Leader – Member Exchange (LMX) Theory

Every leader and follower are unique and work differently in different situations. Leadership is a relationship between leaders and followers, and building this relationship requires an appreciation for the personal values of those who would be willing to give their energy and talents to accomplish shared objectives. Various leadership theories evolved to define the leadership characteristics, traits & styles.

The Leader-Member Exchange theory (shortly LMX theory) occupies a unique position among leadership theories because of its focus on the dyadic relationship between leader and follower. LMX theory was originally called Vertical Dyad Linkage (VDL) theory by Dansereau, Graen & Haga in 1975.

You may have noticed your team leader or manager have more interactions with some of the team members. Also, they have tendency to give more responsibilities to these team members & consider them at first place for rewards and recognition. This tendency is central to LMX theory.

According to LMX Theory, in most leadership situations not every follower is treated the same by the leader. Leaders and followers develop dyadic relationships and leaders treat each follower differently, resulting in two groups of followers—an in-group and an out-group.

The in-group consists of a few trusted followers with whom the leader usually establishes a special higher quality exchange relationship.

The out-group includes the followers with whom the relationship of the leader remains more formal.

LMX is the only leadership approach to consider the dyadic relationship of leader and follower and the exchanges that determine organizational effectiveness. LMX theory asserts that leaders do not interact with subordinates uniformly because supervisors have limited time and resources. One of the implications of this theory is that the nature of the exchange is determined by the leader based on some presumed characteristics of the follower.

Followers get into one of these two groups based on:

* how well they work with the leader

* how well the leader works with them

* their personalities

* role responsibilities they assume

* follower’s competencies and accomplishments

‘In-group’ followers do their jobs in accordance with the employment contracts and can be counted on by the supervisor to perform unstructured tasks, to volunteer for extra work, and to take on additional responsibilities. Supervisors exchange personal and positional resources (inside information, influence in decision-making, task assignment, job latitude, support, and attention) in return for subordinates’ performance on unstructured tasks.

As a result of high LMX relationship, we can achieve increased

* mutual trust,

* confidence,

* job satisfaction,

* organizational commitment,

* common bonds,

* open communication,

* independence,

* respect, rewards & recognition

In contrast, followers who perform only in accordance with the prescribed employment contract are characterized as ‘out-group’ with limited reciprocal trust and support, and few rewards from their supervisors. Subordinates in the Out-Group may be new to an organization.

“When leaders and followers have good exchanges, they feel better, accomplish more, and the organization prospers” – Northouse

High-quality exchanges brings positive organizational outcomes such as innovation, empowerment, positive job climate, and organizational citizenship behavior. So, a leader should look for ways to build trust and respect with all of their subordinates, thus making the entire work unit an in-group. When the relationships between leaders and subordinates are all high-quality, “the goals of the leader, the followers, and the organization are all advanced”

Update on 08/16/2011 – Entire Information in a Google Doc Presentation Format: