I once worked for the customer service department of a large internet travel company. Honestly, the job was not that great. We were swamped with work and there was a lot of pressure to perform above and beyond the expected level. In a group of about 20 people, almost everyone did the same jobs and performed the same tasks, with the exception of about 4 individuals who performed a different task. This task was often seen as less demanding and easier than the tasks performed by the other team members. Not only that, but this group also formed their own clique within the team, socializing more amongst themselves, performing their tasks at a minimally acceptable level, and developing an often negative view of the team, the company, and the leader. Our team leader in turn, treated this group differently than the rest of the team, often maintaining a distance and limiting personal interaction. In this example, the formation of in-groups and out-groups correlated with different transformational and transactional behaviors by the leader.
The formation of in-groups and out-groups is posited by Leader-Member Exchange Theory as a means to explain differences in the leaders’ treatment of followers based on their characteristics (Northouse, 2016). According to exchange theory, members are grouped into in-groups and out-groups according to their relationship with the leader and their willingness to go above and beyond normal job descriptions, which in turn prompts an elevated response from the leader (Northouse, 2016). In the example described above, clear in-groups and out-groups had formed within the team. The small clique within the team that was not interested in performing beyond normal performance standards and they often voiced dissent with the organization and perceived favoritism of the leader within the team.
On the other hand, those members who formed part of the in-group experienced a different relationship with the leader. The in-group refers to the group that has a more personal relationship with the leader and goes above and beyond set standards, which in turn prompts a response from the leader to go above and beyond normal leadership duties (Northouse, 2016). As a member of the in-group in this instance, I would often stay late, take on extra workloads, and attempted to help the leader as much as possible. In return, the leader considered me for participation in special projects, granted me more flexibility in scheduling, and worked to make sure that I was successful and satisfied. In different studies, this high-quality exchange between leader and follower was related with higher degrees of employee satisfaction, better performance, and less turnover (Northouse, 2016). This high-quality leadership interaction is also associated with a positive return on part of the employee that is expressed through employee citizen behaviors (Northouse, 2016). Personally, I felt a strong, personal connection with a leader who truly cared for me as a person and not just an employee, which encouraged and motivated me to perform more.
The difference in treatment between in-groups and out-groups is also related to the transformational leadership approach. According to this approach, there are two general leadership categories: transactional and transformational. Transactional leadership focuses on the formal exchanges that occur between leaders and followers, while transformational leadership refers to the engagement of the leader with their followers in such a way that the followers are inspired and empowered to meet the desired goal (Northouse, 2016). According to Bass’s Full Range of Leadership Model, as cited in Northouse (2016), transactional leadership consists of two factors including contingent rewards and management-by-exception. Contingent reward refers to the exchange of something valued by the follower in return for completion of the objective, while management-by-exception refers to the leadership practices that seek to find and correct mistakes and noncompliance with standards (Northouse, 2016). In the aforementioned example, the out-group received these transactional leadership behaviors, creating a dynamic that was based on formal exchanges established by the roles and responsibilities of the involved parties. The in-group was subject to a very different type of leadership, where the leader was more attentive to the needs and desires of the followers and actively engaged them to go above and beyond in meeting objectives. This is indicative of transformational leadership, wherein leaders seek to establish personal connections with their followers and inspire and motivate them (Northouse, 2016). According to Bass’s model, as cited in Northouse (2016), transformational leadership factors include creating an inspiring and emotional connection with followers through idealized influence, establishing high expectations and inspiring compliance by motivating employees with a shared vision, challenging and intellectually stimulating followers, and creating a supportive climate that seeks to meet the individual needs of the followers (Northouse, 2016). In line with exchange theory, which notes that in-group members are more motivated to go above and beyond what is expected, transformational leadership also results in this increased performance (Northouse, 2016). As a member of the in-group, I was a beneficiary of this transformational relationship. Because of this, I felt committed to a higher purpose in the organization, and I was committed to achieving the performance goals, even if this meant that I had to work late or take on extra work.
In this example, the connection between exchange theory and the transformational leadership approach is clear. The out-group members are characterized by those who also receive a transactional leadership approach, resulting in lower satisfaction and less commitment with the organization’s vision. In-group members were beneficiaries of transformational leadership behaviors, which resulted in increased employee satisfaction and performance.
Northouse, P. G. (2016). Leadership: Theory and Practice (7th ed.). Thousand Oaks, CA: SAGE Publications