What does it take to be a good leader?
Do you need to be smart? Capable? A good communicator?
According to the leader-member exchange theory (LMX), the success of a good leader rests on his or her ability to develop and propagate high-quality relationships with their subordinates or team members.
In particular, a leader’s exchanges with their team members should be defined by trust, mutual respect, and general liking. These exchanges help each individual member grow and improve, which overall contributes to the team’s success.
The History of the Leader-Member Exchange Theory
Researchers named George Graen, Fred Dansereau, and William Haga introduced the concept of the leader-member exchange theory when they published their seminal article on the topic in 1975.
The article was published in a scholarly journal, Organizational Behavior and Human Performance, and was called “A Vertical Dyad Linkage Approach to Leadership within Formal Organizations: A Longitudinal Investigation of the Role Making Process.”
The foundation for LMX (Leader-Member Exchange Theory) is the vertical dyad linkage theory (VDL). “Dyad” means a pair of two individuals who are sociologically linked, such as a manager and team member.
According to VDL, leaders develop relationships with only some of their subordinates. The rest, they merely supervise.
Leader-Member Exchange Theory or LMX says this approach is detrimental to the team as a whole because leaders need individual relationships with their entire unit for everyone to receive the same growth opportunities.
Leader-Member Exchange Theory in Practice: 3 Steps to Forming Relationships
According to the leader-member exchange theory, managers and team members go through three stages when forming a relationship:
During this time, a leader or manager will observe and assess the skills and strengths of new members.
New members have been initiated and start work within the team. Managers set expectations during this stage that they want all members to live up to. For example, the manager may expect hard work, trustworthiness, and loyalty.
During this stage, as members settle into their roles, managers will categorize them into one of two groups, sometimes without even realizing it:
- In-group – Team members who prove themselves and live up to the manager’s expectations will be categorized as part of the in-group. These are the people the manager trusts and respects, and as a result, give them more challenges, chances for growth, and opportunities for advancement.
- Out-group – Team members put into the out-group have not lived up to expectations. They have proved untrustworthy, disappointing, or incompetent. As a result, they will not receive the same opportunities or one-on-one time with the manager as the in-group. Their work may be unchallenging because the manager doesn’t trust them with harder tasks.
During routinization, routines and exchanges between the manager and team members become clear.
In-group members will want to continue to live up to the manager’s expectations. Out-group members may start to feel stuck, and they may end up distrusting or disliking the manager. Out-group members usually don’t stick around for very long.
3 Important Aspects of LMX Theory
The following three aspects of LMX (Leader-Member Exchange Theory) are important to understanding:
1. Members Who Develop a Relationship with Their Leader Have an Advantage
Naturally, according to the leader-member exchange theory, members who develop rapport and a relationship with their leader/manager will have a big advantage over those who do not.
Through their manager, they’ll get more opportunities to prove themselves, more one-on-one training and attention, and more chances to succeed and rise in their profession.
2. LMX Assumes That Everyone on the Team Is Deserving of Trust, Opportunities, and Advancement
One flaw associated with LMX is the theory assumes all team members are equally deserving of the same opportunities, advancement, and bonuses.
The truth is not everyone is hard-working, honest, or universally skilled. Managers need to focus on delegating the right tasks to the right people as well as developing relationships with their team. Not all of these relationships will look the same, but they should help each team member live up to their potential.
3. LMX Shows How Managers Can Have Bias Toward Some Team Members
A huge benefit of LMX is that it often reveals a leader or manager’s bias toward their team members.
For example, a manager may naturally be drawn to those members who remind him or her of themselves. The manager may also subconsciously place members in the out-group not based on skill or capabilities, but rather based on personal dislike.
The leader-member exchange theory helps you reevaluate your relationships with your team members and understand how your exchanges turned positive or negative. Then you can identify those members you’ve placed in the out-group and work on reestablishing and strengthening those relationships.
Ultimately, LDX can help you build a better team with members who are more fulfilled and working to their potential. That can spell success for the entire operation.