To Maximize Employee Outcomes, Focus on Exchange

Author: E. L. Moraff

Most employers can imagine their dream employee. This employee has valued skills, works hard, believes in the company’s mission, consistently goes above and beyond and so on. Organizations spend precious resources in an effort to successfully identify, hire, and retain these individuals. But understanding how to create a culture that supports, engages, and binds these employees to the organization is often daunting. One logical place to begin relates to creating an environment that individuals perceive to be fair and just. Research findings over the past three decades show that organizational justice perceptions affect an employee’s commitment, satisfaction, performance, and willingness to go the extra mile (Cohen-Charash & Spector, 2001; Colquitt, Conlon, Wesson, Porter, & Ng, 2001). Employees who perceive their organization as unjust are more likely to quit, skip work (Gellatly, 1995), and engage in counterproductive behaviors (e.g., theft, gossiping, bullying; Moorman 1991). 

Leadership makes a different here. It may seem obvious to point out that leaders exert tremendous influence over an employees’ work experience. In many instances, managers can improve employee performance by simply being fair and attentive. As Burton, Sablynski, and Sekiguchi point out, it’s not enough to structurally create a just environment for an employee to thrive. Employees need to have high-quality leader relationships with their leader as well (2008). Research findings on Leader-Member Exchange, show that engaged and mutual interactions between an employee and a supervisor can boost organizational citizenship behaviors and employee performance (Erdogan & Liden, 2006). Put another way, teaching supervisors how to nurture relationships with their subordinates sets the stage for better employee outcomes.

Organizational Justice & Leaders: the ideal environment

Research findings show that employees perceive and distinguish between at least three types of organizational fairness (Cropanzano and Greenberg, 1997). Arguably the most well known type of fairness is distributive justice, which refers to the perceived fairness of how outcomes, such as salary, are distributed among people. Procedural justice refers to the perceived fairness of the process by which outcome distributions, for example, how fair is the performance appraisal process upon which salary increases are based. The final, and somewhat more scientifically controversial form of justice is called interactional justice. This type of justice refers to the extent to which the employee perceives that he/she was treated fairly and respectfully in interpersonal interactions (Burton et. al, 2008). For instance, does the employee perceive that they are being shown dignity and respect during the appraisal discussion? Even if the outcome or process is perceived to be unfair, did the messenger (usually a supervisor) at least provide an adequate explanation? 

As the concept of interactional justice suggests, the communication process itself can have a powerful effect on perceptions of fairness! From a practical perspective, employees are concerned with justice because how they are treated interpersonally is viewed as an index of their social standing in the team and what their outcomes at work might be (Williams, Scandura, Pissaris, & Woods, 2016). Similarly, higher quality employee-supervisor relationships strengthen overall justice perceptions. A leader who has poor communication skills and social sensitivity can impede the organization’s otherwise strong structural justice. Perhaps the organization has great processes, but the leader consistently treats an individual unfairly. The leader will diminish the possibility that employee will achieve stellar outcomes (Burton et. al, 2008).

Leader-Member-Exchange (LMX) theory and research provides important information about how leaders affect employee attitudes and behavior. According to the theory, LMX refers to the “quality of the relationship between a supervisor and an employee; it involves an examination of the dyadic relationships, interactions, and perceptions about the working relationship” (p. XX, Graen & Scandura, 1987). As LMX research suggests, rapport and trust develop through a series of interpersonal exchanges that employees and employers have during the normal course of business. This rapport in turn affects an employee’s perception of organizational justice and a range of work outcomes, including organizational citizenship. (Burton et. al, 2008). 

LMX theory highlights the importance of one-on-one interactions, particularly between supervisor and subordinate. Obviously, that relationship can vary substantially across the organization and even with the same leader. Generally, weak supervisors will have weak LMX with their subordinates, but even strong supervisors may not be able to have high LMX with all supervisees (Erdogan et. al, 2006). Depending on company size, a leader may not have the time or space to engage in frequent enough interactions to develop a high quality relationship (Erdogan et. al, 2006). Even with this limitation, managers can consciously choose to allocate their relational energy with LMX in mind. For instance, maintaining a high level of fairness in interactions with employees can be particularly important for individualistic workers. For workers higher in collectivism, managers need to focus on developing relationships because fairness alone will not boost overall perceptions of organizational justice in collectivist cultures (Erdogan et. al, 2006). 

How to Recognize Successful & Unsuccessful LMX Dyads

Managers looking to identify how employees perceive the state of their relationship can glean clues from employee behavior. How often an employee approaches a supervisor serves as one important indicator. Similarly, when an employee does approach a supervisor or leader, what tactics do they use to influence the leader (Williams et al., 2016)? Research indicates that employees with high quality relationships with their supervisors will use more direct involvement and interaction strategies than employees that perceive a poor relationship with their supervisor. Employees with strong relationships with their supervisor are also more likely to seek out the supervisor and vice versa. Further, employees with a high LMX are more likely to present their point of view using logical arguments and evidence that supports the feasibility and relevance of a request, (Williams et. al, 2016). 

In contrast, employees with a lower quality relationship with their employer are less likely to approach the supervisor directly or alone (Williams et. al, 2016). Instead, such subordinates may try to make their request or viewpoint known by enlisting the help of supportive co-workers who have better relationships with the supervisor (Williams et. al, 2016). Rather than attempt to convince a supervisor of an idea on its own merits, individuals with less high quality relationships to their supervisor are more likely to build a coalition of people to support their idea before presenting it to a person in authority (Yukl and Tracey, 1992). Ingratiating behaviors, intended to curry relational favor with the boss, demonstrate that the employee feels insecure in the relationship, and that they may perceive the supervisor to be generally unjust (Erdogan et. al, 2006). This soft influence tactic may indicate that a manager is coming off as unfair and authoritarian (Erdogan et. al, 2006). 

Last but not least, managers can observe employee behaviors for clues about how the employee regards their relationship to the manager and their perceptions of fairness. High absenteeism, high levels of retaliation, and perceived low commitment to the work serve as definite red flags (Burton et. al, 2008). 

Conclusions & Further Directions

The research findings are clear: employee perceptions of injustice (distributive, procedural, and interactional) in the workplace are associated with poorer work attitudes, performance, and citizenship behaviors. LMX theory and research shows that an important source of justice perceptions, particularly procedural and interactional, arises from the quality of the interpersonal relationship established between the supervisor and employee. High quality relationships, characterized by trust and open dialogue, are likely to promote justice perceptions. 

From a practical perspective, research findings suggest that supervisors can indirectly assess the quality of their relationship with subordinates by considering how often they seek interaction and the strategies by which subordinates present viewpoints and suggestions. 

Yet there are still many gaps in our understanding of how justice perceptions arise from supervisor-subordinate relationships. Additional research is needed to better understand how individual differences in employee traits and attitudes affect perceptions of their relationship to their supervisor and perceptions of fairness, and the pathways by which those perceptions affect job performance and organizational citizenship behaviors. In the interim, the the findings to date suggest that leaders are well-advised to build strong interpersonal relationships with as many subordinates as possible. While this relational investment requires a lot of energy, committed supervisors can expect a more motivated staff team and better individual outcomes. 

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Williams, E. A., Scandura, T. A., Pissaris, S., Woods, J. M., (2016). Justice perceptions, leader-member exchange, and upward influence tactics. Leadership & Organization Development Journal 37 (7), pp. 1000-1015.

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