Several years ago, the agency that I work for underwent a massive reorganization spearheaded by the agency’s leader. The reorganization was an ambitious undertaking because it left no part of the 40,000 employee agency untouched. It is not uncommon for a leader to choose individuals closest to them to achieve an extensive change to a company or organization (Northouse, 2016). Northouse (2016) uses the example of a CEO developing relationships with upper management to focus on new strategic and tactical corporate goals with the understanding that those individuals will then run their departments accordingly. In this case, the agency leader called upon his network of high-quality partnerships to advance his goals for the reorganization (Northouse, 2016). The Leader-member exchange theory is useful in analyzing how leaders create groups within an organization to help them accomplish their goals (Graen & Scandura, 1987, as cited in Northouse, 2016).
The Leader-member exchange theory is a process focused on how leaders and followers interact (Northouse, 2016). The central concept is the relationship a leader forms with each of their followers, and the quality of leader-member exchanges that results from those relationships determines whether outcomes are positive or negative (Northouse, 2016). Gerstner and Day (1997) analyzed 164 studies and found that leader-member exchange theory is a factor in follower job performance, satisfaction, and commitment (as cited in Northouse, 2016). Lower employee turnover rates and increased work motivation are related to high-quality leader-member exchanges (Northouse, 2016).
The agency head was a four-star ranking military member, a career military man who commanded attention. Although he sought out opinions, he knew what he wanted and how he wanted it. To kick-off the reorganization initiative, this leader formed five teams, hand-picking the executive leaders closest to him to lead the teams. Leader-member exchange theory supports the formation of privileged groups (Northouse, 2016). Accordingly, these individuals represent his in-group – the set of followers with compatible personality and personal characteristics who have proved their interest in working with the leader by executing prior activities above their typical job duties (Northouse, 2016).
This leader was either not aware of his unconscious bias or decided to ignore it because the approach to establishing the five groups did not appear to be fair and equal (Northouse, 2016). The teams consisted of predominantly middle-aged white males. However, there were a few white females and a couple of minority representatives. However, the optic from employees’ perspectives was that those individuals were on the team to check the proverbial diversity and inclusion checkbox.
Due to the agency’s size, the leader could not have a dyadic or close personal relationship with every employee/follower (Northouse, 2016). Employees not part of the in-group thus formed the out-group. The out-group is the set of followers that are not as compatible with the leader; “they come to work, do their job, and go home” (Northouse, 2016, p. 140). In the case of this reorganization, there were two out-groups. The first is the out-group of executive leaders not chosen to be on one of the five teams. The second out-group is comprised of the agency employees who would be subjected to the reorganization.
The success of this reorganization hinged on communication, which is extremely important in leadership and leader-member exchange theory (Northouse, 2016). These two out-groups only received formal communications on the impending organizational changes, which generally prompted more questions than they answered. While those who were part of the five-team in-group received more information from the leader, which they were very secretive about and held very close. The level of information sharing by a leader is indicative of in-group and out-group relationships (Northouse, 2016). This behavior resulted in an ‘us versus them’ dynamic and created a contentious in-group out-group relationship. The formal communication to out-group members consistently asked for their patience and support. However, the low-quality leader-member relationship due to lack of nurturing of out-group member needs left followers not wanting to engage or support the plan. There were no collaborative or useful exchanges between the leader and the out-group; therefore, he did not have their trust, commitment, or respect (Northouse, 2016).
The reorganization moved forward and, after two tumultuous years, was finally implemented. Five years later, the plan’s architect is gone, and employees are still disgruntled about how the reorganization was derived and executed. The overhaul left many employees feeling demoralized and less effective. Many say the changes have hindered decision making and slowed down projects. The consensus is that the top-down approach did not result in the efficiencies it claimed it would. At best, it was a waste of money and, at worst, made employees’ jobs more difficult. Several executive-level resignations have been attributed to the execution of this leader’s reorganization plan. The outcome could have been drastically different if the agency head had focused on leadership-making – having high-quality exchanges with all followers instead of just a select group (Northouse, 2016).
While this leader could not have a personal relationship with 40,000 employees, he could have achieved higher-quality leader-member exchange with more transparency into the reorganization plan. According to the leadership-making model of Graen and Uhl-Bien (1991), this leader could have offered up involvement in the reorganization to a broader, more diverse set of employees through new roles and responsibilities with more direct involvement with the five teams, and the overall plan and implementation (as cited in Northouse, 2016). A more inclusive approach may have avoided the inequities and negative feelings the out-group had towards the reorganization.
Reference
Northouse, P. G. (2016). Leader-Member Exchange Theory. In Leadership: Theory in practice (7th ed., pp. 137-160). Los Angeles, CA: SAGE.
Carl Mendoza says
It is really unfortunate that this particular leader did not take better advantage of the leader-member exchange theory to make this transition smoother. It seems as though focusing solely on the influence he had over his in-group created an irreparable divide within the organization. Not only did this leader’s focus on the in-group make the out-group feel undervalued, the special attention given only to the in-group creates the appearance of discrimination against the out-group (Northouse, p. 146, 2016). Additionally, focusing on the opinions of the five leaders that were selected by the General to carry out the transition created a sense of “us vs them” as you described in the scenario. Fairness issues such as pay increases and promotion opportunities, decision-making rules, or communication of issues within the organization are amplified when leaders like the General focus too much on one of the groups over the other (Northouse, p. 147, 2016). The negative effects of this fairness issues were more than apparent in this leadership downfall situation.
As you pointed out, transparency from the General with the carrying out of this transformation plan could have made this entire process much smoother. He could have focused on his communication with the team, as a whole, rather than focusing solely on his five team leaders. As you pointed out, he could have focused on leadership making, which would have focused on making every member of the team feel as though they are a part of the in-group and avoided the negatives of being a part of the out-group (Northouse, p.142, 2016). While the General may not have been able to do this himself, he could have allowed his five leaders do this within their teams on his behalf. Additionally, he could have moved to a virtual presence to ensure he is able to be transparent with his entire team through social media interactions, as well as live conferences to ensure everyone felt included.
References
Northouse, P.G. (2016). Leadership: Theory and Practice. 7th Edition. Los Angeles: Sage Publications.