ADM 612 - Leadership

1. ADM 612 - Leadership Lecture 8 – Transactional or Exchange Leadership

2. Introduction • The previous lectures dealt with leader-oriented theories. Followers were referenced largely as targets of influence or support.

3. Introduction • Transactional theories view leader-follower relationships as reciprocal exchanges in which leaders and followers create a transaction that allows for mutual satisfaction of goals and needs.

4. Exchange Theories in Social Psychology • Homans’ Theory of Elementary Social Behavior. • Homans argued that human beings seek to maximize rewards and pleasures and to minimize costs, pain, and punishment. • When two people engage in social interaction, they exchange behaviors that either reward or punish each other.

5. Exchange Theories in Social Psychology • Homans’ Theory of Elementary Social Behavior (contd.). • For each member of the exchange, the resultant combination of rewards and costs incurred will yield either a profit (i.e., rewards exceed costs) or a loss. • Profitable relationships will be continued, whereas unprofitable ones will not.

6. Exchange Theories in Social Psychology • Homans’ Theory of Elementary Social Behavior (contd.). • Each person’s needs and desires, some of which are constant over time and some of which may vary, will determine the reinforcement “value” (i.e., the rewardingness) of any behavior). • Homans also discussed the principle of distributive justice.

7. Exchange Theories in Social Psychology • Homan’s Theory of Elementary Social Behavior (contd.). • Justice occurs when an individual who is engaged in an exchange with another person receives rewards that are proportional to costs such that the profits of each person are proportional to their investments (knowledge, skills, effort, material resources). • Two individuals might differ greatly in what they expect based on their previous experience and will thus evaluate the “just” result differently.

8. Exchange Theories in Social Psychology • Thibaut and Kelley’s Theory of Interdependence. • Determining the reward value of social interactions. • Exogenous factors that increase value of relationship. • Abilities – Interact with those with abilities that they do not possess. • Similarity – Shared values increases the likelihood of social cohesion and support. • Proximity – Physical proximity reduces interaction costs. • Complementarity – Compatible goals.

9. Exchange Theories in Social Psychology • Thibaut and Kelley’s Theory of Interdependence (contd.). • Exogenous factors (leadership examples). • Leader’s task-related skills > Follower loyalty and effort. • Similarity of values would enhance trust between individuals of differing powers. • Leaders and followers share close proximity. • Complementarity of purpose could make the exchange emotionally as well as practically rewarding.

10. Exchange Theories in Social Psychology • Thibaut and Kelley’s Theory of Interdependence (contd.). • Endogenous determinants are those factors internal to the interaction that increase the amount of positive outcomes. Adjust and synchronize their behaviors so pursuit of individual goals does not not undermine the other person’s pursuit of their goals.

11. Exchange Theories in Social Psychology • Thibaut and Kelley’s Theory of Interdependence (contd.). • Leader-follower relationships characterized by gross inequalities in power and the frequent use of that power are likely to be compared quite negatively to alternative relationships, whereas exchanges based on feelings of mutual interdependence are likely to become increasingly cohesive and interdependent.

12. Exchange Theories in Social Psychology • Equity theory. • Both Homans’ distributive justice and Thibaut and Kelley’s comparison levels recognized that relationships are evaluated not only in terms of their absolute levels of rewardingness, but in comparative terms. • Implicit or explicit assumption: Relationships should be fair and equitable.

13. Exchange Theories in Social Psychology • Equity theory (contd.). • The assessment of fairness in a relationship is made by comparing one person’s ratio of outcomes to inputs to another person’s ratio. • Each person in a relationship asks, “Am I getting what I deserve?” and compares his or herself to appropriate comparison persons. • If you are unfairly disadvantaged or unfairly advantaged, the imbalance leads you to change outcomes or inputs or the perceptions of outcomes or inputs.

14. Transactional Leadership Theories • Hollander’s Idiosyncracy Credit Model. • Leadership is a social exchange; the currency is legitimacy. • Leadership is a dynamic process involving ongoing interpersonal evaluations by followers and leaders. • Leader provides task-related vision and direction; followers reciprocate with heightened responsiveness to the leader, legitimating the leader’s authority to exert influence.

15. Transactional Leadership Theories • Hollander’s Idiosyncratic Credit Model. • Idiosyncrasy credit relates followers evaluations to leader legitimacy. • Leaders earn credits that allow them to innovate, that is, to act in ways or suggest strategies that deviate from traditional approaches of the group or behave idiosyncratically.

16. Transactional Leadership Theories • Hollander’s Idiosyncratic Credit Model (contd.). • Credits are earned through the demonstration of competency in helping the group achieve goals and conforming to group norms. • Success leads to increased credits, status, and influence (and more flexibility). • Failure leads to loss of credits. • Elected leaders feel more legitimacy and are more likely to behave idiosyncratically, but are also more subject to criticism.

17. Transactional Leadership Theories • Hollander’s Idiosyncratic Credit Model (contd). • Salient points: • Leadership is a process of give-and-take, in which the leader’s ability to influence is based on a legitimacy that flows from followers. Followers are the leader’s most important strategic audience, determining the leader’s latitude to act. • The exchange between leader and follower must be seen as both just

18. Transactional Leadership Theories • Graen’s Vertical Dyadic Linkage Model. • A leader and a subordinate go through a role-making process in which they negotiate the terms of their collaboration. This is particularly important for work on unstructured tasks for which job definitions and standard procedures are not sufficient to define all aspects of leaders’ and followers’ respective responsibilities.

19. Transactional Leadership Theories • Graen’s Vertical Dyadic Linkage Model. • By sampling the possible ways in which they may interact around these unstructured tasks, leader and subordinate develop a pattern of reciprocal influence that moves the dyad toward greater or lesser interdependence.

20. Transactional Leadership Theories • Graen’s Vertical Dyadic Linkage Model. • Superiors have a number of rewarding options. • Information, openness to influence, interesting tasks, latitude and autonomy, emotional support, and attention. • Subordinates have a number of responses. • Commitment, loyalty, effort, and ingenuity. • When exchanges of reciprocal influences develop that are rewarding to both parties the working patterns become more intricately and productively coupled.

21. Transactional Leadership Theories • Graen’s Vertical Dyadic Linkage Model. • Quality of leader-follower exchanges is related to job-related communication, subordinate satisfaction, turnover, and frequency of promotions. • Exchanges can be differentiated within a unit. • Exchanges must be sensitive to the particular subordinate.

22. Processes of Influence, Motivation, and Control • Behavior modification approaches. • Several theorists argue that effective supervision involves “pinpointing” desirable target behaviors and targeting reinforcements in a contingent and timely fashion. • Generally speaking, contingent rewards work better than contingent punishments. • Clarify path-goal relationships and promote notions of equity. • But, many behaviors critical to effective organizational behavior are difficult to pinpoint and even harder to consistently monitor.

23. Processes of Influence, Motivation, and Control • Goal setting approaches. • Tasks may be difficult to monitor because they are not highly structured and the specific behaviors may not be known in advance or may change. Task behaviors may be continuous and not discrete. • Alternative: focus on desired outcomes rather than behaviors. • By focusing on the outcome, the responsibility for regulating behavior is left to the individual worker who monitors and corrects his or her own behavior to reach goals.

24. Processes of Influence, Motivation, and Control • Goal setting approaches (contd.). • Degree of employee participation in goal setting can range from very low (superior-set goals) to very high (delegation). • Tenets of goal theory (Locke): • Conscious intentions regulate actions, that is, people are more likely to do what they intend to do. • Specific goals result in higher performance than general goals or no goals. • Difficult, but not impossible, goals result in higher performance than easy goals. • Goals enhance the positive effects of incentives, feedback, and deadlines on performance. • Supervisor-set goals only have an effect on performance to the degree that they are consciously accepted by the subordinate.

25. Processes of Influence, Motivation, and Control • Goal setting approaches (contd.). • Employees will accept difficult goals when they perceive them to be reasonable, and when they perceive a strong contingency between goal attainment and desirable outcomes. • High performance cycle model (Locke and Latham). • Goal acceptance and commitment are determined by the subordinate’s perception of the likelihood that effort will result in suitable levels of performance, with that perception largely affected by the subordinate’s level of self-efficacy.

26. Processes of Influence, Motivation, and Control • Goal setting approaches (contd.). • High performance cycle. • Assigned goals have a powerful effect on self-efficacy. • They reflect the judgment of a competent and legitimate authority. • They show confidence in a subordinate’s ability to meet the goal, resulting in increase in confidence and efficacy. • They provide a challenge that motivates the employee to prove competence. • They set a standard against which the subordinate can measure achievement and again a sense of accomplishment and satisfaction.

27. Processes of Influence, Motivation, and Control • From goals to self management. • Sims and Lorenzi regarded reinforcement schedules and assigned goals as stages to self-development. • In self-management, the individual worker or manager sets and monitors his or her own goals, rewarding him- or herself when performance is achieved and taking corrective action when performance falls short of the goal.

28. Processes of Influence, Motivation, and Control • From goals to self management (contd.). • Self-management process: situational leadership theory modified with social learning theory. • In the early stages of development, when the subordinate does not yet have the ability or interest to operate independently, the superior creates a learning experience that simultaneously maintains the subordinate’s attention on set goals and provides the opportunity for successful experiences to build confidence.

29. Processes of Influence, Motivation, and Control • From goals to self-management (contd.). • As the subordinate matures, he or she is encouraged to participate in setting goals and has large aspects of task and the decisions surrounding the task delegated to self-management. • The characteristics of the leadership situation most conducive to self-management are unstructured tasks, subordinate with important information on the task, effective implementation requires subordinate acceptance, employee shares organizational goals (normative decision theory).

30. Processes of Influence, Motivation, and Control • Communication and Influence. • The emphasis in social learning and goal theory is understanding the needs of the subordinate and creating an organizational environment that encourages the subordinate to seek the satisfaction of those needs through avenues that promote organizational success.

31. Processes of Influence, Motivation, and Control • Communication and influence. • Influence tactics. • Ingratiation. • Assertiveness. • Rationality. • Exchange of benefits. • Upward influence. • Coalitions. • Inspirational appeals. • Consultation.

32. Processes of Influence, Motivation, and Control • Communication and influence. • Most commonly used tactics: rational persuasion, inspirational appeals, and consultation. • Least commonly used tactics: exchanges, coalitions, and pressure tactics. • Noncoercive strategies that provide a rational and justifiable basis for attitude change, rather than manipulative or threatening attempts to gain compliance. • Coercion likely to lead to negative attributions leading to further use of strong tactics.

33. Summary • Leadership influence rests ultimately on the follower’s perceptions of the legitimacy of authority. • Best relationships are built on high levels of mutual respect and trust (mentor-protégé relationships).

34. Summary • The most successful influence strategies are those that employ reasoned argument (rational appeals) and shared interest (consultation). • The most acceptable forms of power are those that rely on the leader’s legitimate expertise (expert power) and the follower’s trust and respect for the leader (referent power).

35. Summary • Even the most specific forms of exchange, embodied in behavioral contingencies or goals, realize their greatest potency when employed in a program that allows the subordinate the autonomy for self-management with its potential for instilling intrinsic motivation and personal dignity.