Relationship Between Authentic Leadership, Leader-Member Exchange, And Psychological Capital In The Workplace

Authentic Leadership

The business environment nowadays faces problems in the field of managerial and employee relationships which certainly influence the business outcomes and performance. The business leaders are facing difficulties in obtaining optimal results due to lack of proper guidance to the subordinates (Leroy et al., 2015). The organization will not face such kinds of obstructions and the targeted goal will be achieved if they adopt an amazing leadership style. It will encourage the employees to have faith and confidence over their manager and put hard efforts to achieve organizational goals (Kim & Diefendorff, 2015). One of the most accepted theories in the third millennium is the authentic leadership theory. Although there has been many researches till date on topics like authentic leadership, leader-member exchange and psychological Capital but no such correlation between the three topics have been elaborated earlier. This essay will show the relationship between Authentic leadership, Leader-Member Exchange (LMX) and employees’ Psychological Capital (Psy Cap) and how each component is incomplete without the other. The analysis is supported by literature reviews of six different scholarly articles.

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There is a range of different scholarly definitions of authentic leadership and there has been no shortage regarding the concern but the articles agree that authentic leaders are self-sufficient individuals, who are well aware of their limitations, strengths and emotions too. According to Regan, Laschinger and Wong (2016) they are the most genuine and honest personalities who never behave differently at different situations towards their subordinates. The authentic leaders are always in pursuit of better outcomes, advancements of the organization and the progress of the employees, not run behind their own promotion, power and money. They do not treat their employees only with their minds but with their hearts also (Laschinger et al., 2015). That does not mean that authentic leaders are driven by emotions only rather they equally employ their judgement capabilities and empathetic behaviors. They focus on the long term relationships with the clients and behave according to that (Lyubovnikova et al., 2017).

The leader –member exchange theory began first in the 1970s.The theory comprises of the relationships between the leaders and the subordinates (Laschinger & Fida, 2014). The theory highlights how the relationship should be like and the three phases that it passes through. There are three stages which includes role –taking, role –making and routinization. Role-taking is the initial stage when the team members join the team and their working capabilities are assessed (Cianci et al., 2014). The team leader or the manager generally expect them to be had working, talented and prove to be loyal. Burke (2017) argues that if then new team members prove to be loyal, skilled and competent, they are categorized in the In-group and if they prove to be comparably slow and incompetent, they are placed in the out-group (Burke, 2017). The in-group members are more privileged because they are provided more opportunities and more challenging tasks where they can improve themselves (Dhammika, 2016). The out-groups can have comparably less access to the manager and provided less opportunity for improvement because they are considered unmotivated and incompetent. It is difficult for an out- group member to get out of this category once put into it.

Leader-Member Exchange

The last phase is routinization where a routine develops between the manager and the team. The in-group members start working hard to retain the position and reputation of their leader by showing respect, empathy, trust, competence and persistence (Banguntopo, 2018). The out-group members consequently start disliking their leader and proceed to turn –over to start-over in other organizations or other department. This classification, though subconsciously effects the manner of treatment of the managers towards the subordinates and thereby effecting the members’ performances.

Another component that is Psychological Capital (PsyCap) denotes an individual’ positive psychological approach towards progress and development by proving to be confident, effortful and challenging in taking difficult tasks and also succeed in its course. Jansen (2015) puts forward that the concept was originally developed in an organizational milieu and in short, the four major elements of this concept are Hope, Efficacy, Resilience and Optimism(HERO). The idea is connected to the employee’s job satisfaction and emotion based performance level (Boon & Biron, 2016). He suggests an organization must focus on the psychological development of the employees rather than educational developments because human work-power and abilities are less inimitable than other factors such as financial, physical and structural resources (Chow, Lai & Loi, 2015). There are two types of abilities: explicit and tactic. However, the skill, knowledge and competencies gained from education and experience are referred to as explicit knowledge and the type of ability that grows over time staying at the organization is referred to as tactic knowledge which is completely independent and unique (Breevaart et al., 2015). Therefore, a company is supposed to invest on strengthening the tactic knowledge of the employees rather than skilled temporary employees.

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According to Rego et al., (2012) authentic leadership (AL) is a type of leader behaviour that “draws upon and promotes both positive psychological capacities and a positive ethical climate, to foster greater self-awareness, an internalized moral perspective, balanced processing of information, and relational transparency on the part of leaders working with followers, fostering positive self-development”. The author merges the concepts of authentic leadership, psychological capital and creativity literatures showing that authentic leadership predicts the creativity of the subordinate member based on the psychological capital (Rego et al., 2012). The employee’ psychological capital comprises of the four elements which can be improved by authentic leadership and multiply the creativity of the employee and subsequently the growth of the organization too (Rego et al., 2012).

Psychological Capital

For example, the authentic leaders can elaborate the optimism of the employees by enhancing their recognition and interactions with the leaders and encouraging their positive emotions (Rego et al., 2012). They can uplift the employee’s creativity and performance by being caring, fair about the employee’s feelings, providing clear and open interaction, rewarding decent and systematic conduct and giving little attention to individual employees can elevate the optimistic approach of the employees and strengthen their will to succeed in their career (Rego et al., 2012). Psychological capital may prove to be one important resource in fighting with workforce stress and minimize the symptoms of stress. Positive PsyCaps are instrumental in better adapting with the stressful environment. They opine that people with low efficacy are convinced that putting effort to difficult tasks is futile so these kinds of people are more prone to possess negative stress symptoms, while people with challenging mindset are likely be sufficiently competent and effective.

As per the view of Avey et al., (2011) organizational change emerges from the discrepancy in the environment and the gap between the expected and current results (The managers of the organization get affected by this mismatch and change because the pressure foe employing effective strategies fall on their shoulders and the employees face difficulty in adopting the new change. The author suggests that employee resistance is one of the biggest problem often faced by the organization. Positive psychological capital and positive emotions are contributor in defeating the negative reactions such as deviance and cynicism associated with organizational change (Avey, Wernsing & Luthans, 2008). The employee’s thoughts and awareness, mindfulness are considered to be positive emotions. It has also been proved that even if the employee lacks psychological capital, positive emotions namely mindfulness can compensate the gap to a greater extent (Avey, Wernsing & Luthans, 2008). The mindful employees have more opportunities to be creative, hopeful, optimistic, efficacious and resilient at work. The authors mainly analyse the relationship between employee PsyCap and positive emotions (Avey, Wernsing & Luthans, 2008). Employees having higher psychological capital have the possibility of possessing higher positive emotions and subsequently are less prone to be affected by cynicism and deviant behaviors (Avey, Wernsing & Luthans, 2008).

Avey, Luthans and Jensen, (2009) are of the opinion that there is a list of factors that are responsible for the workplace stress such as technological change, competitive pressures, uncomfortable work environment and managerial humiliation. Immense workload and imposed business travel also increases the stress levels (Avey, Luthans & Jensen, 2009). The authors give the example of the U. S business scenario implying that one-fifth of the U.S professionals work for more than 60 hours in a week and more than 12 hours on call affecting their mental health (Avey, Luthans & Jensen, 2009).The American Psychological Association noted that almost 50% of Americans agree that their stress has increased remarkably in the past five-six years. It results in employee burnouts, job dissatisfaction and decreases the work performance level which a great human resource issue (Avey, Luthans & Jensen, 2009). The authors opine that efficacy is strongly associated with workforce performance and expected outcomes. Optimism has been found by these authors as a key aspect in the relationship between job stress and job characteristics. Those workers with higher optimism are less likely to show symptoms of stress. The meta-analysis by the authors suggests that cognitive-behavioral approaches can be considered to be most influential in reducing the symptoms of stress and anxiety improving the quality of work life. It suggests that PsyCap trainings can develop the components of optimism, efficacy, hope and resilience (Avey, Luthans & Jensen, 2009).

Relationship between Authentic Leadership, Leader-Member Exchange, and Psychological Capital

Avey et al., (2011) giving proper evidence comments that psychological capital is highly associated with the employee attitudes often considered desirable by the human resource management. Psychological wellbeing at work, job satisfaction and organizational commitment are included in this (Avey et al., 2011). Along with its significant association with attitudes of the employees, the analysis of this article suggest that the behavior of the employees is also connected with it. The meta –analysis done by the above mentioned authors provides evidence based support the important role that PsyCap plays in determining the employee attitudes behaviors and performances (Avey et al., 2011). It is notable that there have been many researches regarding the importance and role of psychological capital and the managers have become confident regarding the necessity of training to enhance the psychological capital that would improve the work performance of the employees (Avey et al., 2011). It is also equally true that there is a need for further and in-depth research regarding the topic for better understanding the related issues (Avey et al., 2011).

In the article of Story et al., (2913) the challenges that the global HRM is facing are describes properly. The problem is mainly in maintaining the relationships between the global leaders and the followers. Although it has already been declared as a complex issue, the leaders today are facing more problems in keeping a healthy bond because the global distance is creating problems Having positive leaders as well as followers is like having the best advantage in the company within the extremely competitive market(Story et al., 2013) .The global environment market currently has the ‘roller coaster ride ‘which demands multinational employees highly motivated and ready to take up new challenges to accomplish their goals (Story et al., 2013).

The leaders and the employees both are supposed to be able to find out innovative ways to overcome the hurdles that come in the course of work and view them as learning procedures (Story et al., 2013). The leaders with high PsyCap are filled with the essential elements including hope, optimism, efficacy and resilience to perform up to the mark in the demanding and negative environment. Story et al., (2013) are of the opinion that due to the excessive vitality in the global environment, the IHRM of various multinational companies are expected to maintain the accelerated changes causing to move their focus from establishing workable long-term programs and advances toward binding together a list of more short terms for organizational effectiveness (Story et al., 2013). This technique supports a shift in talent management, effective for those people who can work at a distance too. Such employees can well adjust with the changing organizational goals and manage to maintain their career pathway by adopting their own strategies (Story et al., 2013).

Organizational Change and Workplace Stress

As per the view of Luthans et al., (2010) a specific training model is necessary called the Psychological Capital Intervention intended to improve and develop organizational participants and their overall PsyCap. However, there are a number of studies describing that psychological capital is influential for the attitudinal and behavioral aspects of the employees but psychological capital can also be increased by introducing trainings for the employees (Luthans et al., 2010). The managers of any organization can follow the PCI and enhance their own and their associates’ performances.

The organizations can attain higher organizational goals and experience huge profits by encouraging the psychological capital of the subordinates and other professionals (Luthans et al., 2010). The authors demonstrate through their research that psychological capitals are important as they provide the human resource management with a new kind of organizational growth and advancement (Luthans et al., 2010). The development in the human resource supports an employee to become more resilient to rising adversity, more optimistic for the future, more efficacious in accomplishing jobs and more hopeful in understanding and determining pathways to achieve goals (Luthans et al., 2010).

Therefore, from the above discussion and the different literature reviews it can be well understood that within an organization the employee and the employer or the leader play equally important roles to support the organization to grow and develop more. The organizations and the individuals tend to grow faster when the positive impacts are given more importance than the negative aspects. The current practitioners, multinational leaders suggest that there is a need for engaged employees than before. The authentic leadership, leader-member exchange and the psychological capital are the antecedents of the work engagement. The essay gave the definitions of what is an authentic leadership, what are the qualities of authentic leadership, the relationship between leaders and the members and an in-depth description of psychological capital employees and their impact on various organizational aspects. Six articles have been chosen to analyse the interrelations in a better way.

The essay defines authentic leaders to be honest and genuine personalities who support the employees in every way to attain organizational goals. Few of the most important characteristics of authentic leadership are self-awareness, honesty, transparency of communication, equal and balanced treatment towards the subordinates. The leader-member exchange is the relationship and the impression of both the persons towards each other. The final factor is the psychological capital which is the most important factor and strongly associated with the employee performance and the quality of the leadership. The literature reviews of the six relevant articles show that there are four principal elements of psychological capital namely hope, efficacy, optimism and resilience. Thee four factors can be developed within an individual to support him in being more competent and work efficient. An organization can increase the effectiveness of both the leader and the follower by adopting certain strategies such as Psychological Capital Interventions.

Factors Affecting Workplace Stress


Avey, J. B., Luthans, F., & Jensen, S. M. (2009). Psychological capital: A positive resource for combating employee stress and turnover. Human resource management, 48(5), 677-693.

Avey, J. B., Reichard, R. J., Luthans, F., & Mhatre, K. H. (2011). Meta?analysis of the impact of positive psychological capital on employee attitudes, behaviors, and performance. Human resource development quarterly, 22(2), 127-152.

Avey, J. B., Wernsing, T. S., & Luthans, F. (2008). Can positive employees help positive organizational change? Impact of psychological capital and emotions on relevant attitudes and behaviors. The journal of applied behavioral science, 44(1), 48-70.

Banguntopo, U. S. (2018). The effect of leader member exchange to dimension of readiness for change. Jurnal Akuntansi Manajemen dan Ekonomi, 20(2), 30-37.

Boon, C., & Biron, M. (2016). Temporal issues in person–organization fit, person–job fit and turnover: The role of leader–member exchange. human relations, 69(12), 2177-2200.

Breevaart, K., Bakker, A. B., Demerouti, E., & van den Heuvel, M. (2015). Leader-member exchange, work engagement, and job performance. Journal of Managerial Psychology, 30(7), 754-770.

Burke, D. V. (2017). Managers’ Emotional Intelligence and Employee Turnover Rates in Quick Service.

Chow, C. W., Lai, J. Y., & Loi, R. (2015). Motivation of travel agents’ customer service behavior and organizational citizenship behavior: The role of leader-member exchange and internal marketing orientation. Tourism Management, 48, 362-369.

Cianci, A. M., Hannah, S. T., Roberts, R. P., & Tsakumis, G. T. (2014). The effects of authentic leadership on followers’ ethical decision-making in the face of temptation: An experimental study. The Leadership Quarterly, 25(3), 581-594.

Dhammika, K. A. S. (2016). Visionary Leadership and Organizational Commitment: The Mediating Effect of Leader Member Exchange (LMX). Wayamba Journal of Management, 4(1).

Jansen, A. (2015). Implicit leadership theories, leader-member exchange and its workplace outcomes: a case of South African call centre agents.

Kim, T. Y., Liu, Z., & Diefendorff, J. M. (2015). Leader–member exchange and job performance: The effects of taking charge and organizational tenure. Journal of Organizational Behavior, 36(2), 216-231.

Laschinger, H. K. S., & Fida, R. (2014). A time-lagged analysis of the effect of authentic leadership on workplace bullying, burnout, and occupational turnover intentions. European Journal of Work and Organizational Psychology, 23(5), 739-753.

Laschinger, H. K. S., Borgogni, L., Consiglio, C., & Read, E. (2015). The effects of authentic leadership, six areas of worklife, and occupational coping self-efficacy on new graduate nurses’ burnout and mental health: A cross-sectional study. International journal of nursing studies, 52(6), 1080-1089.

Leroy, H., Anseel, F., Gardner, W. L., & Sels, L. (2015). Authentic leadership, authentic followership, basic need satisfaction, and work role performance: A cross-level study. Journal of Management, 41(6), 1677-1697.

Luthans, F., Avey, J. B., Avolio, B. J., & Peterson, S. J. (2010). The development and resulting performance impact of positive psychological capital. Human resource development quarterly, 21(1), 41-67.

Lyubovnikova, J., Legood, A., Turner, N., & Mamakouka, A. (2017). How authentic leadership influences team performance: The mediating role of team reflexivity. Journal of business Ethics, 141(1), 59-70.

Regan, S., Laschinger, H. K., & Wong, C. A. (2016). The influence of empowerment, authentic leadership, and professional practice environments on nurses’ perceived interprofessional collaboration. Journal of nursing management, 24(1), E54-E61.

Rego, A., Sousa, F., Marques, C., & e Cunha, M. P. (2012). Authentic leadership promoting employees’ psychological capital and creativity. Journal of business research, 65(3), 429-437.

Story, J. S., Youssef, C. M., Luthans, F., Barbuto, J. E., & Bovaird, J. (2013). Contagion effect of global leaders’ positive psychological capital on followers: does distance and quality of relationship matter?. The International Journal of Human Resource Management, 24(13), 2534-2553.