Holier than Thou: A Comparative Study of Leader-Member Exchange (LMX) Effectiveness in Transactional and Transformational Leadership in IT Companies

Abstract

This research aims to explore the effectiveness of transactional and transformational leadership style in creating effective Leader-Member Exchange relationship in organization, particularly in IT companies. The research was carried out in the Indonesia during the year of 2020. Semi-structured interviews were conducted on 149 respondents over a period of 12 months between February 2020 and November 2020 in 119 IT companies located in major cities of Indonesia. The results of this study indicate that the transformational leadership is more holistic than transactional leadership. In developing high-quality leader – member relationship, personal touch of a leader is needed to inspire his/ her followers to perform beyond expectations and sacrifice to surpass their self-interests for organizational interests. Moreover, to create a warmer and friendlier work atmosphere a leader should be more aware of the out-group existence and he/she supposes to build a relationship reciprocally not based on personal preferences, but rather based on the recent and future potential, and also assigns tasks to those who have skill and readiness. The challenge of this paper is that difficult to generalize the result as this paper approaches the problems by a qualitative stance. This paper contributes to the exiting literatures on how effective transformational leadership in generating high quality leader – member relationships in order to influence member’s job performance and job satisfaction in an organization.

How work discipline and leadership influence employees’ performance?

“…Companies must have employees who are knowledgeable and highly skilled as well as the ability to manage the company as optimally as possible so that employee performance increases. According to Haeruddin et al (2021a), every company directs its business activities to produce services that can provide satisfaction to consumers so that profits can be obtained as expected. Employees have an important role in the progress or decline of a company (McCarter & Northcraft, 2007).…”

“…This can result in a lack of achievement of the company's goals and objectives and can also hinder the running of the company's programs. In addition to the above factors, the leadership style of a leader is a factor that determines the success of achieving company goals (Haeruddin et al, 2021a). Leadership is needed and needed for all kinds of good activities in the company (Diaz-Saenz, 2011).…”

“…Leaders need to think about a leadership style that is the most appropriate, where the most appropriate leadership style can maximize performance, and employees are easy to adapt in all situations in the company, a leadership style that is appropriate to the situation and conditions will also encourage employees to work more in carrying out their duties and obligations (Haeruddin et al, 2021a;Diaz-Saenz, 2011;Antonakis et al, 2003). Employee needs a directive leadership style, namely the leader tells subordinates what is expected of them, notifies the work schedule that must be adjusted to work standards, and provides specific guidance or direction on how to complete tasks and responsibilities including: planning, organizing, coordinating, and controlling (Haeruddin et al, 2021b).…”