Authentic Leadership: Building Employee’s Psychological Capital

AUTHENTIC LEADERSHIP
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BUILDING EMPLOYEE’S PSYCHOLOGICAL CAPITAL
AUTHENTIC LEADERSHIP
7/18/2018

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INTRODUCTION
American Businessman Bill George introduced the concept of Authentic Leadership (AL) in
the year 2003 in his book “Authentic Leadership’. It has gained more popularity and attention
today as this concept of leadership helps in building an honest and genuine relationship
between a leader and its employees. Authentic leaders are people with positive attitude,
truthful self-concept and implement ethical practices in their work. They do job for the
achievement of goals and not for any monetary benefit and power. For them achieving goal is
everything. They put the aim of the organization ahead their own interest. Employees who
found their leader is authentic experience more job satisfaction and feel very less job
insecurity. Authentic leadership promotes stability in the organization as positive relationship
between an employee and leader lead to less intention of an employee to quit an organization.
In addition, it promotes and encourages creativity among employees that helps an
organization to use innovative ideas shared by their employees and helps an organization to
survive in long run. An AL helps in building psychological capital of employees of an
organization positively and effectively. For this the efforts and proper care is taken by an AL
to inculcate sense of belonging among the employees of an organization. It is also necessary
for an AL to be self-aware and follow ethics for sustainable achievement of organizational
goal.
RELATIONSHIP AMONG AUTHENTIC LEADERSHIP, LEADER-
MEMBER EXCHANGE AND EMPLOYEE’S PSYCHOLOGICAL
CAPITAL
In Authentic leadership (AL), a leader shares his thoughts, opinions, feelings, and other
information openly and clearly with others. An AL shows transparency in his work and
affects employee’s attitude and behavior positively. Employees feel and believe
psychologically safe therefore significantly contributes towards the achievement of
organizational goal. An AL influences and inspire his workforce to contribute to the

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organizations goal with full zeal and enthusiasm. Any relationship in this world is based on
trust and respect. One of the exceptional and practical theory of leadership Leader member
exchange (LMX) theory is also known as Vertical Dyad Linkage theory. Leader member
exchange is an interactive relationship between a leader and his followers. This theory deals
with how a leader develops relationship with its team members and whether these
relationship can significantly contribute to the growth or not. The relationship quality can be
assessed by measuring the degree of trust, understanding, cohesion and support of leaders and
members. A leader in a group maintains his position via exchange agreement with its fellow
members. An AL helps in improving leader-member exchange quality and therefore gaining
trust and confidence of employees. The theory of leader member exchange focuses on the
fact that people are different and they need an interaction. In the year 1987 it was being
suggested by Grean and Scandura that the LMX theory of development goes through three
phases. The theory focuses that relationship between a leader and his subordinates go through
three phases. They are role taking, role making, and routinization.
Role taking
It takes place when a team member joins a group. Then leader of the group measure and
evaluate the skills of the new member and provides them with an opportunity to display their
capabilities and capacities.
Role making
In this process, new team members start working on a project assigned to them. It is generally
expected by a leader that new members will perform their duties and tasks assigned to them
with full honesty, sincerity, dedication, and diligence. Building trust is really important in
role making process if a leader feel betrayed then this can lead to demotion of the member
out -group. During this phase a leader, divide new members into two groups:

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In-group (High quality LMX): if a member proves himself skilled, honest, sincere, capable,
dedicated and diligent then he is in-group. The level of job satisfaction in in group member is
high therefore they perform better in job.
Out-group (Low quality LMX): if a member deceive the trust of a leader and proves his
incompetence, incapability, low level of dedication and insincerity then they are put out of
the group (Medium, 2017).
Routinization
In this last phase, a routine is established between a member and his leader. In-group
members try their level best to please the leader by showing respect, forbearance, and faith.
Whereas out-group members may not like and not trust their leader because their self-
centered quality may influence them to not to trust their leader. The in-group members are
usually similar to their leaders.
This leader member exchange theory focuses on how a leader understands his team members
and related to the effectiveness of an organization. More the in-group members means high
quality of LMX and vice versa. High quality LMX means frequent promotions, evaluating
employee’s performance positively and high degree of commitment towards organization. So
it is important for a leader to develop high quality of LMX with all his team members rather
than establishing with few. An attempt should be made by the leader to make each and every
individual feel that he/ she is an important part of the organization this helps in reducing the
adverse implications of being out-group.
Luthans and his colleagues first introduced the concept of physcological capital, which
consists of four positive physcological resources self-efficacy, hope, optimism, and
resilience.