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What is the relationship between authentic leadership, Leader-Member Exchange (LMX) and employees’ Psychological Capital (PsyCap)? Critically review the literature that explains how to build the Psychological Capital of some different types of employees (such as professionals versus administrative employees, emotional labour, blue collar versus white collar employees, different generational cohort, and/or different ethnicities)? Why do emotions (of for example leaders, managers, employees) significantly impact employees’ performance?


Leadership can be stated as the practical skill that helps to encompass the capability of the major ability of any particular organization or individual for either leading or guiding the other individuals, entire organization and teams (Harris, Li and Kirkman 2014). This leadership has eventually produced the theories after the inclusion of traits, functionality, values, intelligence, behaviours, vision, power and charisma amongst the other members. This leadership is responsible for the involvement of taking significant decisions and creation as well as articulation of clear vision and hence there is an establishment of achievable objectives and goals after providing the major tools and knowledge for achieving them effectively. There is a subsequent relationship within authentic leaderships, leader member exchange theory and finally psychological capital or PsyCap of the employees in an organization (Martin et al. 2016). The following essay will be clearly demonstrating the literature review for explaining the procedure of building psychological capital of the various employees. Moreover, the impact of emotions on the employee performance will also be depicted here.

According to Loi, Chan and Lam 2014, the authentic leadership is the specific approach to leadership, which majorly emphasizes on the building of the legitimacy of leaders via relationships with other members, who value the input and is solely made on the ethical foundations. These authentic leaders could be described as the positive attitude people with specified truthful self-concepts. After building enthusiasm and trust or support from the subordinates, the authentic leaders have the ability for improving team performance and individual performance. There are three distinct qualities of the authenticated leadership, which are self-awareness, balanced-processing, internalized moral perspectives as well as relational transparency.

This leader-member exchange theory or the LMX theory is the specific relationship-based approach towards leaderships, which majorly emphasizes on the dyadic or two-way relationship within followers and leaders. Gu, Tang and Jiang 2015 stated that, this particular theory provides the suggestion that all the leaders could improve the exchanges with one of the subordinates as well as the qualities of this type of exchange relationship influences the responsibilities, access to the resources and performance and decisions. Such relationships are completely on the basis of trust or respect and are the emotional relationship, which could eventually extend beyond employment scope. This specific theory of leader member exchange is broadly utilized by several managers and have replaced all the previous theories.

The psychological capital or simply PsyCap is stated as the positive developing state of any specific person as per the characteristics of higher self efficacy, resiliency, hope and optimism. As per Dusterhoff, Cunningham and MacGregor 2014, the newest approach for gaining popularity in the psychology could be linked with the emotional capital. The psychological capital brings the outcomes for making the significant link between psychology outcomes and economies after taking into account the soft skills as the socio emotional competencies. The psychological capital of the several employees has a positive correlation with the respective attitudes of them. The higher psychological capital employees have major impact on the organizational changes.

Relationship within Authentic Leadership, Leader Member Exchange and Employees’ Psychological Capital or PsyCap

Authentic Leadership

There is the most significant relationship within authenticated leaderships, theory of leader member exchange as well as psychological capital or PsyCap. In each and every organization, this type of relationship is important and significant to obtain better efficiency and effectiveness of the company (Hu and Liden 2013). A positive association is extremely important within the authenticated leadership, theory of leader member exchanging and the major psychological capital for the employees. The major relationships that majorly exist within the emergence of leadership after inclusion of the individual traits like adjustments, extraversion, self efficacy, conscientiousness, adjustments and many others.

The most significant dimensions of this psychological capital or PsyCap are resilience, optimism, efficacy and hope and hence these are the parts of the personal resources of an individual for improving dedication, absorption and vigour in work. Moreover, the PsyCap helps in mediating the relationship between work engagement and authentic leadership. According to Runhaar, Konermann and Sanders 2013, the organizational members with higher level of work management eventually manifest the better level of organizational commitments and they are double productive for those, who all are substantially active for getting engagement within the work. A proper relationship within these authentic leaderships, theory of leader member exchange and the PsyCap or psychological capital is maintained in the report without any type of issue or complexity.

The link between psychological capital and quality of these employee to employee relationship is obtained with the help of the theory of Leader Member Exchange as well as the procedure of the employee engagement (Breevaart et al. 2015). This type of relationship also describes the major effect of the process of employee engagement on employee performances in several work roles. For providing insights to the psychological capital, Leader Member Exchange or LMX has the core influence on work role performance and employee engagement process. The high psychological capital of the organizational employees has the positive relation for the individuals within several work roles. This psychological capital should be developed as well as improved for maintaining this type of relationship for the employees (Graves and Luciano 2013). If this type of relationship will be established in any organization, that particular organization would be getting some of the most important and significant competitive advantages and hence the organization would be enjoying several benefits.

There are four significant and specified capacities of the psychological capital and all of these capacities are important for building the PsyCap for the various kinds of employees. The four capacities of the psychological capital are as follows:

  1. i) Hope: Zacher et al. 2014 stated that, this is the state of positive motivation, which is based on the interactive consequent sense of the successful agencies or goal oriented energy and the pathways for meeting respective goals and objectives. The respective individual gets a high hope if he or she has the hope of reaching to any specific goals and implement the ideas for attaining those goals. The main aim of the goals is to be realistic as well as inspiring. Hope is the most important requirement for building psychological capital effectively.
  2. ii) Optimism: The next PsyCap capacity is the optimism. It is stated as not only the expectation of good things, but also having the feeling that only positive events would be occurring for the person (Kimura 2013). These positive events should be internal, pervasive and permanent. Optimism is about having faith for the own ability in improving any particular situation.

iii) Self Efficacy: This is the third capacity that is referred to as the task specified self confidence with the belief that they have the ability of accomplishing the objectives effectively. The confidence of the employees for performing more proactively and having broader roles is the major requirement of this particular psychological capital.

  1. iv) Resilience: The fourth or the final PsyCap capacity for the different types of employees in any organization is resilience (Wang et al. 2015). It is completely based on the adversity. The returning to the former functioning as well as learning level is done here from experience. The employees hence should have the ability of coping and thriving with the obstacles for the work.

According to Li and Liao 2014, the professional employees refer to those specific employees, who is the member of any organization or profession or the person, who is earning living from professional activities. These professional employees are also responsible for describing the educational training for preparing the members of profession with the specified skills and knowledge required for performing the roles in the profession. There are several ethical as well as moral obligations of the professionals and these are required to be followed. The capacities of PsyCap like hope, optimism, resilience and self efficacy are extremely important for the professional employees for maintaining their work effectiveness.

Leader Member Exchange

The administrative employees are those employees, who majorly exercises the discretion as well as independent judgment during completing his or her duty (Tse et al. 2013). The organizational policies and business operations are eventually involved in the significant roles and responsibilities of these administrative employees. Resilience and self efficacy are the most significant capacities that build the psychological capital.

Emotional labour is stated as the procedure to manage or control the significant expressions and feelings for the core purpose of fulfilling the emotional job requirements. The several workers re eventually expected for regulating the emotions while proper interactions with the customers, superiors and co-workers. The emotional labour also involves analysis as well as decision making in respect to the emotional expressions (Casimir et al. 2014). There is a variety of occupational fields that are majorly expected for managing the emotions as per the demands of the employers. Since, the guarded professions of secrecy like social worker, doctor, psychiatry, national security and several others are important to control their emotions for work, it has a significant impact on the employee performance. The PsyCap capacities of self efficacy, hope and resilience are the extremely important and significant for the emotional labour of various types of employees within the particular organization.

As per Jha and Jha 2013, the next type of employees is the blue collar employee. It solely refers to hose employees, whose job subsequently entails physical labour either entirely or largely. These employees generally work in the factory or workshop. For any particular piece of work of blue collar, it is directly related to the outcomes that are being generated by the organization and the end results should be tangible and identifiable. These blue collar employees have to do excess hard work manually and hence capacities of psychological capital are important for them. These employees should comprise of hope, optimism, self efficacy and resilience. These employees should have a positive attitude towards work for completing the work load given to them.

On the other hand, the white collar employees are those persons, who are responsible for performing professional, managerial and administrative works. These white collar works could be performed within any administrative setting and office. These employees do not have to work manually like blue collar workers and hence the PsyCap capacities like optimism and self efficacy are required for them (Li and Liao 2014). These white collar employees should also have a positive work attitude for doing any type of managerial works.

Emotions are described as the conscious experiences that are being characterized by the intense mental activities as well as certain measure of pleasure and displeasure. The emotion is mostly intertwined with temperament, personality, mood, motivation and disposition. As per LMX theory, cognition is one of the major aspects of emotions. These aspects that are acting primarily on emotions and versions of those emotions which the individuals could feel. The mental processes are extremely important for the perfect interpretation of several events. These emotions have a stronger impact on the performance of the employees of an organization (Kimura 2013). The job performance, team spirit, leaderships, turnover and skills of decision making are also affected with these emotions. Moreover, creativity, innovation as well as interpersonal relations are also directly influenced by employees’ emotions. The well being or the job satisfaction of the employees are even affected by emotions. Any organization gets its competitive advantages when every employee is working properly and this could only happen when the employees of that company are mentally stable.

Psychological Capital or PsyCap


Therefore, from the above discussion, it can be concluded that positive organizational behaviour majorly focuses on the ability of employees thriving within the respective work place and also attaining the peak performances. The qualitative or the cross sectional survey is required for the measurement of retaining the original factor structure or items. However, the significant work engagement as well as the followership measures are being adapted for the proper improvement of internal reliability and construction of validity of the instrument. A better factor structure of the psychological capital is confirmed. The above essay has properly explained the relationship within authentic leaderships, theory of leader member exchange and the psychological capital or PsyCap with major details. The procedure of building the PsyCap for several types of employees and the emotions have the major impacts on the performance of the employees.


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

Casimir, G., Ngee Keith Ng, Y., Yuan Wang, K. and Ooi, G., 2014. The relationships amongst leader-member exchange, perceived organizational support, affective commitment, and in-role performance: A social-exchange perspective. Leadership & Organization Development Journal, 35(5), pp.366-385.

Dusterhoff, C., Cunningham, J.B. and MacGregor, J.N., 2014. The effects of performance rating, leader–member exchange, perceived utility, and organizational justice on performance appraisal satisfaction: Applying a moral judgment perspective. Journal of business ethics, 119(2), pp.265-273.

Graves, L.M. and Luciano, M.M., 2013. Self-determination at work: Understanding the role of leader-member exchange. Motivation and Emotion, 37(3), pp.518-536.

Gu, Q., Tang, T.L.P. and Jiang, W., 2015. Does moral leadership enhance employee creativity? Employee identification with leader and leader–member exchange (LMX) in the Chinese context. Journal of Business Ethics, 126(3), pp.513-529.

Harris, T.B., Li, N. and Kirkman, B.L., 2014. Leader–member exchange (LMX) in context: How LMX differentiation and LMX relational separation attenuate LMX's influence on OCB and turnover intention. The Leadership Quarterly, 25(2), pp.314-328.

Hu, J. and Liden, R.C., 2013. Relative leader–member exchange within team contexts: How and when social comparison impacts individual effectiveness. Personnel Psychology, 66(1), pp.127-172.

Jha, S. and Jha, S., 2013. Leader-member exchange: A critique of theory & practice.

Kimura, T., 2013. The moderating effects of political skill and leader–member exchange on the relationship between organizational politics and affective commitment. Journal of Business Ethics, 116(3), pp.587-599.

Li, A.N. and Liao, H., 2014. How do leader–member exchange quality and differentiation affect performance in teams? An integrated multilevel dual process model. Journal of Applied Psychology, 99(5), p.847.

Loi, R., Chan, K.W. and Lam, L.W., 2014. Leader–member exchange, organizational identification, and job satisfaction: A social identity perspective. Journal of Occupational and Organizational psychology, 87(1), pp.42-61.

Martin, R., Guillaume, Y., Thomas, G., Lee, A. and Epitropaki, O., 2016. Leader–member exchange (LMX) and performance: A meta?analytic review. Personnel Psychology, 69(1), pp.67-121.

Runhaar, P., Konermann, J. and Sanders, K., 2013. Teachers' organizational citizenship behaviour: Considering the roles of their work engagement, autonomy and leader–member exchange. Teaching and Teacher Education, 30, pp.99-108.

Tse, H.H., Lam, C.K., Lawrence, S.A. and Huang, X., 2013. When my supervisor dislikes you more than me: The effect of dissimilarity in leader–member exchange on coworkers’ interpersonal emotion and perceived help. Journal of Applied Psychology, 98(6), p.974.

Wang, X.H., Fang, Y., Qureshi, I. and Janssen, O., 2015. Understanding employee innovative behavior: Integrating the social network and leader–member exchange perspectives. Journal of Organizational Behavior, 36(3), pp.403-420.

Zacher, H., Pearce, L.K., Rooney, D. and McKenna, B., 2014. Leaders’ personal wisdom and leader–member exchange quality: The role of individualized consideration. Journal of Business Ethics, 121(2), pp.171-187.

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