Analyzing The Relationship Between Authentic Leadership, Leader Member Exchange, And PsychCap In An Essay.

Pick a topic below and write a well-referenced literature review in response. You are expected to use the academic literature to support a well-constructed argument.

1. What is the relationship between authentic leadership, Leader-Member Exchange (LMX) and employees’ Psychological Capital (PsyCap)?
2. Critically review the literature that explains how to build the Psychological Capital of 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?   

Four Components of Authentic Leadership

Title: Analyzing the relationship that exist between Authentic leadership, Leader Member Exchange and Psycap.

Authentic leadership is a critical component that has an impact on the overall organizational performance. It is defined as a transparent, genuine, ethical and positive form of leadership. Some of the characteristics of an authentic leader include openness, self awareness and transparency. It is therefore evident that authentic leaders are keen on their thoughts and behaviors and are aware of their own strengths and weaknesses and of those whom they lead. From the definition, authentic leadership can influence how leaders relate with their employees (LMX). It is also clear that authentic leadership through self awareness can identify strength and weaknesses of other people and thus can impact change on their attitude and behavior (psychology).

The concept of Authentic Leadership is derived from the Greek concept of “being true to oneself”. It is grounded on humanistic and positive approach to leadership. From the characteristics of authentic leadership, four components were derived which include self-awareness, balanced processing, relational transparency and internalized moral perspective. Self awareness can be defined as the degree to which leaders are knowledgeable about their own their own strength and weaknesses. When a leader practices self-awareness, they are able to create a good environment with their followers (LMX) and can also identify job roles and set their own self-goals. This in turn creates congruency between self goals and job roles for the followers. As a result, this consistency is likely to motivate the workers to perform better individually and at the organizational level. Individuals who are self-aware are also said to possess high self esteem and self-efficacy. They are also likely to put more effort in order to achieve the set goals (Adil & Kamal, 2015) .

Balanced processing is the ability of leaders to make decisions objectively without malice or biasness. Leaders who exhibit balanced processing are willing to accommodate divergent views and opinions from other people. They are also willing to collect as much information from other people as possible before making decision. This benefits the organization because everyone feels included and valued. In turn, it is likely to motivate followers and boost productivity. Inclusiveness and identification ultimately leads to higher levels of Leader Member Exchange (LMX). Relational Transparency is referred to as the ability of a leader to exhibit honesty and transparency in his interaction with followers. This is aimed at developing trust and mutual intimacy with others. This level of trust exhibited by the leader makes it easier for the followers to have a better relationship with them (LMX). When leaders have this ability, they are likely to pass over these qualities to their followers through social modeling (Bandura, 2012).

Psychological Capital

Internalized Moral Perspective is a guiding framework for leaders to behave according to their moral standards rather than those set by thee societies where they come from or from organizations they represent. These moral standards are not dependent on family, group or any social groupings. Consequently, the decisions they make are not dependent on the standards set by these groups but on ethical standards set by the individual himself. External factors and influences do not determine the leader’s decision. An authentic leader is not expected to be swayed by emotional connections and therefore expected to exhibit qualities of effective leadership. This ensures that the leader is able to make decisions rationally.

 Positive Organizational behavior can be defined as “the study and applications of positive psychological resource capacities that can be measured, developed and managed for their performance impact in their work place (Ruderman & Clerkin)” .Positive Organizational behavior consist of constructs that are known by their umbrella term psychological capital. Psychological capital or Psycap is referred to as an individual’s state of development. (Peterson S. J., 2011).

Self efficacy is defined as confidence exhibited by individuals about their abilities to accomplish a certain task assigned to them (Bandura, 2012). It is derived from Bandura’s theory and is regarded as a state. Self efficacy has been strongly linked to work performance.  Hope is referred to as a “two component positive motivational state consisting of a sense of internalized control or agency that provides energy to accomplish personal goals and an adaptive planning process of contingency pathways to overcome obstacles towards the achievement of goals” (Luthans, Youseff, & Avolio, Psychological capital : developing the human competitive edge, 2006). Hope has been identified as having an impact on work performance. Optimism is defined as a “cognitive, emotional and motivational state that attributes positive events to personal, permanent causes and negative events to external, temporary causes”.  Resilience is the ability to bounce back from adversities, failures and setbacks by developing a positive attitude and adaptation. Resilience has also been positively associated with job performance. Most importantly, resilience can be trained. (Gardner, Avolio, & Walumbwa, 2005) .

Psychological capital and authentic leadership have positive meta-analytic relationship and ultimately have an impact on workplace performance and leader-member exchange. From the four constructs of self efficacy, hope, resilience and optimism, it is clear that authentic leadership is grounded from this POB framework. Positive Psychological Capacities have a significant impact on the development of an authentic leader. It has also been documented that psychological capacities have a bearing on self-development by developing the individuals’ self identity. In turn, self identity is a critical component in developing Authentic Leadership. In addition, it is also evident that theoretical underpinnings of Authentic Leadership are based on attributes of leaders and followers as well as the behavior exhibited by leaders. It is thus important to study psychological capacities of leaders and followers in order to have an integrated approach towards understanding organizational and leadership behavior (Adil & Kamal, 2015).

The Relationship Between Psychological Capital and Authentic Leadership

Authentic leaders have a great impact on their followers by ensuring that they remain positively motivated which ultimately is conducive to their productivity. While it may be depend on whether the followers receive or reciprocate that positive influence, the theory of congruency helps to understand the query (Zhang, Song, Wang, & Liu, 2018). The theory of Congruency states that the capabilities of an individual can be beneficial in filling a needed missing component valued by another individual. Drawing from this theory, an Authentic leader can effect on the followers’ performance by complementing the capabilities needed by the follower in order to perform well.. From the initial model of authentic leadership, it is depicted that authentic leaders utilize their psychological resources to complement the psychological capital of their followers so as to boost performance. The LMX is arguably the transmitting factor/relational process of the effects of authentic leadership. Leadership is a relational process whereby a relationship between leaders and followers has to emerge at some point in the process. The depth/nature and extent of relationship will determine the leader’s behavior and the response from the followers.

1b. Review of the literature that explores the mechanisms of building the Psycap of Employees.

As aforementioned, Psychological Capital is an important component in ensuring that the productivity of followers remains high. Leaders are not only expected to display high levels of psychological capital but also serve as role models in inspiring positivity and optimism to the employees. It has been earlier posited that individuals learn from observing the behavior and attitudes of others.  Different researchers have delved into this matter with a view of understanding the impact of leadership on the performance of employees ( (Avolio & Luthans, 2006) (Luthans, Youseff, & Avolio, 2006) (Gardner, Avolio, & Walumbwa, 2005). The apparent interest in this research is partly attributed to the overwhelming evidence that supports the role of positive attitude/behavior in motivating human beings at work. Initial research pointed out that positive traits of leaders are able to positively impact on the performance of employees (Zhao, Kessel, & Kratzer, 2014) (Peterson, Walumbwa, Bryon, & Mtrowitz, 2009). In another study, Fred Luthans carried out a research to establish the impact of “psychological capacity of Chinese workers” on their performance. The study carried out in three Chinese factories revealed that hope, resilience and optimism had a positive impact on their performance when they were supervised (Luthans, Avolio, Walumbwa, & Li, 2005). In one of the factories, the findings indicated a positive correlation between their positive psychological capacity and  performance. This time, performance was merit-based.

The Impact of Authentic Leadership on Followers' Performance

Researchers have also come up with interventions that can be used to build psychological capital of different types of employees. Fred Luthans (Luthans, Youseff Carolyn, & Avolio, Psychological capital : developing the human competitive edge, 2007) proposed that in order to remain competitive, leaders should focus on investing, managing and developing the psychological capital. In order to investigate the available alternatives to build psychological capital, the authors suggest physical training interventions and development of authentic leadership. In authentic leadership development, recent studies have proposed that authentic leadership is a strong antecedent and a strong predictor of PSYCAP. It has therefore been established that there exist a strong relationship between leaders and their employees’ psychological capital. It has been further posited that it is possible to develop authentic leadership. A combination of positive psychological capacity coupled with a similar organizational context together with other positive catalyst can lead to self-development. In turn, this personal development has an impact on self awareness and regulation behavior. Suzane J. Peterson and other colleagues conducted a study from a large financial organization to try and come out with a model that explains psychological change over time and the impact of this change on performance of employees. The findings revealed statistically significant change (individual) in psychological capacity over a period of time. This change in psychological capital had an impact on performance outcomes (Peterson S. J., 2011).

Psychological capital is considered as both an input and outcome of Authentic development. Leaders are therefore expected to apply their physical capital on their employees because it is a fundamental component of authentic leadership. This further is thus reflected in the psychological development of employees. The mechanisms that can be applied in effecting psychological development include creating an environment of transparency, ethics and honesty, instilling a sense of positivity and optimism, inspiring positive change, transforming psychological behaviors and attitudes. All these mechanisms can be passed on to employees as aforementioned through the theory of complementary congruence. Psychological capital training interventions are those that are flexible to changes. Different literature has suggested that these constructs are developable. These constructs include hope, efficacy, resilience and optimism. Some of the mechanisms that have been suggested include group discussions and games. These mechanisms are aimed at influencing positively the individuals’ level of efficacy, resilience and hope. A model suggested by Luthans and colleagues suggested that these mechanisms have the ability to increase an individual psychological capacity by 2%. Consequently, a utility analysis developed by human resource specialists suggests that such an increase in psychological capacity has a high percentage on return in investment/development. It also been established to boost productivity and financial returns. Similar studies have suggested that face to face interviews have a more positive impact on employee performance levels. Other studies have continuously showed that the relationship between authentic leadership and job performance is sometimes stronger with those with low physical capital than with those of high. The reasoning behind this is that the effect of physical capital becomes less when the employees already have it. They as a result do not require motivation and the other constructs from their leaders.

The Importance of Building Employees' PsychCap

Researchers from “Centre for Creative Leadership” conducted a study with an intention of exploring how to inculcate facets of resilience and hope in modern day leadership in order to address challenges experienced in the workplace. The scientific study was also aimed at exploring some of the conditions that cultivate employee’s psychological capital. The findings from the study revealed that the leadership development training carried out by the Institution had a positive impact on the psychological capital. Moreover, the finding pointed out at some self-regulation mechanisms that can improve psychological capacity. Some of the techniques suggested include coherent breathing and exercises (Ruderman & Clerkin). The leadership training addressed the four qualities of psychological capital. In efficacy, the centre provided opportunity for acquiring new skills in a comfortable environment. This helps to boost employee confidence and resilience. It also increases optimism by helping participants imagine and figure out possibilities. This helps to set new goals and develop a positive attitude. It also offers hope by training leaders on good behavior. This helps to iron our negativity and become proactive in dealing with issues. Finally, the centre addresses resilience by helping the participants speak about their body, mind and

Although there is positive relationship between psychological capital and employee performance, it is imperative to note that it exists over time.

Conclusion

A positive relationship between authentic leadership, leader-member exchange and Psycap has been identified. Authentic leadership comprises of ethical leadership that is positive, genuine and transparent. Components of authentic leadership include self awareness, openness and transparency. Psychological capital is derived from positive organizational behavior. The four constructs of Psycap include self-efficacy, hope, optimism and resilience. Leader Member Exchange is the relationship that exists between leaders and members. All these three components are interrelated.  An authentic leader is expected to exhibit positive physical capital in order to create good working condition with his followers. Psychological capital has an impact on employee job performance. Studies have revealed that leaders who exhibit positive physical capital are most likely to pass over those characteristics to their followers and as a result boost their performance and productivity levels. Physical capital can be passed over to workers through physical training intervention as well as developing authentic leadership. Physical training interventions include games and mouth to mouth interview. Developing authentic leadership includes creating an environment of trust, inspiring positive change and modeling positive behavior and attitudes.

References

Adil, A., & Kamal, A. (2015). Impact of Psychological Capital and Authentic Leadership on Work Engagement and Job Related Affective Wellbeing. Pakistan Journal of Psychology , 1-21.

Avolio, B. J., & Luthans, F. (2006). The High Impact Reader: momThe high impact leader : moments matter in accelerating authentic leadership development. New York: McGraw Hill.

Bandura, A. (2012). Self-Efficacy. New York: W.H. Freeman.

Gardner, W. L., Avolio, B. J., & Walumbwa, F. O. (2005). Authentic leadership theory and practice : origins, effects and development. London: Elsevier.

Luthans, F., Avolio, B. J., Walumbwa, F. O., & Li, W. (2005). The Psychological Capital of Chinese Workers:. Mnangemnet and Organizational Review , 249-271.

Luthans, F., Youseff Carolyn, M., & Avolio, B. J. (2007). Psychological capital : developing the human competitive edge. New York: Oxford.

Luthans, F., Youseff, C. M., & Avolio, B. J. (2006). Psychological capital : developing the human competitive edge. New Jersey: Princeton.

Peterson, S. J. (2011). Psychological Capital and Employee . Personal Psychology , 427-450.

Peterson, S., Walumbwa, F., Bryon, K., & Mtrowitz, J. (2009). CEO Positive Psychological Traits, Transformational Leadership, and Firm Performance in High-Technology Start-up and Established Firm. Journal of Management , 348-368.

Ruderman, M. N., & Clerkin, C. (n.d.). Developing Leadership by Building Psychological Capital. Retrieved August 17, 2018, from https://www.ccl.org/wp-content/uploads/2015/08/Developing-Leadership-By-Building-Psychological-Capital.pdf

Zhang, J., Song, L. J., Wang, Y., & Liu, G. (2018). How Authentic Leadership Influences employee proactivity; the sequential mediating effects of psychological empowerment and core self-evaluations and the moderating role of employee political skill . Frontiers of Business Research In China , 1227.

Zhao, H., Kessel, M., & Kratzer, J. (2014). Supervisor-Subordinate Relationship, Differentiation, and Employee Creativity: A Self-Categorization Perspective. The Journal of Creative Behavior , 165-184.