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International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-551892Impact of Leader Member Exchange onOrganizational Performance andCommitment with Organizational Cultureas Moderator: A Non-Monetary Tactic toEnhance OutcomeUsman Tariq, Ramsha Mumtaz, Dr. H. Mushtaq Ahmad, Dr. Ajmal WaheedAbstract — Due to mounting competition organizational performance and commitment is becoming the core business activity.Leader member exchange in workplace can bring both key players closer for achieving organizational goals through betterunderstanding and communication (Maslyn & Uhl-Bien, 2001) and organizations are trying hard to achieve through sustainableeconomic approaches (K. J. Harris, Wheeler, & Kacmar, 2009). This paper is aimed to analyze the impact of leader memberexchange on organizational performance and commitment with the moderating role of organizational culture as proposed (Liu,Kwan, Fu, and Mao (2013) and persuaded to check the impact of leadership on organizational performance and other determinantsalong with cultural variation. The target population for this study was manufacturing sector employees of Pakistan among which 146employees were taken for data collection through questionnaire based survey (n 146) through simple random sampling technique.The results showed that there is a positive and significant relationship between leader member exchange, organizationalperformance and commitment. Moreover culture moderated this relationship significantly. This study can help organizations’ leadersto enhance organizational performance and commitment without any monetary expense just by bridging the members of firm into acommunication’s chain through leader member exchange.IJSERKey Words— Organizational Performance, organizational commitment, leader member exchange and organizational culture—————————— ——————————1 INTRODUCTIONCommunication gap between the participants of organizationleads towards many malfunctioning which can harmorganizational productivity and performance. It is generallyobserved that increased leader member interaction can play avital role in learning organization’s environment which willlead to more organizational commitment and goalachievement (Vidyarthi, Erdogan, Anand, Liden, & Chaudhry,2014). The leader member exchange (LMX) behavior is abridge between an employer and employee in whichsupervisor exchange values with subordinates in a two-wayrelationship to enhance the subordinate’s performance,adaptability, devotion and responsibilities for betteremployment experience and organizational effectiveness thatresulted in positive appraisal for subordinate (T. B. Harris, Li,& Kirkman, 2014). LMX also facilitates employee with morecompatible role taking, customized role making and effectiveroutinizing with employer by making himself morecommitted with the organization (Leach, 2005) to enhanceorganizational output.Job performance of an individual employee is the mainconstruct of organizational productivity and output.Organizational performance does not only include theobjectives achievement but also stressing on workingconditions and environment of the organization which are theexecuter of the original performance (K. J. Harris et al., 2009;Ogbonna & Harris, 2000). Employee’s input in theorganization will be appraised when its performance will becompatible with the leader’s rating and standards. Theseexpectations can only meet when leader and member interactand share what they want from each other in the workplacesetting. Organizational performance makes the employeesdeserve to get the appraisal and recognition by the leader.The positive appraisal evolves organizational commitmentwhich is also necessary for the long term effectiveness of theorganization. It have three phases; normative, affective &behavioral; these are about the work, members and betterrelationships (Mowday, Steers, & Porter, 1979). Commitmentderives from the interaction and trust which a leadernourishes in the organization and especially in employees.This trust catalyzes employees to be emotionally attached withthe organization and its objectives (Steers, 1977).Organizational commitment just not ensure but also retain theemployees’ efficiency as it reduce the distances among theparticipants of the organization but can only propagatethrough better leader member interaction.In this era of globalization, the organizational success not onlydepends on efficient utilization of resources and broad visionIJSER 2014

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-5518strategies (Schein, 2010) but also on strong organizationalculture to achieve the real organizational glory. Equalemployment opportunities and diversification concept in theworkforce have gathered the diverse manpower under oneroof (Hartnell, Ou, & Kinicki, 2011) which may belong fromdifferent cultures having different norms and traditions. Sothe culture should be such strong in which leader canovercome these variations to ensure uniformity andperformance.In developed countries, the power distance is low to makeworkers committed and participative decision making trend isgrowing which have brought leader and member more closeto each other than ever (Lian, Lance Ferris, & Brown, 2012).But in local and regional environment, a coercive way hasbeen adopted to ensure the discipline of workplace whichleads to unsatisfied, uncommitted and unmotivatedemployees which in return will harm their productivity andperformance. Lot of work has been done on the determinantsof leader member exchange as very rare has discussed itsultimate benefits in the form of performance enhancement andcommitment booster in a particular culture setting which is amuch needed research to do.The purpose of this study is to analyze the impact of a leadermember exchange on organizational performance andcommitment. Moreover, the study will also analyze the role oforganizational culture as a moderator in the relationshipbetween leader member exchange with both organizationalperformance and organizational commitment. The rationale ofthis study is the previous research gap proposed by Liu et al.(2013) who persuaded to explore the impact of leadershipaspects on organizational performance in different cultures toknow the cultural variation’s influence on interaction betweenleader and member to get more efficient performance. Studywill also extend LMX theory in dimensions of harvestingcommitment as well as performance in a cultural setting.behavior of an employee as the communication betweensupervisor and subordinate act as a bridge through which asubordinate can perceive what is expected from him/her(Settoon, Bennett, & Liden, 1996). Gerstner and Day (1997) hasdone a meta-analysis on LMX in which he described thatleader member exchange is significantly related with jobperformance, supervision, overall satisfaction, commitment,role conflict, role clarity, member competence, and turnoverintentions. Dienesch and Liden (1986) criticized that the LMXis a multidimensional construct and it is not very rational toview it from unitary aspect. However, LXM plays pivotal rolein overall organizational performance, hence, it is imperativeto explore this phenomenon.2.2 LEADER MEMBER EXCHANGE & ORGANIZATIONALPERFORMANCEOrganization performance is important for institution as itreflected its progress in marketplace. According to March andSutton (1997), organizational performance is not sustainable ina competitive environment due to its dynamicity. Importanceof organizational performance has been acknowledged butstill the ways to enhance it are not properly unveiled.Organizational Performance is not only associated with thegoals of the firm but it also has some societal implications asorganizational participants develop the social capital which,olds the behavior patterns to enhance business performance(Lesser & Storck, 2001).Citizenship behavior and leader member exchange influencethe in-role and extra-role performance of employees whichcombined to constitute organizational performance. MoreoverJanssen and Van Yperen (2004) talked about these positiveoutcomes of organization performance and enlightened thatthe leader-rated job performance is better shown by thoseemployees who possess mastery orientation behavior. Thislogic further confirmed by Erdogan and Enders (2007) whoused social exchange theory to link the leader memberexchange with job satisfaction and job performance.According to that theory Supervisor’s communication withorganization and followers are inter-related that can becatalyzed through perceived organizational support for betteroutput. But this exchange can never occur in a singledimension but in dyadic. Dyadic exchange is a vital dimensionof leader member exchange to develop employee’s satisfactionwhile the work which has been produced by employeesaccompanied with better relationship contribute towardsperformance (Graen, Novak, & Sommerkamp, 1982). It wasfurther extended by Kacmar, Witt, Zivnuska, and Gully (2003)who also found that Performance rating of the employees whoreported to supervisor frequently is better than the employeeswho reported on infrequent basis. Not only communication isnecessary but also the empowerment or delegation of tasks isvital to increase productivity. Marcoulides and Heck (1993)discussed about the positive moderating role of empowermentin the context of leader member exchange and job outcomes.So the following hypothesis is going to be proposed;H1: There is a significant relationship between leader memberexchange and organizational performanceIJSER2 LITERATURE REVIEW2.1 LEADER MEMBER EXCHANGE & THEORETICALFOUNDATIONLeader Member Exchange is too important for the sustainedgrowth of any organization. According to Maslyn and UhlBien (2001) LMX is an important tool for maintaining goodrelationship between leaders and subordinates. Longer thetenure of the relationship, stronger and better will be theexchange process which will increase the employees’commitment and productivity. Bauer and Green (1996)highlighted that leader member exchange system resulted inthe delegation of tasks and power by the leader because anincremental increase has been perceived by the employer.Theoretical roots of leader member exchange theory werefound very significant in many areas of organization.According to Scandura and Graen (1984) leader memberexchange behavior in an organization can provide greaterproductivity, job satisfaction and supervisor satisfaction.Supervisor’s support is significantly high in low LMX groupto make them socialized with organization through exchangeof desired behaviors. Furthermore leader member exchangetheory also found its roots in organizational citizenship and93IJSER 2014

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-55182.3 LEADER MEMBER EXCHANGE & ORGANIZATIONALCOMMITMENTOrganizational commitment is a key brick of a strongorganizational building and nourishes it with devotion. Meyerand Allen (1991) explained organizational commitment as ahuman resource function as it is the job of strategic managersto induce it in the bottom line employees to extract themaximum output from them. Mowday et al. (1979)enlightened that it is necessary to measure the commitmentlevel to get grip upon the ever changing efficiency by knowingthat how much the employees own the organization. O'Reilly,Chatman, and Caldwell (1991) highlighted the importance ofcommitment’s compliance with the objective of theorganization. Relationship between management and workersalso get improved due to this theory as in this way they aresupporting each other in the holistic matters of organization(Janssen & Van Yperen, 2004).Commitment starts from support which an employeepresumes from his organization and that was elaborated byWayne, Shore, and Liden (1997) who told that perceivedorganization support comes from leader member exchange asemployee feel more relaxed when he can discuss his problemsof workplace with leader and got the appreciation. Wang,Law, Hackett, Wang, and Chen (2005) spotted it with furtherclarification by linking it with organization citizenshipbehavior which got improved when transformationalleadership is here. That ends up in lesser absenteeism andreduced turnover (Oh & Chung, 2011) as employee gettingloyal with the organization due to enhanced commitment andsupport. The communication element reduces the powerdistance between the members so they show morecommitment towards the organization. Moreover Leach (2005)confirmed it by implementing this logic in the nursing fieldwhere he found that more correlation with pharmaceuticaland medical staff enable the nurses to perform better due tothe commitment with whole system.H2: There is a relationship between leader member exchangeand organizational Commitment.94culture and performance. Organizational culture can mediatethe relationship between leadership styles and organizationalperformance as culture itself contributes in job performance tosome extent. Humanistic orientation can also influence theperformance as it results in better team designing andsocialization of new comers into organizational environment(Marcoulides & Heck, 1993). Some more leadership styles alsoassociated with performance which is mentioned by House etal. (1999) that self-protective and autonomous leadership arevaried by organizational culture because most of theorganizations are moving towards democratic style and theextent of autonomy depends upon the leader who is differentwhile moving across various firms.Leader’s communication can have its effect on commitmentlevel but the presence of supporting organizational culture actas catalyst in this relationship. Silverthorne (2004) discussed itby concluding that cultural variations can moderate theleadership abilities to put an impact on job satisfaction andcommitment. Commitment of employees made them orientedaround the organization’s objective which normally designedby the leaders by confronting the social and cultural norms oforganization (Lok & Crawford, 1999).H3: Organizational Culture moderated the relationshipbetween leader member exchange and organizationalperformance.H4: Organizational Culture moderates the relationshipbetween leader member exchange and organizationalcommitment.IJSER2.4 MODERATING ROLE OF CULTUREOrganizational culture is a set of traits and behaviors of itsmembers through which they can not only perceive and thinkabout their internal environment but also can cope withexternal problems. It should be taught to new members tomake them compatible with the organization’s currentphilosophy (Schein, 1984). Avolio, Zhu, Koh, and Bhatia (2004)also elaborated the importance of organizational culture byattributing it as a vital part of socialization process. Culturaltraits like involvement, consistency and mission are goodpredictors of organization’s productivity and performance.Organizational Culture can moderate the impact of leadermember exchange on the organizational performance ascultural variation change the interaction parameters within anorganization. Better way to analyze this impact is to link theprecise influences of organizational culture on the developingfactors of performance (Saffold, 1988). These developingfactors were discussed by Ogbonna and Harris (2000) whoexplained a three dimension relationship among leadership,3 THEORETICAL .1 SOURCE This framework has also been suggested by Liuet al (2013) in their study as future research path but themoderating role of organizational culture has been found bythe extensive literature review.INDEPENDENT VARIABLELeader member exchangeDEPENDENT VARIABLEOrganizational PerformanceOrganizational CommitmentMODERATING VARIABLEOrganizational CultureIJSER 2014

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-55184 METHODOLOGY4.1 SAMPLEThe target population for this study comprised of theemployees of manufacturing and service organizations andthe sample size consisted of 146 employees (n 146) belongsfrom home appliances industry of Gujranwala. This studyused random sampling technique which falls in probabilitysampling domain for the selection of respondents. Simplerandom sampling technique has the main feature of havingequal chances of selection of respondent within thepopulation. In our study this techniques leads us to theselection of various home appliances employees to collectresponses of this research.4.2 PROCEDUREThe home appliance industry was approach in person andexplained the purpose of the study. When they were satisfiedthe questionnaire were distributed personally to respondents.Each respondent was given one questionnaire and were askedto fill in while the researcher was around to help in case theyneed. The personal approach was selected to get the dateaccurate and early. The data was collected in one stageprocess in which questionnaires were distributed and gotfilled in personal presence due to some vital reasons. First ofall it helped in responding queries about the items which aredifficult to understand for the respondents as some of themanufacturing sector employees found it difficult to conceivethe theme of few items in their appropriate context. Secondlyself-administering helped a lot to keep the responses unbiasedup to some extent.The home appliance industry was approached in person andexplained the purpose of the study then the questionnaireswere distributed personally to respondents. Each respondentwas given one questionnaire and were asked to fill in whilethe researcher was around to help in case they need. The datacollection was done in one time process through selfadministered method which helps to keep responses unbiasedup to some extent. To get more realistic views about ourtheme, those organizations were selected who were in thebusiness for more than five years.95Meyer and Allen (1991) developed a scale of organizationalcommitment this study to measure organizationalcommitment. Scale was further modified by both the authorsin 1997. It includes items of affective, continuance andnormative commitment. 9 items were included in instrumentfrom all the given items related to the theme of this researchstudy.This scale measured the commitment level ofemployees with the organization.Organizational culture was measured by using theorganizational culture assessment instrument (Cameron &Quinn, 2011). This instrument contained items hip,management of employees, organizational glue and strategicemphases.5 ANALYSIS AND FINDINGSIn order to analyze the results of this research, we haveentered all the data which we collected from our respondentsabout leader member exchange, organizational performance,organizational commitment and organizational culture intoSPSS. We have applied multiple tests to elaborate the findingslike Descriptive Statistics, Reliability or Cronbach Alpha,Pearson Correlation, Regression and Moderating Effect Testby Andrew F. Hayes to discuss the findings on the basis ofconcrete fact and figures.It is depicting the values of cronbach’s alpha which indicatesthe reliability of instrument as well as of variables. Leadermember exchange, organizational performance andorganizational commitment are showing the values 0.859,0.753 and 0.701 respectively. It is indicating that theinstruments used for research are highly reliable for the studyas the rule of thumb for this is that only those measures can beused who has this value greater than 0.70.Table 1Cronbach AlphaIJSER4.3 MEASUREMENTFive point likert scale was used to get the responses fromrespondents in case of measures regarding all variables. In thisscale rating alternatives are categorized as 5 strongly agree,4 agree, 3 neither agree nor disagree, 2 disagree, and 1 strongly disagree.Leader member exchange was measured by using a scaledeveloped by (Scandura & Graen, 1984). After doing someappropriate modifications, 7 items were selected to getresponse. This scale measured the exchange relationshipbetween leader and follower.Dimovski and Škerlavaj (2005) developed an instrument tomeasure organizational performance which was used in thisstudy. This instrument had the items related financial,suppliers, employees and customers’ aspect of performance.Among all the questions, 9 items had been included to theinstrument to collect responses for this study.Leader Member Organizationa OrganizationalExchangel Performance CommitmentCronbach’sAlpha0.8590.753Table 2Descriptive analysisGenderAge (Years)Female 2021-30 31-4041-50Male %or%less66.4 33.611. Tenure (Years)5 or less 6-1011-1576%IJSER 2014http://www.ijser.org17.1%6.8%16 ormore0.70151-6061 orabove--

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-5518Model RTable 4Regression TableModel SummarybRAdjusted R Std. Error of the DurbinSquare SquareEstimateWatson1.483 .480.695aa. Predictors: (Constant), LMXb. Dependent Variable: OP.407791.5111-2 included the demographics of the research study. In termsof gender, there were 66.4 % male respondents while 33.6%were the female ones. 58.2% of the employees were liesbetween 21-30 years age group. Employees belonged frommanufacturing and service industries were respectively 51.4%and 48.6%. As far as employment tenure is concerned, 76%employees had less than 5 years tenure in the respectiveorganization. Most of the respondents were intermediate andgraduated in terms of their g. (2-tailed)NPearsonCorrelationSig.(2-tailed)NModel SummarybModel R RAdjusted R Std. Error of the DurbinSquareSquareEstimateWatson1.836a .698.696.413491.910a. Predictors: (Constant), LMXb. Dependent Variable: OCThen to check the impact extent of leader member alcommitment, linear regression analysis was applied withDurbin-Watson. R square tells the total change in thedependent variables (organizational performance andorganizational commitment) due to the impact of independentvariables (Customer Satisfaction & Brand Image). For leadermember exchange and organizational performance, it isshowing the value 0.483 which enlightened that leadermember exchange can bring 48% change in organizationalperformance. Durbin-Watson test is basically used to checkthe direction of the impact that either the variables arepositively or negatively correlated or integrated. As fororganization performance, it is showing the value 1.511 whichis less than 2 so it means that leader member exchange andorganizational performance are positively correlated.Meanwhile for the relationship between leader memberexchange and organizational commitment showing the valueof R square about 0.698 concluding that leader memberexchange can bring 69% change in organizational commitmentand it is positively correlated as Durbin-Watson value is 1.910which is less than 2. Furthermore this relation has also beensupported by the above mentioned Pearson correlation inwhich the values indicated that organizational commitment ismore closely related with leader member exchange than theorganizational performance.Table 5ANOVAaSum of dfMean FSig.SquaresSquareModelRegression 22.402 122.402 134.716 .000b1Residual23.946 144 .166Total46.349 145a. Dependent Variable: OPb. Predictors: (Constant), LMXIJSERTable 3CorrelationsLeader Organizational OrganizationMember OCPearson.836**.673**CorrelationSig. (2-tailed).000.000N146146146**. Correlation is significant at the 0.01 level (2-tailed).It shows the Pearson Correlation among the variables. As thevalues of leader member exchange for organizationalperformance and organizational commitment are 0.695 and0.836 respectively. So it is showing a significant correlationamong the independent and dependent variables.ANOVAaModelIJSER 2014http://www.ijser.orgSum ofSquaresdfMeanSquareFSig.

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-5518156.986333.295 .000bRegression 56.98624.621144 .171Residual1Total81.607145a. Dependent Variable: OCb. Predictors: (Constant), LMXResults explain the significance level exist between therelationship between variables. As both ANOVA tables fororganizational performance and organizational commitmentrespectively are showing the .000 value of significance whichis less than 0.05 so it means that leader member exchange isstrongly related with both organizational performance andorganizational commitment.Table 6Beta ValuesModelUnstandard Standardized TizedCoefficientsCoefficientsBStd. BetaError(Constant) 1.825 .1151LMXModel UnstandardizedCoefficientsBStd.Error(Constant) 1.309 .1161LMX.626 .034Tolerance VIF15.88.000411.60.000 1.0007Int 1-.1009 .0707 -1.4257 .1561 -2.407 .0390Interactions: int 1 LMXX OCLIt is about checking the impact of moderating variable whichis organizational culture in our case by applying a testdesigned by Andrew F. Hayes. Results showed that for int 1,the value of P is 0.1561 which is greater than 0.05 so itenlightened that organizational culture does not moderate therelationship between leader member exchange andorganizational performance.Model 1, Y OC, X LMX, M OC, Sample size: 146,Outcome: OCTable 8Moderation ModelCoeffseTpLLCIULCIConstant 3.5122 .0573 61.2845 .0000 3.3989 3.6255OCL.1693 .0819 2.0681 .0404 .0075.3312LMX.3944 .0649 6.0750 .0000 .2660.5227Int 1.3256 .0707 4.1381 .0001 .4812.1701Interactions: int 1 LMXX OCLAbove mentioned analysis is about checking the impact ofmoderating variable which is organizational culture in ourcase by applying a test designed by Andrew F. Hayes. Resultsshowed that for int 1, the value of P is 0.0001 which is lesserthan 0.05 so it enlightened that organizational culturesignificantly moderate the relationship between leadermember exchange and organizational performance.IJSER.393 .034 .695a. Dependent Variable: OPSig. CollinearityStatisticsCoefficientsaStandardized tCoefficients1.000Sig. CollinearityStatisticsBetaTolerance VIF11.241 .000.83618.256 .000 1.0001.000a. Dependent Variable: OCIt highlights the beta values of research variables which depictthe sole impact of independent variable on dependentvariable. Tables are showing that the beta value fororganizational commitment is 0.836 which is higher than thebeta value of organizational performance which is 0.695. Thusboth of our hypotheses H1 and H2 respectively approved asthere is significant relationship among leader memberexchange, organizational performance and organizationalcommitment. Collinearity had also been analyzed as tolerancevalues and VIF are 1 in both cases which is less than 5 so itdepicts that there is no multi collinearity existed betweenvariables.Model 1, Y OP, X LMX, M OCL, Sample size: 146,Outcome: OPTable 7Moderation ModelCoeffSeTPLLCIULCIConstant 3.1518 .0505 62.4552 .0000 3.0520 3.2515OCL.1268.0939 1.3706.1727 -.0569 .3142LMX.2808.0693 4.0499.0001 .1437.4178976 DISCUSSIONThis research study revealed that there is a significantrelationship between leader member exchange with bothorganizational performance and Organizational commitment.As shown by the values of Pearson correlation, all thevariables under study are significantly correlated but therelation between leader member exchange and organizationalcommitment was more stronger than the relationship betweenleader member exchange and the organizational performancedepicted by the values of correlation and R square which were0.836 and 0.698 respectively. It also supported the factexplained by Wayne et al (1997) that the communicationbetween leader and its subordinates enhances the affectivecommitment of subordinates. Thus, based on the analysis andfindings hypothesis 1 and 2 are upheld and accepted.Organizational culture as a moderator had also been foundsignificant for the relationship between leader memberexchange and organizational commitment as the significancevalue of the interaction was 0.0001 which was lesser than 0.05.Steers et al (1997) also found in their research that supportiveorganizational culture has been required to enhance theemployees devotion towards the company through the interorganization communication. Thus H4 is highly supported bythe facts and figures. Therefore, hypothesis 4 was upheld andaccepted. While there was no moderating effect was found oforganizational culture in the relationship between leadermember exchange and organizational performance due to theinteraction significance value which was higher than 0.05.Hence, hypothesis 3 was not upheld and accepted andtherefore rejected.IJSER 2014

International Journal of Scientific & Engineering Research, Volume 5, Issue 12, December-2014ISSN 2229-55187 CONCLUSIONThe core objective of this research was revolved around tocheck the impact of leader member exchange onorganizational performance and commitment with themoderating role of organizational culture which was foundpositive by the results. The findings of the study showed thatthere is significant and positive relationship between leadermember exchange and both the variables, i.e., organizationalperformance and organizational commitment respectively.The study further depicted that leader member exchange, thedistance between leader and his/her subordinates reducedwhich turned out in better understanding of bilateral issues,problems and demands and afterwards that particularphenomenon resulted in the better performance not only ofindividual employees but also of the whole organization andthe ever committed workers too. The present study’ results arein line with Lok et al (1999) which supported tha

Organizational Performance and Commitment with Organizational Culture . achievement (Vidyarthi, Erdogan, Anand, Liden, & Chaudhry, 2014). The leader member exchange (LMX) behavior is a . theory also found its roots in organizational citizenship and behavior of an employee as the communication between

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