The importance of being psychologically empowered: buffering the negative effects of employee perceptions of leader-member exchange differentiation

Although differentiated relationships among leaders and their followers are fundamental to Leader–Member Exchange (LMX) theory, research provides limited knowledge about whether employees’ responses to individual perceptions of LMX differentiation are uniform. In a field study, we examined whether individual-level psychological empowerment buffers the negative relationship between perceived LMX differentiation and job satisfaction and found that the negative relationship is strongest under low employee psychological empowerment conditions, as compared to high psychological empowerment. Furthermore, in a multi-wave field study and an experiment, we extended these initial findings by investigating employees’ perceptions of supervisory fairness as a mediator of this moderated relationship. We found that the indirect effect between perceived LMX differentiation and job satisfaction, through supervisory fairness perceptions, is strongest under low employee psychological empowerment, as compared to high psychological empowerment. Collectively, our findings showcase the importance of psychological empowerment as a tool for employees to use to counteract the negative effect of perceived differentiated contexts. Practitioner points: When employees perceive that their managers have differentiated relationships across workgroup employees, employees tend to be less satisfied in their jobs, and this negative relationship is explained through employees’ perceptions of supervisory fairness. Employees with low psychological empowerment levels (e.g., employees who feel less in control of their work) report lower levels of job satisfaction when they perceive that their managers differentiate among employees. However, employees with high levels of psychological empowerment are more resilient in contexts where managers are perceived to differentiate across workgroup employees. The findings reinforce the necessity for managers and organizations to implement and promote empowerment initiatives.