What Is the Leader-Member Exchange Theory? (Definition and How It Works)

Leader Member Exchange Theory

How does the leader-member exchange theory work?

A leader is more likely to evaluate how they view their team members and, as a result, be more appreciative of the skills and individual personalities that each team member brings to the workplace if they are aware of how the leader-member exchange theory operates. The leader-member exchange theory can be used by managers to create a workplace where there is either no outgroup or where the outgroup has equal access to opportunities and skill-building responsibilities:

1. Know who is in the out-group

Keep in mind that managers may unconsciously classify team members into one of the two groups based on perceptions, whether those perceptions are accurate or not. Write down the names of all the employees who you would consider to be in the out-group in order to start putting the leader-member exchange theory to work for you. Determine each person’s reason for not belonging to the in-group one by one.

Managers may want to consider whether the worker was uncooperative in a meeting, has low motivation, or engaged in any other behavior that might have bred mistrust. The manager can then conduct further analysis to determine whether or not their response to a real or perceived slight was fair. This can be a really helpful first step in figuring out why someone belongs to one group instead of the other.

2. Develop relationships

A manager should work to rebuild relationships with those they have put in the out-group once they have identified them. The team member will appreciate the effort and likely improve their work, attitude, and relationship with other team members, including those in the in-group, as a result of doing this. A manager will benefit from this because they now have a team member who is contributing to and helping the entire group.

Although an out-group member isn’t used to receiving attention from their manager and may be wary at first, their manager should exhibit a genuine interest in building rapport. To accomplish this, managers should get to know their team members and proactively inquire about how each member’s day is going and whether they can assist with any tasks that are on the employee’s plate.

Understanding a person’s motivations, career goals, whether they enjoy challenging work, and expectations from you as their manager are all part of developing a relationship with them. So that you can manage effectively, take the time to arrange a one-on-one meeting to collect this crucial information.

3. Provide specific opportunities

The manager should create training or skill-building opportunities that are specific to each employee once they have more information about them. A manager might establish a peer-to-peer mentoring program or schedule regular coaching sessions if an employee expresses a desire to learn more from the team. A manager can set up webinars or in-person training sessions for an employee who wants to learn something new.

If a manager is still unsure whether they can trust a team member to perform well, they can begin by giving them low-risk tasks to complete and then assess how they perform. If they succeed, they can take on more work so the manager can evaluate them. If they don’t do well, the boss still has the chance to talk to them about it and teach them how to do better the next time.

Both a leader and a team member would gain from reevaluating as needs and objectives change to ensure that the employee is still receiving the opportunities that are best for them.

What is the leader-member exchange theory?

The leader-member exchange theory, also referred to as LMX or Vertical Dyad Linkage Theory, examines the bond between team leaders and their subordinates and how that bond influences each worker’s development and output. According to the theory, the leader-member relationship goes through three stages in total, including:

1. Role taking

This phase essentially marks the employee’s entry into the company or their first reporting to their current manager. The leader-member relationship will likely start over for an employee who started their career at a company in the marketing department before moving on to the customer service department because they are now reporting to a new manager. However, if the two managers have conversations about their employees, it’s possible that the employee is starting the relationship at a different point in the three stages than a brand-new employee would be.

Team members are currently joining the group for the first time. The new hires’ skills, experience, and abilities are being accessed by managers as they get to know them. A leader’s first impression of an employee will cause them to form an impression of the team member, and they are more likely to provide opportunities for their new team member based on this impression.

2. Role making

Team members are now a part of the group at this stage, working on tasks and projects that have been assigned to them. While assuming that everyone is working hard, communicating clearly, and supporting their team, a manager may watch how everyone interacts and develop a solid understanding of the abilities each member brings to the group. They especially count on a new team member to put forth their best effort as they integrate into the group. The majority of managers fully believe they can trust their new team members and that they will be committed to the group and company.

This phase is crucial because it is at this point that leaders will divide their newly formed teams into one of two groups. This often happens subconsciously. The two groups are:

The manager will put a team member in the in-group if they demonstrate to them during the role-taking stage and the start of the role-making stage that they are devoted to the group, a hard worker, worthy of trust, and have the abilities to do their job well. This group will go on to get more opportunities, more difficult or interesting work, and more managerial focus. In order to help them develop their skill set and advance in their position, the manager might also give them resources like access to conferences and training sessions or consider them for promotion.

You may have noticed that members of the in-group frequently have traits and abilities in common with one another. Relationship building is made simpler for managers and other employees by those who are similar to them.

On the other hand, managers categorize out-group members in this manner if a worker somehow betrays their trust or otherwise gives the manager the impression that they aren’t as valuable a worker as their teammate from the in-group. As a result, the members of the out-group team work on tasks that are less difficult, don’t call for creativity, and pose a lower risk than other tasks. Although a manager may not be aware of it, they tend to communicate with these employees less frequently than other employees.

Without manager approval, a manager may reduce the duties or decision-making authority of a team member from an unaffiliated group. Additionally, they might not have the same level of access to the resources or opportunities needed to advance their skill set. As a result, an out-group team member may become bored with their position and frequently blend in with the group instead of standing out to the manager.

3. Routinization

Members of the in-group team continue to put in a lot of effort to win their managers’ approval. They could display the qualities that make managers trust their work and their judgment, like patience and empathy for their team.

Out-group members may become disengaged and even start to dislike their managers and teammates who are in the in-group if they feel like they aren’t a vital part of the team. They might find it challenging to integrate into the in-group, which is frequently the case, and might feel defeated as a result. It might be necessary for an out-group member to start over in a different department or at a different company if they want to join the in-group.

Advantages and disadvantages of the leader-member exchange

There are advantages and disadvantages of the leader-member exchange, including:

Advantages of the leader-member exchange

Disadvantages of the leader-member exchange


What is an example of Leader-Member Exchange Theory?

Unlike other theories, LMX theory focuses on and discusses specific relationships between the leader and each subordinate, making it a superior theory of leadership. LMX Theory is a robust explanatory theory. Our attention is drawn to the importance of communication in leadership by the LMX Theory.

What is the basic idea behind Leader-Member Exchange Theory?

This theory, which is also referred to as LMX or the Vertical Dyad Linkage Theory, examines how team members and managers form relationships and explains how those relationships can either promote growth or impede it.

What is Leader-Member Exchange Theory also known as?

(Also known as LMX or Vertical Dyad Linkage Theory) It’s not always appropriate for managers to treat every member of their teams equally. For instance, you probably have team members with whom you have a great working relationship because you can rely on them, they put in a lot of effort, and they have never let you down.

What are the four factors of Leader-Member Exchange?

The fundamental tenet of the leader-member exchange (LMX) theory is that leaders create two groups of followers—an in-group and an out-group. Greater responsibility, more rewards, and more focus are given to in-group members. The leader allows these members some latitude in their roles.

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