Leader-member exchange (LMX) theory

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Leader-member exchange (LMX) theory There are leadership theories that organizations can use to manage workplace diversity and improve workers' performance, particularly the leader-member exchange (LMX) theory. According to Shaban (2016), this theory maintains that organizational leaders should build individualized working relationships with the employees rather than treating all employees as a collective group using a similar leadership approach. This relates to what Gomez-Mejia, Balkin, and Cardy (2012) describe as a cultural relativity approach to management that involves adapting management practices to a diverse workforce's values, attitudes, and behaviors. The Leader- member exchange theory concerns the dyad or the relationship between the organizational leader and each employee independently as opposed to the relationship with the entire team. This theory also emphasizes that leaders acknowledge the presence of in-groups and out-groups within a team. Shaban (2016) advises that leaders engage more with the in-group members and offer tangible rewards to them but treat out-group members based on the formal contract agreement and offer them support as outlined in the contract. According to him, the significant advantage of the Leader-member exchange theory in managing diversity is that it allows leaders to treat each member of the workplace team independently rather than collectively. He also contends that leader-member exchange theory allows organizational leaders to invest in the in-group members with higher productivity (Shaban, 2016). Thus, he advises leaders to increase in-group members and reduce out-group members to build high-quality relationships with the employees. But Shaban’s (2016) arguments are empirically unsubstantiated because recent research evidence has shown that nationality and value similarity are not associated with leader-member exchange theory (Pichler et al., 2019). In their study to investigate social exchange and diversity from the sample of 63 managers of Dubai-based multinational firms, Pichler et al. (2019) showed that profound similarities between managers and followers were unrelated to increased leader-

member exchange as expected. This empirical evidence indicates that leader-member exchange may be an inappropriate theory for workplace diversity.

References Shaban, A. (2016). Managing and leading a diverse workforce: One of the main challenges in management. Procedia Social and Behavioral Sciences, 230 , pp. 76-84. https://doi.org/10.1016/j.sbspro.2016.09.010.

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