A Social Hierarchy Perspective on the Detrimental Effects of Leader–Member Exchange Differentiation on Team Functioning: Leader‐Conferred Status Versus Member‐Conferred Status

ABSTRACT Leader–member exchange (LMX) differentiation is often found to undermine team functioning. In this paper, we employ theoretical work on social hierarchy to investigate when and why LMX differentiation may not hinder team functioning. We differentiate two sources of members’ social hierarchy in teams: the leader‐conferred hierarchy based on leaders’ actions and the member‐conferred hierarchy based on respect, admiration, and informal influence that members possess. The leader‐conferred hierarchy provides information about members’ within‐team status conferred by the leader, while the member‐conferred hierarchy informs members’ within‐team status conferred by team members collectively. We propose that the detrimental effects of LMX differentiation on team functioning are influenced by the degree of perceived alignment of members’ within‐team status between these two hierarchies (i.e., perceived status alignment). Only when perceived status alignment is low does LMX differentiation induce members’ status conflict and thus hinder team performance. The results of our two independent field studies lend support to our propositions.