Impact of Drama Darkside Leadership and Leader-Member Exchange on Corporate Performance
Sunanta Wiguna1, Etty Murwaningsari1, Yvonne Augustine Sudibyo1*
1 Fakultas Ekonomi dan Bisnis, Universitas Trisakti, Jakarta, Indonesia
*Corresponding Author: yvonne.augustine@trisakti.ac.id Accepted: 15 November 2022 | Published: 1 December 2022
DOI:https://doi.org/10.55057/ijaref.2022.4.4.5
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Abstract: The purpose of this study is to analyze the impact of leader drama on darkside leadership and leader-member exchange behavior on corporate performance. This research is quantitative research by distributing questionnaires to 675 respondents in middle-up management positions in five cities in Indonesia. Multiple linear regression analysis was used as an analytical tool. This study succeeded in proving that darkside leadership has a significant negative effect on corporate performance and leader-member exchange has a significant positive effect on corporate performance. The implications of this result, management needs to be wary of leaders in their companies. This research also supports the Person-Organization Fit Theory, so there needs to be a common goal between employees and the company. This research can be used for management to continue to innovate in managing the leaders they choose. In addition, this research also contributes to providing an overview of leadership drama in the company environment by combining darkside leadership and leader-member exchange, so that companies can anticipate avoiding the risk of leader behavior that can reduce corporate performance.
Keywords: Darkside Leadership, Leader-Member Exchange, Corporate Performance
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1. Introduction
Currently after going through a fairly long pandemic period since 2019. This period is the most difficult period for all levels of society. This is also felt by stakeholders to maintain their investments in various companies. The decline in corporate performance has become an important, complicated problem to solve where all company operations are prohibited by the government to maintain the health condition of all people in the world. Thus, various decisions became meaningless and in the end, several employees were dismissed because of the company's inability to meet the company's operational needs.
After various countries reopened access and the pandemic began to gradually improve.
Companies in Indonesia have begun to prepare new business strategies. Companies need to innovate to survive and change strategies so that businesses can run based on the new economic situation in 2021. Triono Saputro, Executive Director of PPM Manajemen said that stakeholders need to change attitudes to be more efficient and be careful in investing. The recommended investment is an investment in technology to make business faster, more effective, and more efficient. (Rahajeng, 2021).
Based on the results of a survey conducted by the Center of Innovation & Collaboration (CIC) of PPM Manajemen from December 2020 to January 2021, it was stated that around 29.7% of respondents were ready to face the challenges of 2021. Then 59.1 % were preparing their companies. Then the survey shows that to support the development of the company in 2021 it is necessary to pay attention to service quality, leadership, changes in organizational structure, partnerships with relevant institutions, and increasing technical competence of employees. The reason is that respondents assess the risks that need to be faced from the external including price competition, technological developments, and the impact of the economic recession.
Meanwhile, internal factors include ineffective managerial decision-making and employee competencies that are not following current conditions. Thus, it is important to study leadership to support corporate performance (Rahajeng, 2021).
This study is different from previous research, this study combines research conducted by Sahridlo et al., (2020) and Nauman et al., (2021). This study uses the independent variables Darkside leadership and leader-member exchange. While the dependent variable of this research is corporate performance. This study aims to fill the void and examine the risks associated with leadership as one of the challenges faced after the pandemic period ends.
This research was conducted to contribute to seeing the drama of leaders through darkside leadership behavior so that management can anticipate one of the challenges in the future.
Because the decision of the leader is a decision that can have a wide impact on the company optimal supervision is needed.
2. Literature Review
Person-Organization Fit Theory (PO Fit Theory)
Person-Organization Fit Theory or called PO Fit Theory is a theory that was developed because of the focus on the suitability and comparison between the desire of employees to work with the expectations of the organization to hire these employees. This theory brings together organizational values with individuals such as employees and leaders. Many researchers have revealed that this theory is the main key in maintaining and also maintaining an employee commitment that is indispensable in a business environment that continues to move dynamically and competitively. (Kristof, 1996)
Then, the level of compatibility between individuals and organizations depends on the ability of the organization to meet the needs of its employees. Meeting the needs of employees in the organization is not only in the form of compensation, but the work environment and opportunities for employees to develop their careers are needed to create this suitability.
Meanwhile, in terms of the organization or company, the contribution of employees in the form of commitment, ability, and expertise dedicated to the company is important and needed by the company. (Kristof, 1996).
Corporate Performance with Balanced Scorecard (BSC)
The Balanced Scorecard (BSC) is a corporate performance measurement method used by the company or commonly referred to as a management strategy. At first, the balanced scorecard was only used to improve the analysis of the financial measurement system. Then it expands and develops and is used to measure four perspectives, namely finance, customers, internal business processes, and learning and growth. Some of the functions of the balanced scorecard include: First, it is used as a company measuring tool regarding the achievement of the vision and mission. Second, it is used as a measure of the company's competitive advantage. Third, it is used as a strategic guide for running a business. Fourth, it is used to analyze the effectiveness
of the strategies used. Fifth, as an illustration of the company's SWOT analysis. Sixth, as a key performance indicator of the company. Seventh, as feedback for shareholders, and finally as a means of communication and also information on corporate learning. (Kaplan & Norton, 1991;
Chandra & Yvonne, 2015).
Darkside Leadership
Several studies have defined darkside leadership as a description of destructive leadership behavior. The leadership places more emphasis on narcissism and psychopathy associated with alienation as well as betrayal. In addition, behaviors such as manipulation, intimidation, coercion, and one-way communication are considered some of the features of destructive behavior. Leadership based on darkside leadership usually emphasizes the negative outcomes that will be experienced by the organization and its members including employees and external stakeholders. The results achieved in such behavior are results that are not desired by all parties.
(Padilla et al., 2007)
Leader-Member Exchange (LMX)
Leader-member exchange (LMX) is a natural relationship between leaders and employees that arises from a process of role formation. Leader-member exchange can usually reflect social exchanges between leaders and employees. Leaders will develop unique relationships with each of their employees. In the context of the relationship, the leader will reveal the quality of the relationship between the two. A leader has good relationship quality if he shows high responsibility towards work. The quality of this relationship is called the quality of the leader- member exchange in-group relationship. However, on the other hand, if the leader has a low- quality relationship, which is indicated by a distrustful attitude towards the leader or will eventually experience resignation. So, the quality of the relationship is included in the category of leader-member exchange out-group. (Widyaningsih & Saptoto, 2019)
Previous Research
The first previous research is research related to corporate performance. In this study, the results show that there is an influence between Management by Objective (MBO) and Employee Engagement, then there is an influence between Change Orientation Leadership and Employee Engagement and there is no influence between Leader-Member Exchange and Employee Engagement. Furthermore, there is an influence between Employee Engagement on key performance indicators or key performance indicator’s using the Balanced Scorecard (BSC). (Sahridlo et al., 2020)
Second, research related to corporate performance. This research reveals that performance is the ultimate goal of the organization. The results of this study prove that quality objectives and incentives have a positive relationship with quality performance. While the quality of performance has a positive relationship with customer satisfaction and financial performance, and finally customer satisfaction has a positive relationship with financial performance.
(Murwaningsari, Basaria and Rachmawati, 2009).
Third, research related to darkside leadership. The results of this study support the mediating effect of despotic leadership and employee performance by increasing work withdrawal behavior. Then, the influence of despotic leadership on performance through work withdrawal behavior was found to be weaker in employees with higher levels of Quality work life.
(Nauman et al., 2021)
Fourth, research related to leader-member exchange. The results showed that empirical testing in the field showed that both attitudes and supervisors had a positive effect on company goals.
However, the test of leader-member exchange moderation on both does not apply to the influence of supervisors and company goals because it is a more complex process that can be influenced by other variables. This study provides a different view regarding the leader- member exchange associated with company goals. (Hwang, Kim, and Shin, 2020).
Hypotheses Development
Darkside Leadership and Corporate Performance
Darkside leadership is dangerous behavior in a company. Drama from leaders often develops to create an atmosphere that is unsettling for employees. The drama is usually in the form of abuse of authority for the personal benefit of the leader. A leader is a person who is trusted by management to be a role model for the company in improving and developing the company.
However, under certain conditions, the leader cannot carry out this belief. Several factors include the leadership's feeling of disappointment with the company so this feeling of revenge triggers the emergence of darkside leadership.
Several previous studies have tested despotic leadership which is one of the darkside leadership behaviors. The study revealed that darkside greatly affects employee comfort at work which in turn can lead to work withdrawal behavior. This behavior can have an impact on corporate performance. Because, in this condition, every employee cannot work according to his/her ability optimally. In the end, it causes a decrease in the quality of work life. The mentality of the employees is disturbed and at the same time, the signal that the corporate's performance will experience chaos begins to open. (Nauman et al., 2021)
This what research suggests that the drama created by leaders through darkside leadership will affect the corporate's overall performance.
H1= Darkside leadership has a negative effect on corporate performance
Leader-Member Exchange and Corporate Performance
The replacement of leaders with subordinates is an interesting scheme. This condition is driven by the same uniqueness that leaders have with employees. Employees who have similarities with their leaders are included in the in-group category. Meanwhile, employees who do not have anything in common with their leaders are classified in the out-group category. However, this concept emphasizes more on in-group groups more. This means that if an in-group situation is formed, both of them will synergize to advance the company. In the end, the corporate's performance can be realized optimally.
Many studies related to leader-member exchange have been carried out. The results show that the independent variable of occupational stress is significant to the dependent variable of turnover intention. The results of this study mean that the research hypothesis is rejected because leader-member exchange (LMX) and occupational stress cannot predict turnover intention together. This study assumes that the leader-member exchange will be able to synergize under the right conditions. So this research assumes that the number of leaders and employees who have a good relationship improves corporate performance. (Widyaningsih &
Saptoto, 2019)
H2= Leader-member exchange has a negative effect on corporate performance
3. Methodology
This study uses quantitative research methods by distributing questions to respondents. These questions are a reflection of the indicators used in this study. The unit of analysis of this research is the individual and the Likert scale used is a scale of 1 to 7. Then, this study uses a data collection technique, namely purposive sampling with criteria including respondents in Jakarta, Bogor, Depok, Tangerang, and Bekasi which are cities in Indonesia. Then, respondents have middle-up management positions, namely supervisors, managers, and directors. In addition, respondents are still actively working during 2022 both in State-Owned Enterprises (SOE) and private companies. Finally, the leader has a minimum education of S1 and five years of working experience.
This study uses an analytical tool, namely multiple linear regression using SmartPls 3 and SPSS Amos 25 software. The research models are:
Research Model:
BSC= 𝜷1 DL + 𝜷2 LMX + e Information:
DL= Darkside Leadership, LMX= Leader-Member Exchange and BSC= Corporate Performance
This study uses a measurement of corporate performance by adopting measurements from Kaplan & Norton (1991) who introduced the balanced scorecard with four perspectives, namely finance, customer, internal business, and innovation and learning. Furthermore, the measurement of darkside leadership uses research indicators developed by De Hoogh & Den Hartog (2008) and later used by Nauman et al., (2021) which has a six-item scale including the Morality and fairness dimension, Role clarification dimension, Power sharing dimension, Despotic leadership, Perceived top management team effectiveness, and Optimism about the future. While the measurement of leader-member exchange uses Erdogan & Bauer (2015), Yukl (2012), and Wiguna & Augustine (2022) with dimensions including Job Attitudes, Behavior, Career Success, Task-oriented, relations-oriented, change-oriented, and External.
4. Result
This study collects data on 675 respondents at the supervisor and manager level with the demographics of the respondents as follows:
Table 1: Respondent Demographics
Criteria Category Frequency Percentage
1. Gender Man 338 50%
Women 337 50%
2. Education Bachelor Degree 600 89%
Master Degree 57 8%
Doctoral degree 18 3%
3. Experience 5-10 years 352 52%
10-15 years 214 32%
15-20 years 70 10%
20-25 years 21 3%
Above 25 years 18 3%
4. Age 25-30 years 220 33%
30-35 years 218 32%
35-40 years 134 20%
40-45 years 64 9%
45-50 years 19 3%
Above 50 years 20 3%
5. Position Supervisor 334 49%
Manager 308 46%
Director 33 5%
6. Departement Human Resource 67 10%
Finance, Accounting and Tax 161 24%
Production 143 22%
Marketing and Sales 204 30%
Research and Development 36 5%
Information and Technology 36 5%
Others 28 4%
7. Business Hotels and Restaurants 2 1%
Service 90 13%
Mining 31 5%
Property 22 3%
Banking 37 5%
Trade 151 22%
Retails 21 3%
Automotive 60 9%
Manufacture 201 30%
Others 60 9%
8. Company Age 5-10 years 128 19%
10-15 years 145 21%
15-20 years 108 16%
Above 20 years 294 44%
9. Number of Employee Under 50 people 75 11%
50-100 people 155 23%
100-250 people 162 24%
250-500 people 135 20%
Above 500 people 148 22%
10. Company Classification Private Company 609 90%
State-owned enterprise - SOE 66 10%
Source: (Wiguna, Murwaningsari, Sudibyo, 2022)
Table 1 shows that the percentages of women and men are balanced at a percentage of 50%.
Then, the respondent's education is dominated by bachelor's degree education with a percentage of 89%. In addition, respondents have 5-10 years of work experience. The age of the respondents was dominated by the age of 25-30 years with a percentage of 33%, besides that the most positions were at the supervisor level, but close to the manager level at 49% and 46%. This means that the respondents have represented the point of view between men and women regarding the drama of darkside leadership. Respondents' understanding is sufficient because they have work experience and adequate education to assess darkside leadership, LMX, and corporate performance.
In addition, the interesting thing in this study shows that this study is in a millennial environment at the age of 25-30 years. Each of these groups with the dominance of supervisor
and manager levels assesses the drama of leaders on a more modern side in accordance with technological developments and developing adaptations of ways of working.
Table 2 provides an explanation of the descriptive statistics of the respondents used in the study.
Table 2: Research Descriptive Statistics
Variable N Minimum Maximum mean Std.
Deviation
DL 675 1.00 6.00 2.96 1.39
LMX 675 1.00 7.00 5.08 1.36
BSC 675 2.00 7.00 5.12 1.29
Source: Processing Results of SPSS Amos 25
Description: DL= Darkside Leadership, LMX= Leader-Member Exchange and BSC=
Corporate Performance
Table 2 provides an explanation that respondents consider that in the current company many respondents agree with the existence of darkside in the company with the highest score of 6.
However, other respondents assess the absence of darkside with a score of 1. Behavior that leads to transformational leadership. Then, respondents assessed that the in-group and out- group carried out by the leader in carrying out their duties received various and contradictory reactions. Some of them rate strongly agree and others rate strongly disagree. As for the corporate's performance, even though the respondents agreed that the performance was good with an assessment of strongly agreeing, the overall average score was 5.12 which means that the respondents considered it quite agree with the corporate's current performance. This does not show a fantastic number, because if there is an alignment of the four perspectives from the BSC, it is expected that the respondent's assessment of a higher number, namely the score strongly agrees.
When analyzing further the results of respondents' assessments of darkside leadership, the average data obtained is 2.96. This shows that respondents quite disagree that there is a practice the drama of darkside leadership in the company where they work. Nevertheless, the maximum value can strengthen that although the average is quite disagree, the practice of drama darkside leadership has proven its existence in the corporate environment.
Furthermore, this study conducted multiple linear regression testing on the three variables used, namely darkside leadership, leader-member exchange, and corporate performance. Then the test results are shown in the following table:
Table 3: Multiple Linear Regression Test BSC= 1 DL + 2 LMX + e
Variable Prediction
Direction Coefficient P Values
DL -> BSC - -0.535 0.000*
LMX -> BSC + 0.366 0.001*
*significant level 5%
Source: SmartPls 3 Processing Results
Description: DL= Darkside Leadership, LMX= Leader-Member Exchange and BSC=
Corporate Performance
Table 3 above shows that the two variables used in this study, namely darkside leadership and leader-member exchange, have the same power that affects the corporate's performance. Both have a direction that is following the predicted direction of the alleged direction of this study.
This becomes important because these two variables are variables related to leader behavior.
Thus, management as a user who recruits leaders needs to be careful about how to choose the leaders.
In this context, a simple interpretation can be given that every one-time decrease in the level of darkside leadership can lead to an increase in corporate performance of 53.5%, then likewise with leader-member exchange, every one-time increase in leader-member exchange can lead to an increase in corporate performance of 36.6%. The numbers both prove that the darkside in the company is the most important thing. Because when a comparison is made between darkside and leader-member exchange, there is a higher level of improvement in corporate performance on darkside leadership.
Its mean, darkside leadership is very important for management because impact of influence negatively will decreasing corporate performance. The negative darkside leadership effect of 53.5% is strong enough to affect the company's performance. If the level of darkside leadership is higher, the leader will use his authority to act abusively toward his employees. In the end, this condition reduces the level of productivity and employee engagement in corporate performance. So it is only natural that there are a few respondents who have long working experience because employees have experienced abusive actions that caused employees to withdraw. The impact of this condition is that employees will become silent employees or move out to other companies. This indeed provides evidence that the drama has been successfully created by darkside leadership.
Leader-member exchange coefficient value which is smaller than darkside leadership does not mean that leader-member exchange is not important. Leader-member exchange has contributed to the decrease in darkside levels. Leader-member exchange is better because it doesn't brutally damage the company. Then, the influence of the positive leader-member exchange of 36.6%
on the corporate performance shows that there are conditions in-group created by the leader to make the drama successful.
Table 4: Adjusted R2 and Model Fit BSC= 1 DL + 2 LMX + e
Variable Adjusted R 2 SRMR
BSC 0.797 0.024
Source: SmartPls 3 Processing Results Description: BSC= Corporate Performance
Table 4 above explains that the results of the darkside leadership and leader-member exchange testing on the corporate's performance have an overall adjusted R2 value of 79.7 %.
That is, the two variables are variables that are related and affect the corporate performance.
This is important because the influence of both is quite strong to affect the corporate performance. Thus, it is important for management to manage both properly so that leader drama does not occur. So, it is important to manage both optimally. While the remaining 20.3
% is influenced by other variables that are not explained in this study.
5. Discussion
Darkside leadership turns out to be real. This study sees that the darkside is not merely an expression that humans have both positive and negative sides. But darkside leadership has become a matter of attention. The darkside form in theory only classifies transformational leadership types that reflect good leaders and transactional and laissez-faire leadership types that describe the darkside leadership. However, it turns out that there are various forms of darkside, there are many theories that discuss the darkside with various behaviors including despotic leadership, destructive leadership, Narcissism leadership, Machiavellianism leadership, psychopathic leadership, charismatic leadership, authentic leadership, harmful leadership, and others. These types exist in the business environment in corporate decision- making.
This type of leader can carry out his activities in the company with various behavioral dramas, including the leader does not want to accept any suggestions and criticism from his employees.
Thus, employees only carry out activities according to instructions. Then, the leader can be manipulative, meaning that the leader tends to justify any means that can benefit himself.
Another drama is in the form of micromanaging, meaning that the leader always takes over the work excessively and manages everything without allowing employees to take the initiative.
Furthermore, other dramas in the form of inconsistent, Leaders tend not to have an attitude towards the decisions they make. (Augustine & Muslimah, 2016; Quamila, 2021; Wanta &
Augustine, 2021)
Then, this study examines to identify the existence of darkside leadership in the company. So the most appropriate step is to use a survey as conducted by several studies through the Darkside Leadership Questioner (DLQ) by providing opportunities for employees to assess the appointed leader. Then, if the assessment has been developed, the results of the assessment will be considered by management to determine the leader. These considerations include a comparison between competence and the level of darkside leadership possessed by the leader.
If the impact of darkside leadership turns out to have an impact on the loss of employees, teams, and organizations. So management needs to anticipate this type of leadership. (Erickson et al., 2015).
In addition to darkside leadership, the results of this study also show the importance of leader- member exchange facing companies today. In this context, low leader-member exchange revolves around the concept of formal work only. This means that there is no close relationship that is built between leaders and employees. This is called an out-group. However, it turns out that the results of this study expect that there is an in-group condition where every leader and employee has a sense of trust, respect, and mutual influence between the two. This will have a positive impact on the corporate's performance. (Hwang, Kim, and Shin, 2020)
The importance of maintaining the values of leader-member exchange pays attention to management in assessing leaders in their companies. Leaders who carry out their activities through this concept can build partnership building. This means that there is a danger of leader behavior that builds this relationship in different groups and outside groups. This will cause feelings of resentment and hostility between groups so that optimal conditions are not achieved.
The most common example is when the leader gives greater benefits to in-group members but not to out-group members. This will lead to comparison and hostility and breakdown of relationships within the organization. So that the impact of employees who are included in the
out-group group will withdraw and disengagement from the company (Wiguna & Augustine, 2022, Junhakim, 2021).
Then, the steps that can be taken to establish fairness in the in-group and out-group are to give positive impressions and decisions for each employee. This means that every leader needs to treat employees in equally positive conditions so that in these circumstances there is no conflict between employees. If the conflict occurs, it can reduce the corporate's performance as a result of hostility and revenge among employees. If the company wants to see in which position the leader-level member exchange employees are. So, a survey can be conducted on employees to determine the level of quality of the relationship between leaders and employees.
In theory, PO Fit theory supports the importance of studying darkside leadership and leader- member exchange. If in practice, it is proven that the employee does not feel comfortable with the leader's condition, the employee will withdraw and leave the company, then the company needs to recruit new employees and align employees with company goals. If both can be controlled optimally, it is expected to form mutually beneficial reciprocity between employees and the organization so that the leader does not become an obstacle in the process of improving corporate performance.
6. Conclusion, Implication, Limitation and Future research
Research conducted on managers, supervisors, and directors in five cities in Indonesia, namely Jakarta, Bogor, Depok, Tangerang, and Bekasi, has succeeded in proving that darkside leadership has a significant negative effect on corporate performance and leader-member exchange has a significant positive effect on corporate performance. The drama of leaders through darkside leadership varies according to the type of leadership inherent in each leader.
This study shows the negative influence of dark side leadership on corporate performance will have an impact on the leader's work and trigger abusive actions against employees thereby reducing employee productivity and employee engagement. In such conditions, employees will remain silent or move out to another company. This is a drama that was successfully created by darkside leadership. Then, the categories of employees in the practice of leader-member exchange also vary, so it is necessary to control so that the company has a quality leader- employee relationship in the in-group category. The decrease in the level of darkside leadership and the increase in contributions from the leader-member exchange have an impact on improving the corporate overall performance.
Implication
Results of research have significant impact on management decisions that need to be careful in choosing, assessing, and determining trusted leaders to carry out their activities in the company.
Management needs to conduct regular assessments to assess the level of darkside leadership as well as the strength of the in-group leader-member exchange so that both can form a better level of employee engagement. The results of the survey conducted regularly are used as a guide to determine the company's strategy during the end of the pandemic.
Limitation and Future research
This study has limitations on the leader-member exchange. The results of the study did not separate the in-group and out-group regarding the research respondents. Thus, this research assumes that the impact of drama darkside leadership and leader-member exchange is the existence of employee engagement at every level of employees. Thus, this limitation is
expected in future research to examine more deeply the leader-member exchange which is predicted to cause moral disengagement and employee engagement.
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