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

Running head: POSITIVE LEADER
POSITIVE LEADER
Name of the Student
Name of the University
Author Note

1
POSITIVE LEADER
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

2
POSITIVE LEADER
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,