Examining the Effects of LMX Differentiation and Leaders' Relationships with Key Members on Teams: A Social Networks Approach

A key assumption in the leader-member exchange (LMX) literature is that leaders struggle with developing and maintaining high-quality exchange relationships with all of their members. As a natural consequence, leaders typically develop high-quality relationships with a select few of their followers while maintaining formal and distant relationships with others. Such differentiated relationships in teams may have negative consequences, and this dissertation examines how LMX differentiation impacts team performance by creating task and relationship conflict. Furthermore, this dissertation advances theory on LMX differentiation by arguing that not all kinds of differentiation are the same. Specifically, drawing from the literature on social networks and surrogate behaviors, I contend that leaders can mitigate the detrimental effects of LMX differentiation by developing high-quality LMX with members in key positions in team instrumental and expressive networks. I propose that through purposeful differentiation, leaders can mitigate the negative impacts that LMX differentiation has on task and relationship conflict, thereby improving team performance. Data were collected from 123 senior-level teams in a leadership development program. Results revealed that LMX differentiation had indirect negative effects on team performance via task conflict but not relationship conflict. While having high LMX with key members directly contributed to lower levels of conflict in teams, no support was found for hypotheses suggesting that such relationship qualities would moderate the relationship between LMX differentiation and either form of conflict. Despite some null findings and methodological limitations, insights from this dissertation highlight the importance of leaders developing high-quality relationships with influential members in team social networks. This dissertation also advances our understanding of LMX – and by extension, LMX differentiation – phenomena by not only examining two simultaneous team mechanisms, but also incorporating the between-member relationships surrounding leader-member relationships through team social networks. Future research should extend this theoretical framework to different types of teams and explore alternative ways of identifying key members in team social networks.