A Strategic Approach to Employee Relationships
San Jose’s Adobe is renowned for popular software development like Photoshop, Illustrator, and Acrobat, among others. Its products are used by millions of people around the world, yet the company encourages its managers to get to know their own employees on a personal level. By doing so, Adobe is more engaged and productive because its employees are more engaged and focused. In this latest Velocity blog, we dive into understanding leader-member exchange (LMX), how it relates to employee experience, and how you can improve employee experience using LMX theory in your own organization.
LMX – What It Is and Is Not
To start, “leader-member” refers to the manager and employee of, or direct report to, that manager. Leader-member was used academically when first conceived by Scandura & Graen in 1984 and expanded upon in 1995 by Graen & Uhl-Bien. For the sake of brevity, LMX is used to represent this critical relationship.
LMX theory focuses on relationships leaders have with individual members in organizations. Leaders form different types of relationships, or exchanges, with their members – positive ones with in-groups and more distant ones with out-groups. High-quality LMX (i.e., high LMX) involves trust, communication, and support, leading to higher job satisfaction and performance for in-group members; further, in-group members often go above and beyond their job descriptions. In contrast, low-quality LMX (i.e., low LMX) results in disengagement and dissatisfaction among out-group members. A greater prevalence of low LMX today is the popular trend of “quiet quitting” – i.e., going through the motions and doing the minimum amount of work to retain employment. This is nothing new, it’s just a different way of saying low LMX!
LMX is not a zero-sum concept always having in-groups and out-groups. Improving LMX with one member does not mean diminishing LMX with another. Some leaders suggest “you can’t win ‘em all,” that there will always be a mix of high- and low-LMX relationships, and believe in the zero-sum game. Improving leaders’ abilities to reach all members of their teams equates to high-LMX relationships for more employees.
LMX is not a relationship where only leaders act and only members react. This relationship is rooted in reciprocity – a leader appreciates a “shout-out” from members just as much as members do from leaders. At Velocity, all employees are encouraged to give shout-outs called “High Fives” via the 15Five platform, recognizing co-workers up and down the organization, giving them well-deserved credit on a job, or recognizing them for a personal accomplishment worthy of cheer. This strengthens bonds between all employees and results in a close-knit team.
Building on reciprocity, trust is not just an employee’s trust in a leader, it is the leader’s trust in a member to complete an important project requiring a quick turnaround time, as an example. When an employee stays late one day to work on a task for a manager, it is not uncommon for that manager to reciprocate – formally or informally – by having the employee go home early another day as a reward. This trust and reciprocity are important in the LMX relationship because each party is fully vested in the success of the organization through each other.
EX – What It Is and Is Not
Employee experience (EX) is briefly stated as everything an employee encounters, observes, and feels at work. EX is influenced by factors like work culture, leadership, communication, and opportunities for growth.
EX includes everyday experiences and employee lifecycle events such as new employee recruiting and onboarding, professional development, and retention/exit. It includes the experiences employees have with their managers’ effectiveness. This last point aligns with LMX very closely.
EX is not to be confused with EE (employee engagement). According to Qualtrics, EX creates a positive, supportive, and engaging work environment, ultimately leading to higher employee satisfaction, productivity, and retention. The cumulative effect of experiences by employees drives employee engagement – i.e., possessing physical, cognitive, and emotional resources necessary to invest in their roles – much like experiences drive other outcomes such as inclusion and well-being. Think of employee engagement as a by-product of the daily experiences of employees.
How are LMX and EX connected?
LMX and EX are interconnected because the quality of leader-member relationships significantly influences the overall experience employees have within organizations. Three main points are provided here.
First, LMX shapes the interactions and exchanges between leaders and individual employees. High LMX fosters the traits noted above between leaders and their in-group members. These employees are likely to feel appreciated, engaged, and satisfied with their work, contributing to an overall positive EX. Conversely, employees in low-LMX (out-group members) relationships experience less support and engagement, leading to negative EX.
Second, LMX affects employees’ perception of an organization’s work culture and leadership. High-LMX relationships create positive organizational climates and enhance overall EX as employees feel a sense of belonging and alignment with the organization’s values.
Third, it is not a one-way street with LMX and EX – EX also influences LMX. Positive employee experiences, characterized by opportunities for growth, work-life balance, and supportive environments, encourage leaders to develop stronger relationships with their team members. Leaders who prioritize their employees’ well-being and development are likely to foster high LMX, creating that needed positive feedback loop.
LMX and EX are interconnected in a cyclical relationship. High LMX does its job and enhances overall EX, leading to higher employee satisfaction and engagement; positive EX, in turn, facilitates stronger LMX relationships. Recognizing and nurturing this connection is crucial for organizations to create harmonious and productive work environments where both leaders and employees thrive.
Using LMX to Improve EX
There are ways to improve EX using LMX as noted by the following:
- Increased Trust and Communication: Not all managers are natural leaders, in fact, as many as 60% of new managers underperform or fail within their first two years. In essence, some leaders benefit greatly from leadership development. Improving LMX builds trust and fosters open communication between leaders and employees. When employees trust their leaders – and vice versa – and feel comfortable expressing their ideas and concerns, positive EX manifests where employees feel valued and supported.
- Recognition and Appreciation: Strengthening LMX leads to recognition and appreciation of employees’ contributions. Nearly 4 in 5 employees are highly engaged when they feel strong recognition from their organizations. When leaders have positive relationships with their team members, they are likely to acknowledge members’ efforts, boosting morale and enhancing EX.
- Opportunities for Growth: High-LMX relationships result in leaders actively supporting their employees’ professional development. Offering employee growth opportunities – e.g., coaching or mentoring, development programs, etc. – increases EX by showing employees their career advancement is valued and supported.
- Collaboration and Teamwork: Improving LMX encourages collaboration and teamwork within the organization. When leaders and employees have strong relationships, they are likely to work cohesively, fostering positive team cultures and enhancing overall EX. These highly engaged teams achieve a 41% reduction in absenteeism and a 21% gain in organizational profitability.
- Work-Life Balance: Leaders who prioritize LMX are likely to be empathetic towards their employees’ work-life balance. This consideration for employees’ well-being contributes to positive EX where employees feel cared for and supported in managing their personal and professional lives.
- Reduced Turnover: High LMX leads to high employee retention rates. When employees have strong relationships with their leaders, and vice versa, they are less likely to seek job opportunities elsewhere, resulting in stable workforces and positive EX for remaining employees.
- Employee Satisfaction and Engagement: By focusing on improving LMX, leaders increase employee satisfaction and engagement. High LMX leads to an enjoyable work environment, resulting in higher levels of commitment and enthusiasm among employees.
Investing in leader-member exchange impacts overall employee experience. High LMX fosters trust, recognition, collaboration, and opportunities for growth, which collectively contribute to a fulfilling and positive EX for employees. Organizations that prioritize LMX see improved employee satisfaction, engagement, and productivity.
At Velocity Advisory Group, we discover the unique needs of your business, implement surveys that matter, translate the results into an action plan, and achieve. Contact Us today to finally get your business culture unstuck.