The Nature of LMX Differentiation and Diversity Climate

Diversity climate has been recognized as key to preventing negative diversity effects and fostering positive diversity effects. Despite this consensus, the field has recently been criticized for using measures of diversity climate that are not linked to diversity theory, including non-climate items, and mixing referents and levels of analysis. Perhaps most critical is the fact that the literature provides few concrete suggestions for leaders and organizations in terms of how to create positive diversity climates. References to leadership implications have been unspecific or contradicted leadership theory – such as treating all employees well and equally. In this study, we address these shortcomings. We develop and validate a theoretically sound measure of diversity climate and build theory to explain how the underlying nature of leader-member exchange differentiation sends strong signals to employees about whether diversity is valued or not. By focusing on the underlying reasons, we also contribute to the leader-member exchange literature and offer one potential explanation for conflicting findings on the effects of differentiation.