The Relationship Between Authentic Leadership, Psychological Capital, and Leader-Member Exchange in Building a Positive Workplace Environment

This study explores the relationship between authentic leadership, psychological capital, and leader-member exchange in building a positive workplace environment. It also discusses the impact of emotions on employee performance and how to build psychological capital in employees. The study emphasizes the importance of proper leadership and binding with the leader to establish a strong and efficient team in the organization.

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Name of the Student
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Author Note

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Introduction
Leadership is very important in any organization as it helps to guide employees and
show them the correct path and to complete their tasks in a proper manner which would be
beneficial for both the employee and the organization. The study explains the three concepts
of authentic leadership, psychological capital (PsyCap) and leader-member exchange (LMX)
and portrays the relationship between them. The study further divulges into explaining the
different ways that psychological capital can be built in certain employees and the emotions
that affect employees.
The relationship between authentic leadership, Leader-Member Exchange (LMX) and
employees’ Psychological Capital (PsyCap)
Wong and Laschinger (2013) states that authentic leadership has been on the rise for
the past few years and have emerged as a source of benefit for organizations and employees
alike. Authentic leadership has received support from several sources due to their way of
operations. The approach of authentic leadership shows the ability of leaders to form
legitimate relationships with their followers. These leaders depend on their honesty and
transparency to lead their followers which helps to gain trust and loyalty in return (Wang and
Hsieh 2013). The vital characteristic of an authentic leader is their positive approach towards
any situation which helps them to motivate the followers and give them trust that they would
be able to achieve any task. Çavuş and Gökçen (2015) describe psychological capital
(PsyCap) as the mental state of an employee and the initiative of organizations to maintain
the well-being of their employees. There are four capabilities which are targeted in building
the psychological capital of employees. The four capabilities are resilience, optimism, hope,
and self-efficacy. Resilience is the ability to reach the former form after facing a situation and
learning from the situation. Optimism is the expectation of good things as well as being

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confident in any situation. Hope is a positive motivation that helps an individual to overcome
any situation. Self-efficacy is the belief of an individual to accomplish any task in an
effective manner.
Erdogan and Bauer (2015) discuss leader-member exchange as the approach of
forming a two-way relationship between the leader and the followers. This concept
emphasizes the fact that leaders often form relationships with their followers and that the
relationship formed is based on mutual respect and trust. There are two groups that are often
formed through this exchange or relationship forming which are – in-group and out-group.
In-group consists of those subordinates that have a special bonding or connection with the
leader (Martin et al. 2016). The people of this group receive more privileges and preferences.
The other group which is the out-group consists of subordinates who have no amount of
connection with the leader and are therefore excluded from any special preference. These
groups are formed based on the working capability, personality, religion, gender and many
other traits which depend on the leader.
Authentic leadership is often used by organizations to increase the psychological
capital of the employees in the organization. Wang et al. (2014) state that authentic leadership
has a great impact on the performance of employees. Authentic leader have an openness
within them which leads the employees to trust them and form a bond with them. An
authentic leader will be able to motivate the employees in performing to the best of their
abilities and explored many areas which otherwise were not known by the employees. This
would help them to increase their knowledge horizon. Authentic leaders not only lead but
they lead by example. They are wholly committed to their work and find the best possible
way to get the desired results for any tasks. This shows the employees the leader himself is
inclined towards working for the best of the organization. They are credible role-models who
can help employees to become aware of their own abilities and knowledge. Moreover,

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authentic leaders have their own set of morals and ethical values which they dedicatedly
follow and this enables the subordinates to follow the same path. Authentic leaders have the
capacity to increase the psychological capital of employees. They are an influential figure
who strengthens the four capabilities of psychological capital building which are resilience,
optimism, hope, and self-efficacy. The increase in these capabilities will help in increasing
the PsyCap. This will help the employees to perform better and give their best. In groups
where the traits of the leader and the followers combine and match, it helps to increase more
psychological capital as the leader would be able to exert more influence to the subordinates.
When subordinates are in need of support and psychological resources, authentic leaders are
the one who provide those resources to boost up the group. The leader teaches the group to
support and complement one another which strengthens the bond between the group members
as well and helps in teamwork.
Authentic leaders not only increase the PsyCap of the employees by giving them
motivation but also guide them by showing them the real situation which makes the
employees trust the leader and follow his guidance. The leader-member exchange between an
authentic leader and follower is always different from leader-member exchange of other types
of leaders (Avey 2014). Due to the trustworthy nature of an authentic leader there are very
close bonding that are formed between the leader and his subordinates. In this type of
leadership, most of the subordinates belong to the in-group since the leader is unbiased in
nature. The leader focuses on the ability of the employee to performance than any other traits.
He tries to help each employee grow in their field and therefore hopes to form a unique bond
with each member of the team. The followers in return try their best to impress the leader
with their performance. They incur their complete trust and loyalty towards the leader and
follow the guidance and path that is shown by the leader. The relation between the three
concepts which are authentic leadership, psychological capital (PsyCap) and leader-member

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exchange (LMX) is interlinked with each other. The change in one impacts the other and
three of together helps to form a strong employee base which is very important for any
organization. Therefore, there is a strong influence on each other based on these concepts.
Impact of emotions of leaders, managers and colleagues on the performance of
employees
Ashkanasy and Dorris (2017) state that emotions play a major role in the lives of
every employee in an organization. Hey spend most of their time in the workplace and hence
the views and the behaviour of their colleagues, managers and leaders create a significant
influence on their performance. A positive workplace environment creates a good impact and
a negative workplace environment creates a bad impact on the performance. The impact not
only lies in their performance but also on the thought process, decision making and views.
Interpersonal connections in the workplace are the main reason for the affect that emotions
have on job performance. Good environment in the workplace contributes to the well-being
of the employees and the increase in psychological capital. The support of the colleagues is
one of the ways to establish a good working environment. Employees working together
should help each other out during any trouble and have good communication with one
another so that peace and harmony can be maintained in the office. Moreover, appreciation
from leaders and managers is another way for building good emotions in employees which
will motivate them to work better and more efficiently. The appreciation will make them feel
valued and a part of the company. However, negative emotions such as anger, jealousy and
sadness are often found in every organization among the employees. These emotions are built
through the lack of support from both the employees and the leader or manager. Negative
emotions may lead to fights and sabotaging on each other’s work which would be a drastic
influence on the operations of the company.

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Emotions effect the decision making process of the employee. A positive emotion
would help the employee to make good decisions in favour of him and the organization. On
the other hand, negative emotions can also help in good decision making process since the
employee would be agitated and more concentrated on proving himself better than the others.
This negativity can sometimes be beneficial for the employee himself but would be bad for
the work environment (Ogungbamila 2013). Emotions are also related to being present or
absent from the workplace. Employee who have a good time in the workplace will often
avoid being absent as compared to the employees who receive negative vibes from the
workplace. Emotions also have an impact on the creativity of employees and this can only be
present if the employee is in positive state of mind. Being happy and satisfied in the
workplace helps the employee to open their mind to all kinds of creative ideas which will
help the organization. Moreover, emotions also impact the interpersonal relation in the
workplace. Positive emotions will instil a helping behaviour in the employee, whereas
negative emotions will lead to jealousy or anger which will lead to the disruption of another
employee. Therefore, it can be said that emotions have a direct influence on the behaviour of
employees and hence it creates an impact on the work performance of the employee. This is
why it is necessary to manage the emotions of every employee in the workplace to avoid any
disruption or issue.
Building psychological capital of employees
Human resources are an important part of any organization and therefore, they should
be managed in the best way possible. The concept of psychological capital has erupted with
the necessity of focusing on the mental aspect of employees in the workplace. Psychological
capital states that along with the knowledge base and the skills of the employee, the mental
competency should also be measured and increased for the growth and success of the

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organization. The way to build psychological for different types of employees is same but
different, meaning that even though the same goal is present, the approaches might be
different for different employees. Certain kinds of employees are professional employees,
administrative employees, emotional labour, blue collar employees, white collar employees,
employees of different ethnic background. The approach for each one of these employees for
building psychological capital will be different based on their different job roles and work.
Professional employees are the ones who are hired depending on their professional
capability such as lawyers, doctors and others. These employees require special and specific
training to complete the tasks that are mentioned in their job role. To build the PsyCap of
these employees it is needed to provide them with a positive work environment where they
can find the path to grow and enhance their present skill and knowledge base. These
employees find peace in becoming more proficient in their profession. Administrative
employees are the ones who provide administrative assistance in the work place and helps in
the efficient running of the company. They take care of the various day to day tasks of the
workplace which is very important for the company. To build their PsyCap it is necessary to
make them feel appreciated and valued. Their effort should be recognized by the management
in keeping the basic operations of the company together and this will help them to work
better. Emotional labour is the process of meeting the emotional requirements of the
employees so that they can work better. The emotional requirements would help the
employees to perform better and more efficiently. These are the different ways to build
psychological capital in employees and to motivate them to work more efficiently.
Conclusion
Hence, it can be said that leadership is a major component of a good performance o
employees. A good leader would be able to guide the employees in the correct path, whereas

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a bad leader would divert the path of the employees and disrupt their skill and knowledge. An
authentic leader is one of the best leadership approaches into building a strong and efficient
team in the organization. For the good psychological capital of the employees in the
organization proper leadership and binding with the leader is required and this can be
established with the association with an authentic leader. The leader-member exchange with
an authentic leader also has positive effects and this is beneficial for the organization.

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References:
Ashkanasy, N.M. and Dorris, A.D., 2017. Emotions in the workplace. Annual Review of
Organizational Psychology and Organizational Behavior, 4, pp.67-90.
Avey, J.B., 2014. The left side of psychological capital: New evidence on the antecedents of
PsyCap. Journal of leadership & organizational studies, 21(2), pp.141-149.
Çavuş, M.F. and Gökçen, A., 2015. Psychological capital: Definition, components and
effects. British Journal of Education, Society and Behavioural Science, 5(3), pp.244-255.
Erdogan, B. and Bauer, T.N., 2015. Leader–Member Exchange Theory. In The Oxford
Handbook of Leader-Member Exchange.
Martin, R., Guillaume, Y., Thomas, G., Lee, A. and Epitropaki, O., 2016. Leader–member
exchange (LMX) and performance: A meta‐analytic review. Personnel Psychology, 69(1),
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Ogungbamila, B., 2013. Perception of organizational politics and job-related negative
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