Issue: Summer 2002 Mission Current Issue Editorial Board Past Issues Kravis Leadership Institute Claremont McKenna College Fairness in Leader-Member Exchange Theory: Do We All Belong On The Inside? By Nathan Harter Purdue University and Donna Evanecky, Purdue University at Kokomo Contact Us Call for Papers Academic Citation: Nathan W. Harter and Donna Evanecky, \"Fairness in Leader-Member Exchange Theory: Do We All Belong on the Inside?\" Kravis Leadership Institute Leadership Review, Summer 2002. An abridged version of this paper was presented in March, 2002, at the thirtysecond annual conference of the Popular Culture Association, in Toronto. About the Authors: Nathan Harter has taught Organizational Leadership for twelve years at Purdue University, after practicing law in Rising Sun, Indiana. Associate Professor Harter has pursued studies into the philosophical underpinnings of leadership. Donna Evanecky joined the Purdue University School of Technology at Kokomo as Assistant Professor for the Department of Organizational Leadership and Supervision in August 2001. Evanecky has eight years of supervisory, engineering, and quality experience, along with extensive education, teaching, and technical expertise. The past ve years of Evanecky's career were spent at DaimlerChrysler's Indiana Transmission Plant in Kokomo. INTRODUCTION Leader-Member Exchange theory (or LMX) describes differences in the way leaders treat the in-group and the out-group. LMX then prescribes bringing all followers into the in-group. This paper questions the justice of arrangements both described and prescribed by LMX. In what respect are distinctions between in-groups and out-groups unfair? Are these distinctions eradicable in fact? Would it even be fair to try eradicating them? E-mail this page THE IMPORTANCE OF FAIRNESS TO LEADERSHIP GENERALLY A number of writers emphasize the role of fairness in the relationship between a leader and a follower, even if they do not agree on its importance or what exactly constitutes being fair. Jerald Greenberg, one of the most prominent authors in the eld of organizational justice, makes the observation that people all have perceptions of fairness. People behave as though it matters (Greenberg, 1996). So, for all intents and purposes, in the leadership process, fairness matters. This is a reassuringly empirical place to begin. In what way does it matter? The answer to this question is not so clear. Going all the way back to The Prince (Machievelli, 1531/1991), the perception of fairness matters a great deal because followers believe that it matters. It is that simple. For this reason, a prudent leader would certainly try to seem fair. The truth of the matter (Machiavelli argued) is that leader effectiveness is more important ultimately than fairness, so a leader may in fact be unfair when it serves his ends - so long as he remembers to keep up appearances. Fairness is an expectation that followers have and little else. What a leader must remember is that a follower's perception is their reality. Seem to others to be fair, he advises, and you can literally get away with murder. Machiavelli was responding to a series of writings about political leadership that had told leaders to practice virtue. He changed the tone of the discussion by saying that in reality, doing the right thing morally or spiritually often meant doing the wrong thing when it came to being effective. In other words, being fair does not always work. Right does not make might. Virtue can ruin leadership. Effectiveness and ethics are two separate things. Many writers since have tried to refute the old Florentine, with varied success. The noted philosopher John Rawls insists for example, \"Justice is the rst virtue of social institutions.... [L]aws and institutions no matter how efcient or well-arranged must be reformed or abolished if they are unjust.\" Rawls then wrote that \"one may think of justice as fairness...\" (Rawls, 1971, p. 111). His famous principle of fairness \"holds that a person is required to do his part as dened by the rules of an institution when two conditions are met: rst, the institution is just (or fair),...and second, one has voluntarily accepted the benets of the arrangement or taken advantage of the opportunities it offers to further one's interests\" (Rawls, 1971, p. 111f). We shall return to this principle soon. The point is that not everyone agrees in what way fairness matters. So, people all have perceptions of fairness, but they do not agree. Why should leaders try to understand and overcome these differences? The answer is that patterns of fair dealing build trust. Trust accumulates, making relationships more reliable. Reliability Trust accumulates, making relationships more reliable. Reliability makes relationships more efcient, if not more pleasant, including the relationship between a leader and a follower, (e.g., Gardner, 1990, p. 33; Fukuyama, 1995, p. 21; & Young, 1991, chap. 2). This is part of the reason why issues of fairness and trust lie at the heart of leadership. This paper questions the justice of arrangements both described and prescribed by Leader-Member Exchange Theory. In what respect are its distinctions between in-groups and out-groups unfair? Are these distinctions eradicable in fact? Would it even be fair to try eradicating them? The rst step in this paper is to explain LeaderMember Exchange Theory and its ethical implications. WHAT DOES LMX DESCRIBE? Leader-Member Exchange Theory (also known at one time as vertical-dyad linkage) goes back over twenty-ve years (Northouse, 2001, p. 111), and builds on the seminal work of the sociologist Georg Simmel, nearly one hundred years ago. In its current form, Leader-Member Exchange Theory (or LMX, for short) emphasizes that the relationships a leader has with followers can be divided into two types. These two types of relationship tend to divide followers into two groups - one group for the one type of relationship and another for the other type. The two groups are referred to as the \"ingroup\" and the \"out-group\". Again, the determining factor as to which sub-group a follower belongs to has to do with the nature of that person's relationship with the leader, (Northouse, 2001, p. 112). This is important because it places a great deal of responsibility for the split on the leader directly and not on cliques or coalitions. Thus, the ethical implications of LMX are to be traced to the leader, which is one of the theory's limitations. The distinction between the two groups is not arbitrary. According to LMX, the in-group can be distinguished from the out-group in the following manner. Members of the in-group will have more responsibility and decision-making inuence than those in the outgroup. Quite probably, the in-group member will have higher job satisfaction and access to valuable resources, such as money, time, and authority because of their status with the leader. Along with these, the leader will demonstrate trust, support, collective goals, as well as initiative beyond the scope of the everyday job toward the member of the in-group, in exchange for more effort and enthusiasm (Northouse, 2001, p. 114-115, 118). In contrast, members of the out-group are given little support or responsibility, along with minimal inuence in decision-making. Overall, lack of interaction with out-group members by the leader is apparent. For example, perhaps the leader disagrees with a member's views and work style. The leader may interact very little with the member because of this dissimilarity. Thus, it is likely that the member and the leader will develop a low quality relationship, ultimately driving the member into the out-group. He or she becomes marginalized. This distinction between groups goes all the way back to biblical times. In the Old Testament, II Kings 14:28 refers to King Jeroboam's administration ignoring policies of justice and fairness. As a result, the rich became richer, and the poor, poorer. There was an in-group and an out-group created by the different relationships they had with the king. This historical anecdote correlates with organizations today with respect to the in-group getting more than the out-group. People in the out-group are so oppressed or invisible that it is hard for the leader to notice their plight. Instead, the leader continues to give more challenge, freedom, and responsibility to the in-group members. They in turn do more to justify their status, which puts them at the forefront of the leader's mind the next time a job needs to be done and the next time a perquisite comes along, and so it continues in a spiral: the rich do get richer. In other words, LMX describes a disparity that can be traced to the leader. Something the leader says or does over time contributes to the creation of two unequal factions. On the surface, this seems unfair. Disparities of any kind are highly suspect, especially if one begins from an egalitarian viewpoint that everyone ought to be treated the same. Making matters worse is the tendency for the disparity to become more pronounced and permanent, so that people become xed in their groups, notwithstanding their talent or efforts. Once the groups take shape, they tend to stay that way and rigidify. This too seems unfair, because now members begin each new day on an uneven playing eld. The out-group would have to go to extraordinary lengths to reach the status and power already being enjoyed by the in-group, and it becomes simpler to give up. The disparity supposedly affects productivity, and that makes sense (Northouse, 2001, p. 115 & 119). Once the disparity strikes participants as unfair (Northouse, 2001, p. 120) and they conclude that the leader either caused it or at least has not repaired it, they are likely to question the leadership itself. That is not good. So what does LMX recommend that the leader do? WHAT DOES LMX PRESCRIBE? LMX proceeds as though the division into in-groups and out-groups is both unproductive and unfair. Consequently, it offers to a leader certain prescriptions to prevent or x the situation (Northouse, 2001, p. 115-118). LMX prescribes rst that leaders become cognizant of their attitudes toward all of their members. Certainly a leader may not like some people as much as others, but a leader must separate personal feelings from the task at hand. The task is leadership. If a member sees that a leader treats members differently, especially over time, he or she may perceive inequity. As the Equity Theory attributed to J. Stacey Adams (1965) states, a member perceives what they can get from a situation (outcomes) in relation to what they put into it (inputs), and then compare their input-outcome ratio with the inputoutcome ratio of others. If an inequity is perceived, the member will attempt to correct it, perhaps by reducing effort or quitting altogether. Say for example that six people work for a given manager. All but one of these employees is male. As time passes the female begins to realize the boss is not treating her as he does her co-workers, even though she works longer hours and completes more successful projects than do her co-workers. She is likewise not given extra responsibility, freedom, or special perks. She is in the out-group. Or, in this instance, she is the out-group. As time goes on, she begins to do things to make the situation equitable -- things like discontinuing her long hours, losing dedication, and ultimately resigning. Although this is an illustration, it is not ction; it actually happened to one of the authors in a previous career. Can and will a leader stop this segregation of in-group and outgroup from occurring? That is the question LMX expects a conscientious leader to answer. Warren Bennis has been quoted as saying, \"Good leaders make people feel that they're at the very heart of things, not at the periphery. Everyone feels that he or she makes a difference to the success of the organization. When that happens people feel centered and that gives their work meaning.\" (EduLeadership.com) This is the rst step under LMX that a leader must take toward ending the segregation of in-group and out-group members. The leader's success depends upon grasping this truth. It has been said that for a leader to be successful, they must surround themselves with competent people. More likely than not, a leader will have very competent people within the out-group, but if he or she is not using these valuable resources fully, then they cannot contribute to the leader's success. At the end of the day, if not everyone is a member of the in-group, then the leader has failed and has jeopardized the potential for success. This at least is the prescription for managers. In the end, LMX advises a leader to avoid the temptation to participate in creating disparities and to become especially sensitive to the perceptions of followers, so that as a consequence all followers might be brought within the in-group. QUESTIONS OF FAIRNESS LMX is coherent, and it takes workplace justice seriously. For these two reasons, if for no other, it deserves further study and respect. Our purpose in this section is to raise questions about the ethics of LMX: Is it fair? By the same token, is the situation it hopes to remedy unfair? 1. As a preliminary matter, we would ask whether LMX is overly simplistic, offering an either/or schema (one is a member either of the in-group or of the out-group) rather than a more subtle continuum of being more or less \"in\" as a matter of degree, so that clear groups are really the product of one's imagination or interpretation, like polar extremes on a graduated scale? Could that not be possible at least sometimes? Andy is more favored than Betty, who in turn is more favored than Clark, and so on. The assumption that there are in fact two distinct groups, as opposed to degrees of being \"in\ Situational Leadership Theory: An examination of a prescriptive theory