Comparison of Transformational and LMX Leadership Theories

This report compares and contrasts transformational and LMX leadership theories to determine the most appropriate of the two. It discusses the pros and cons of each theory and their impact on employee motivation and organizational success.

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Leadership
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MGT3LWM
LEADERSHIP
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School of Business
College of Arts, Social Science & Commerce
La Trobe University
Bundoora, Victoria, 3086
Australia

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Table of Contents
Introduction...............................................................................................................3
Transformational Leadership.....................................................................................3
Pros..................................................................................................................................................3
Cons.................................................................................................................................................4
Leader-Member Exchange Theory...............................................................................................5
Pros..................................................................................................................................................5
Cons.................................................................................................................................................6
Conclusion.................................................................................................................7
Bibliography..............................................................................................................8

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Introduction
The primary goal of any type of leadership is to make sure that the staff performs beyond
what is expected of them. Many leadership theories such as transformational theory mostly
emphasize leadership from the leader’s point of views such as the trait approach, style approach
as well as the skills approach or the follower and the context. Transformational leadership
ensures that the employees achieve the unexpected by influencing other peoples’ values and
attitudes. However, the Leader-Member Exchange (LMX) theory considers a different approach
whereby it views leadership as a process that is based on an interaction between a leader and a
follower. It takes a special person in delivering a vision that is inspiring, but there are advantages
and disadvantages linked to every type of leadership style. The reason for this report is to
compare and contrast transformational and LMX leadership theories to determine the most
appropriate of the two.
Transformational Leadership
Transformational leadership takes place when a leader performs his/her role so perfectly
that they end up gaining the trust, loyalty, and respect along with the appreciation of the
individuals that follow them. In turn, this transforms the followers’ behaviors. With this type of
leadership, the leader completely motivates the people to work harder by giving them rewards
which comprise of promotions, paid vacation, or even bonuses for their good behavior, as well as
punishments, - demotions and improvement programs- due to their poor behavior (McCleskey,
2014, pp.117). Following this type of leadership, the staff is intrinsically motivated to follow the
example of their leader due to the respect that they develop for them.
Pros
United for a common cause: these type of leaders are exceptional in their ability of
quickly analyzing the current situation of an organization as well as developing a virtuous vision
to assist in the growth and development of the organization.
Reduces turnover costs: in some instances, employees come and go. In this case, it may
result in a high cost for the company to find and train new employees for replacement (García-
Morales, Jiménez-Barrionuevo and Gutiérrez-Gutiérrez, 2012, pp.1044). However, this type of

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leadership seeks to reduce employee turnover by ensuring that individuals completely feel
included and engaged in the firm.
Creates and manages change: firms that intend to evolve should embrace change despite
the difficulties that might be encountered because many people resist change. However, the good
thing about transformational leaders is that they possess the ability to sell the benefits of
exchange through the development of an inspiring new vision as well as getting individuals to
buy the idea.
Ensures the organization is open and ethical: an important value of a transformation
leader is integrity. The leader’s influence is based on their ability to remain transparent including
living openly according to the values they have established for the firm (Braun, Peus, Weisweiler
and Frey, 2013, pp.281). Such leaders are value-driven and are ethics-focused and this
encourages the organization’s staff to act in the company’s interest.
Cons
Results in employee burnout: While some staff might be inspired by the presence of a
transformational leader, others remain under constant pressure. Such leaders emphasize a lot on
authenticity (Breevaart, et al., 2014, pp.145). The constant push of achieving the company’s
vision including the behavior of taking pride in an organization’s achievements likely results in
demotivation as well as burnout among some staff.
It is risky and disruptive: the problem of change in an organization is that if it takes place
frequently, it becomes disruptive. Nonetheless, if the leader takes unnecessary risks, it can be
detrimental to the organization (Grant, 2012, pp.459). Most are the times when companies
employ transformational leaders with the intention of creating change. However, it becomes
problematic when such a leader fixates on change rather than something more positive for the
company.
High chances for abuse: in some instances, a transformational leader’s way of doing
things might result to be the wrong way. The leader might follow certain visions that are not
likely to result in a positive outcome for the organization.

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Overlooks reality and truth: it is recognized that transformational leaders are likely to
over depend on their emotions and passion that they end up overlooking the truth and reality
(Odumeru and Ogbonna, 2013, pp.335). Such over-reliance is also likely to restrict their desire to
delve into logical reasoning and research to assist face the reality of their organizations.
Nonetheless, transformational leadership negatively affects creativity and innovation.
Despite transformation leadership fosters creativity and innovation by enhancing collaboration,
in some instances, this type of leadership enhances creativity among followers but also increases
their dependency. As a result, this reduces their level of creativity.
Leader-Member Exchange Theory
There are two ways in which the leader-member exchange theory works. First, the theory
describes leadership and second, it prescribes leadership. In these two instances, the primary
concept is the dyadic relationship that is formed by leaders with their subordinates (Volmer,
Spurk and Niessen, 2012, pp.460). Descriptively, the leader-member exchange theory is of the
suggestion that it is essential recognizing the existence of in-groups as well as out-groups in a
firm or a group. In the real sense, leaders are entitled to offer every employee the chance of
exercising new roles and responsibilities.
Pros
The Leader-Member Exchange Theory makes key contributions to the understanding of
the process of leadership. First, the LMX theory is an effective descriptive theory. Intuitively,
this theory makes sense in describing work units in regards to individuals that contribute more
and those people that contribute less to a company. Basically, in an organization, there are in-
groups and out-groups. Irrespective of the potential harm associated with out-groups, it is no
secret that leaders have got special relationships with specific individuals that more and obtain
more as well (Dulebohn, Bommer, Liden, Brouer and Ferris, 2012, pp.1737). People may dislike
this but it is a reality and the leader-member exchange theory has actually extensively elaborated
on this situation. The theory validates the experience relating to how individuals in a company
relate with each other and with their leaders. In this instance, some contribute more and end up
receiving more while others contribute less and end up receiving less.

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Second, the theory is unique because it is the only leadership theory that has made the
dyadic relationship concept the centerpiece of the process of leadership. Other theories
emphasize the characteristics of followers, leaders as well as contexts, or even a combination of
any of the three (Breevaart, Bakker, Demerouti and van den Heuvel, 2015, pp.761). However,
none of these other theories address specific relationships between leaders and each of their
follower.
Third, this theory is worth noting since it directs every person’s attention to the benefits
of effective communication in leadership. The LMX theory suggests a high-quality exchange
that is inextricably limited to efficient communication (Martin, Guillaume, Thomas, Lee and
Epitropaki, 2016, pp.93). Through communication, leaders as well as the followers develop,
nurture as well as sustain useful exchanges. Efficient leadership only takes place when there is
mutual trust, commitment, and respect in the communication between followers and leaders.
Fourth, the theory provides leaders with essential alerts. By so doing, the theory assists in
warning the leaders not to allow letting either their conscious or unconscious beliefs from
influencing the individuals that are welcome into the in-group. Such biases comprise of race,
ethnicity, age, and religion (Vidyarthi, Erdogan, Anand, Liden and Chaudhry, 2014, pp.468).
Some of these principles outlined in the leader-member exchange theory act as good reminders,
expressing that leaders should always remain fair and equal in the manner which they approach
their followers.
Cons
Despite its advantages, the LMX theory also has its disadvantages. First, the LMX
theory, through its vertical dyad linkage formulation counters the fundamental human value of
fairness. Throughout, it has always been taught that it is important that individuals aim at getting
along with each other and treating everyone equally (Loi, Chan and Lam, 2014, pp.51). Forming
in-groups or even cliques has been portrayed as a bad thing because they harm individuals that
cannot be part of these in-groups. Since work units are divided into two basic groups by the
leader-member exchange theory divides, one group tends to get special attention from the leaders
and this paints a picture of discrimination against the out-group.

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Nonetheless, although the LMX theory was not developed to discriminate against
individuals with disabilities or based on their genders or culture, it tends to support the creation
of privileged groups in the workplace. As a result, the theory appears both unfair and
discriminatory. Furthermore, in-groups and out-groups may result in an undesirable impact on
the entire group.
Conclusion
The transformational leadership theory revolves around inspiring the staff to perform the
best in their work and following the example and personality of their leader. Nonetheless, the
theory also believes that individuals can perform better if they are positively motivated.
However, the theory faces several criticisms because transformational leaders are driven by their
emotions and passion. The LMX theory on the other is the most preferable theory because it
mainly focuses on developing interactions between the followers and their leaders and not as
emphasized by other theories such as transformational leadership theory that advocates for the
interactions between the leader and the organization. The only major concern for this theory is
that it encourages the formation of in-groups where some followers benefit more than the others.

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Bibliography
Braun, S., Peus, C., Weisweiler, S. and Frey, D., 2013. Transformational leadership, job
satisfaction, and team performance: A multilevel mediation model of trust. The Leadership
Quarterly, 24(1), pp.270-283.
Breevaart, K., Bakker, A., Hetland, J., Demerouti, E., Olsen, O.K. and Espevik, R., 2014. Daily
transactional and transformational leadership and daily employee engagement. Journal of
occupational and organizational psychology, 87(1), pp.138-157.
Breevaart, K., Bakker, A.B., Demerouti, E. and van den Heuvel, M., 2015. Leader-member
exchange, work engagement, and job performance. Journal of Managerial Psychology, 30(7),
pp.754-770.
Dulebohn, J.H., Bommer, W.H., Liden, R.C., Brouer, R.L. and Ferris, G.R., 2012. A meta-
analysis of antecedents and consequences of leader-member exchange: Integrating the past with
an eye toward the future. Journal of management, 38(6), pp.1715-1759.
García-Morales, V.J., Jiménez-Barrionuevo, M.M. and Gutiérrez-Gutiérrez, L., 2012.
Transformational leadership influence on organizational performance through organizational
learning and innovation. Journal of business research, 65(7), pp.1040-1050.
Grant, A.M., 2012. Leading with meaning: Beneficiary contact, prosocial impact, and the
performance effects of transformational leadership. Academy of Management Journal, 55(2),
pp.458-476.
Loi, R., Chan, K.W. and Lam, L.W., 2014. Leader–member exchange, organizational
identification, and job satisfaction: A social identity perspective. Journal of Occupational and
Organizational psychology, 87(1), pp.42-61.

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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), pp.67-
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McCleskey, J.A., 2014. Situational, transformational, and transactional leadership and leadership
development. Journal of Business Studies Quarterly, 5(4), p.117.
Odumeru, J.A. and Ogbonna, I.G., 2013. Transformational vs. transactional leadership theories:
Evidence in literature. International Review of Management and Business Research, 2(2), p.355.
Vidyarthi, P.R., Erdogan, B., Anand, S., Liden, R.C. and Chaudhry, A., 2014. One member, two
leaders: Extending leader–member exchange theory to a dual leadership context. Journal of
Applied Psychology, 99(3), p.468.
Volmer, J., Spurk, D. and Niessen, C., 2012. Leader–member exchange (LMX), job autonomy,
and creative work involvement. The Leadership Quarterly, 23(3), pp.456-465.