follower is based on exchanges
• Follower rewarded for meeting leader expectations
• This contractual approach clarifies expectations and consequences while maintaining focus on goal achievement
• It’s basically “do this, get that” leadership

Transformational Leadership

• Involves inspiring followers to commit to shared visions and values that transcend immediate self-interest
• Leader and subordinate interact so they are raised to a higher level of motivation and morality than they would otherwise achieve
• Achieves results by changing follower attitudes, beliefs, and values rather than simply providing external incentives
• Focuses on changing or transforming the goals, values, ethics, standards, and performance of others

Characteristics of Transformational Leaders

Transformational leaders tend to be:

• Curious and communicative
• Visionary, charismatic, and inspirational
• Confident with a need to influence others
• Hold strong attitudes that their beliefs and ideas are correct
• Innovative and challenge the status quo
• Focus on people and are flexible
• Look to the future and carefully analyze problems
• Trust their intuition

Transformational leadership is most related to extraversion and is positively related to agreeableness, conscientiousness, and openness to experience, while negatively related to neuroticism (Bono & Judge, 2004).

Four Components of Transformational Leadership

1. Idealized Influence (Charisma)

• Involves serving as role models who maintain high ethical standards
• Inspires follower admiration and trust
• Uses high moral and ethical standards
• Uses enthusiasm to motivate and inspire followers

2. Inspirational Motivation

• Encompasses creating compelling visions of the future
• Communicates them enthusiastically to inspire follower commitment
• Develops a vision and motivates employees to reach long-term goals

3. Intellectual Stimulation

• Involves challenging assumptions and encouraging innovation
• Supports creative problem-solving approaches
• Encourages change and open thinking
• Challenges the status quo and appreciates diversity

4. Individualized Consideration

• Represents attention to follower individual needs
• Includes coaching and mentoring behaviors
• Recognizes unique contributions and potential
• Encourages individual growth and takes time to mentor
• Treats followers as individuals rather than applying uniform approaches

Research Evidence

Meta-analysis found strong correlations between transformational leadership and several aspects of leader effectiveness, including follower satisfaction, follower motivation, and group performance (Bass, 1997). The augmentation effect suggests that transformational leadership adds value beyond transactional approaches rather than replacing them. The most effective leaders combine transformational inspiration with transactional clarity about expectations and consequences.

Transformational leadership is used on every continent and is best liked by employees. Even more successful transformational leaders exhibit transactional behaviors as well – they must still set expectations and clarify roles. However, transformational leadership can result in dependence on the leader versus empowered self-direction.

Gender, Culture, and Leadership

Leadership doesn’t happen in a vacuum – it’s influenced by broader social and cultural factors that affect both leader behavior and follower expectations.

Gender and Leadership

Gender Representation

In 2017, women made up 47% of the labor force and about 50% of all high-paying management, professional, and related occupations. However, representation varies considerably across industries and organizational levels, with women remaining underrepresented in senior executive positions.

Leadership Style Differences

Women have more participative and interpersonally-oriented leadership styles than men. Men and women emerge as leaders in contexts that are consistent with their gender roles. These differences may reflect socialization experiences, role expectations, or strategic adaptations to organizational contexts.

Double Bind Dilemmas

Double bind dilemmas create particular challenges for women leaders who must balance competing expectations. To be seen as competent leaders, women may need to demonstrate masculine traits like assertiveness and toughness. However, displaying these traits may violate gender role expectations and result in negative evaluations for being unfeminine. Women are at a huge disadvantage because leadership is “masculine-typed,” and to be effective, a woman has to be masculine, but that’s inconsistent with gender expectations.

The Feminine Advantage Hypothesis

The feminine advantage hypothesis proposes that women’s tendencies toward inclusion, interpersonal sensitivity, and nurturing make them better suited for contemporary leadership challenges. This perspective suggests that organizational changes requiring collaboration and relationship-building favor traditionally feminine leadership approaches. Female leaders show higher levels of transformational and transactional contingent reward behaviors versus male leaders’ management by exception.

The highest proportion of women managers is found in medicine and health, though there’s disagreement over whether this advantage truly exists.

Cultural Variations in Leadership

How different cultures perceive leadership is becoming an increasingly important concern in our global economy. Expected, accepted, and effective leader behavior likely varies by culture.

The GLOBE Project

The GLOBE (Global Leadership and Organizational Behavior Effectiveness) project involves 61 countries and 200+ researchers. It focuses on leadership in individualistic versus collectivistic cultures and identifies leadership traits and behaviors that are universally valued while documenting significant cultural differences in leadership expectations.

Traits and behaviors important to leadership across cultures are integral to transformational leadership. Leaders’ global experiences impact their ability to think strategically – leaders whose international experiences took place in cultures very different from their own were better strategic thinkers.

Key Cultural Dimensions

Power Distance represents a crucial cultural dimension affecting leadership relationships:

• High power distance cultures accept hierarchical authority and status differences
• Low power distance cultures prefer egalitarian relationships and question authority more readily
• Transformational leadership was more positively linked to procedural justice when employees were lower on power distance

Individualism-Collectivism influences leadership through its effects on:

• Group orientation
• Decision-making preferences
• Accountability expectations
• Individualistic cultures may prefer directive leadership and individual accountability
• Collectivistic cultures may favor participative approaches and group responsibility

Emotions and Leadership

Emotional Intelligence

Emotional intelligence represents a critical factor in leadership effectiveness that encompasses awareness and management of both personal emotions and others’ emotions. Leaders with high emotional intelligence create stronger bonds with followers while demonstrating more effective leadership behaviors. Emotionally intelligent leaders are better equipped to navigate uncertainty, foster psychological safety, and build trust across diverse teams.

Emotional Expression

Emotional expression differs between transformational and transactional leaders, with transformational leaders expressing more positive emotions that inspire and motivate followers. This emotional positivity contributes to effectiveness by creating attractive visions and optimistic expectations.

Emotional Contagion

Emotional contagion enables leaders to influence follower emotional states through their own emotional expressions. Leaders who consistently display positive emotions can create positive organizational climates, while those who express negative emotions may undermine morale and performance.