Examining Group- and Individual-level Differences in LMX Experiences on Individual Outcomes

Abstract

Applying arguments from leader-member exchange (LMX) and social comparison theory, we explore a three-way interaction between LMX quality, LMX differentiation (variance in LMX across workgroups), and LMX dissimilarity (within workgroup individual-level differences in LMX) to predict individual performance. The three-way interaction predicted three mediators – engagement, satisfaction, and perceived stress – such that high LMX differentiation and high LMX dissimilarity resulted in the strongest positive effect on engagement, satisfaction and stress as LMX quality increased. We reason this condition represents a minority employee in terms of LMX, working with a leader who is discerning and/or divisive. Such a minority employee, we argue, is likely motivated but also pressured to maintain that coveted status. All other combinations of LMX differentiation and LMX dissimilarity exhibited weaker relationships with predictors than the high-high condition. In turn, engagement and satisfaction positively predicted supervisor-rated performance, but perceived stress was not a significant predictor of performance. We discuss contributions our study makes to the literature in untangling the joint effects of LMX factors at multiple levels and shedding light on the nomological network of LMX differentiation; as well as practical recommendations for managers in improving leader-member relations, and, as a result, performance.