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Exchange Relationships and Employee Job Performance

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Individualism describes how well individuals integrate into primary groups (Hofstede, 2001), and peoples’ expectations for being taken care of by others. Individualists are more interested to serve their own self-interests as distinguished from collectivists who would rather sacrifice their own self-interests for the sake of collective purposes. Thus, the individual is of primary importance over any collective interests. They “ tend to value personal time and the freedom to adopt personal approaches to their work” (Kankanhalli et al. , 2007). ‘ Uncertainty avoidance’ refers to the degree to which people feel threatened by uncertain situations.

People with strong uncertainty avoidance characteristics have a greater preference for rules, highly developed structures and organizational stability (Hofstede, 2001). Thus, they are at ease in highly organized situations. People from eastern cultures tend to have higher uncertainty avoidance tendencies whereas those in the west are more willing to take risks and thrive when they have greater control and flexibility over their own lives. Power distance refers to “ the extent to which the less powerful members of an organization expect and accept that power is distributed unequally” . Thus, the followers seldom perceive themselves in a decision-making role, and employees prefer to avoid taking responsibilities preferring instead to allow the leader to make important decisions. LMX (leader-member exchange) defines how leaders develop relationships with their subordinates based on exchange.

The theory suggests that different styles are used for each relationship, so these are one-to-one relationships based on reciprocal exchanges. Furthermore, low-quality LMX, as with employment contracts, is distinguished from high-quality LMX characteristics of mutual trust, a feeling of obligation and loyalty, and in return a more favorable attitude of the leader towards his subordinates.

Employee job performance refers to how well employees perform their job, which may be possible to measure quantitatively in terms of their output. It is considered one of the most crucial factors for maintaining and increasing organizational effectiveness (DeWitt, 2010) and is, therefore, a prime concern of the leaders of organizations. Although plenty has been written on both transactional and transformational leadership as well as the relationship between them, there is neither sufficient research on how the two influence employees’ job performance (Bass et al. , 2003), nor on their degree of dependency on organizational culture.

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