A Comparative Analysis of Transformational Leadership and LMX Theories

This essay delves into the concepts of transformational leadership and leader-member exchange (LMX) theory, exploring their impact on fostering creative performance within organizations. It begins by defining leadership and highlighting the significance of both leadership styles in influencing employee behavior and achieving organizational goals. The essay provides a detailed overview of each theory, discussing the key components and contrasting their applicability in various organizational settings. Transformational leadership is presented as a leader-focused approach that inspires positive changes, while LMX is examined as a relationship-based theory that categorizes employees into in-groups and out-groups. The essay highlights the similarities and differences between the two theories, analyzing how they impact creative performance at an individual level. It also discusses the advantages and disadvantages of each approach, including the potential for LMX to create group divisions. The essay concludes by emphasizing the importance of transformational leadership in promoting innovation and inclusivity, while acknowledging the situational-specific nature of both leadership models.

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Leadership
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Introduction
Leadership is the ability to unite influence and power. This means that leadership is not
only based on the power that comes from a given position but also it needs the influence to
attract followers, shape their behavior, instill performance, and attain the goals of an
organization. Scholars have developed various theories that try to explain the different leadership
scenario. Among the theories, transformational leadership and leader-member exchange (LMX)
have been considered important in facilitating creativity. In the contemporary rapid changing
work environment, it is important for an organization to adopt the think out of the box approach
to leadership styles. Extensive diverse workforce requires the managers to lead not only
individuals but the team as a whole (Effelsberg, Solga and Gurt, 2014, pp.139). Leaders play a
critical role in influencing the workers through two major leadership approaches that are
transformational leadership that is leader-focused and leader-member exchange theory that is
relationship based. However, little is known about how these two theories can be applied to
interact with each other and influence employees for creative performance. This study will,
therefore, focus on analyzing transformational leadership and LMX for creative performance.
The leader-member exchange theory was first coined in the 1970s. It was established to
analyze the relationship that exists between members in an organization with their managers. The
theory establishes that all the relationship between managers and the employees undergo the
steps of role-taking, role-making, and routinization (Loi, Chan, and Lam, 2014, pp.50). Role-
taking is developed when a new team member first joins a group. The managers are able to
assess the skills and abilities of the employee. Role-making is when new members takes on work
projects and the manager evaluates them to establish whether they are loyal, hardworking, and
trustworthy in their new roles. At this stage, the manager subconsciously sorts the new members

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into groups. The groupings consist of in-group which has loyal, skilled and trustworthy
members. The manager gives a lot of attention to this group and offers them opportunities and
challenging tasks and work privileges. The out-group is made up of incompetent and
unmotivated employees. This group have less access to the manager and are not considered for
work privileges. Routinization is whereby routines are established. The in-group members strive
to maintain a good impression with the manager while the out-group members develop mistrust
and dislike for the manager. Transformational leadership inspires positive changes in an
organization setting. This type of leaders is passionate, enthusiastic, and energetic (Breevaart, et
al., 2015, pp.762). Transformative leadership style employs the use of personality, vision, and
strength by the leader to motivate the workers towards a common goal (Anderson and Sun, 2017,
pp.80). Some of the components of this leadership style include intellectual stimulation, where
the leader foster creativity among the team. Individualized consideration is another component
that offers support and encouragement to the individual employee (Ghasabeh, Soosay and
Reaiche, 2015, pp.465). Inspiration motivation helps the employees to follow their passion
through motivating them to fulfill their goals. Lastly, idealized influence uses role modeling to
mentor the employees. The workers can emulate the persona of the leader.
Some of the similarities that have been established between LMX and transformational
leadership theory is that both of the theories involve the employees in the organization culture.
The LMX theory groups the workers into two distinct groups based on their characteristics,
loyalty, and trustworthiness (Martin, et al., 2016, pp.102). The high performing employees are
involved in the day to day running of the organization. Additionally, the out-group team is
offered a simple task to participate in organization operation. Transformational theories are all
about encouraging the employee to perform better in work situation. This type of leader is a

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visionary and he facilitates change in the organization by influencing positive behavior. Apple
former CEO Steve Jobs was an example of a transformational leader (Du, Swaen, Lindgreen and
Sen, 2013, pp.163). Even though most of the employees viewed him as some sort of a dictator,
he used his vision for Apple to encourage innovation among the employees. Steve Job was
successful as he is credited with the development of iPhones, iPods, and iTunes which have
driven the sales and success of Apple for a long time.
Both transformational leadership and leader-member exchange model foster creative
performance at the individual level. Transformative leaders are proactive in their operation and
thinking and exhibit unstoppable search for solutions to complex problems (Van Knippenberg
and Sitkin, 2013, pp.35). These leaders influence the workers to achieve more and become
innovative through altering their portfolio needs and self-interests. Transformational leadership
theory offers support to the workers to come up with new ideas (Odumeru and Ogbonna, 2013,
pp.355). For example, Google applies this approach through its 80/20 rule whereby the workers
are encouraged to spend 20 percent of the working time on their own ideas. This model has
resulted in transformational products such as Gmail and AdSense (Amanchukwu, Stanley and
Ololube, 2015, pp.7). In the LMX theory, the leader develops high-quality exchange relationship
with the in-group. This offers challenging opportunities to the in-group members. The in-group
is provided with the opportunity to innovate by being offered task-related resources and
encouraged to come up with new ideas. Both the transformational and LMX models are
instrumental in fostering creative performance among the workforce.
Some of the contrast exhibited by LMX and Transformational theory is in their
applicability. Transformational leadership is situational-specific and it cannot be applied in
organizations requiring routine and highly mechanized tasks. The LMX theory, on the other

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hand, works effectively in such settings as the leader is able to allocate a complex routine task to
the in-group members that he has formed a bond with (Saeed, Almas, Anis-ul-Haq and Niazi,
2014, pp.219). Similarly, transformational leadership is counterproductive in new organizations
that lack experienced employees and already established rules. Transformational leadership
requires a setting with already set up mechanisms and systems. However, LMX thrives in such
new organizations as the leader is able to apply the steps of role-taking, role-making, and
routinization to pick members that he can effectively work with. Additionally, transformational
leadership impacts the decision-making process due to the dependency of collaboration between
the manager and the workers. In the LMX the manager has the sole power to affect the decision.
He does not need to consult with the employees on an issue relating to the management of the
organization.
The LMX or Vertical Dyad Theory has been found to be lacking in terms of employee
inclusion. This theory negates the notion that every worker is different. It perpetuates the
conditions that lead to out-group placement. For instance, the in-group members who have
established favor with the manager are at a position to gain favors and opportunities for
advancement in career. The out-group is neglected by the manager regardless of how the
employees in this group may have strived to change their capabilities. This theory focuses on the
individual relationship between an employee and the manager and fails to address the
relationship of group dynamics. The transformational leadership style is more accommodative.
The leader in this leadership style model can mentor both individual and groups in the
organization setting towards better performance. Transformational leadership does not seclude
an employee based on the personal attributes but strives to ensure inclusivity of all employee to
create a harmonious workforce.

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LMX has the potential of causing a ripple negative impact on the organization. This is
manifested when the relationship of the leader with the in-group takes a toll on the out-group
members. LMX can result in rivalry among the groups. The out-group members may develop the
feeling of being unfairly treated and their efforts not being appreciated. This is because the in-
group members are being offered better opportunities and have a good relationship with the
leader. Such can result in direct conflict among the group members. The out-group members may
additionally not hold respect for the leader, and he may only be respected out of the position of
authority he holds. This conflict may negatively affect production and performance among the
employees. Transformational leaders are considered to be innovators in society. They think big
and inspire the workforce toward creativity and innovation (Landis, Hill and Harvey, 2014,
pp.97). However, such leaders run a risk of criticism. For example, Steve job was very fanatical
about innovation and excellence at Apple. This made him disregard counsel from other managers
and stakeholders of the company. At one point, Apple had to fire Jobs even though he was
reinstated back on later year. This shows that pushing transformational leadership too far can
result in potential failure.
Conclusion
The foregone has described the characteristics of both leader-member exchange theory
and transformational leadership theory. Transformational leaders have been established as those
that drive innovation within the members of the workforce. There are situations where both
theories have been established to portray negative effects to the organization operations. LMX
model shows the characteristics that leaders look in their in-group members. Transformational
leadership, on the other hand, has been successful over the years and has resulted in employee
satisfaction, and facilitated the innovation culture within the organization. Some of the

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disadvantages of the LMX model has been portrayed in the seclusion of the out-group members.
These employees tend to be dissatisfied with their working conditions as they are not given
opportunities to develop themselves. In retrospect, transformational leadership has been found to
be specific to certain organization environment with already established rules and systems.
However, the transformational leadership model is the better theory as it fosters innovation and
inclusivity of all the employees in the decision-making process.

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