Leader Member Exchange Theory

Many leadership theories have emphasized leadership from the point of view of the leader (e.g., trait approach, skills approach, and style approach) or the follower and the context (e.g., Situational Leadership® and path-goal theory). Leader-member exchange (LMX) theory takes still another approach. LMX theory conceptualizes leadership as a process that is centered on the interactions between leaders and followers.
Before LMX theory, researchers treated leadership as something leaders did toward all of their followers. This assumption implied that leaders treated followers in a collective way, as a group, using an average leadership style. LMX theory challenged this assumption and directed researchers’ attention to the differences that might exist between the leader and each of the leader’s followers.
In the first studies of exchange theory, which was then called vertical dyad linkage (VDL) theory, researchers focused on the nature of the vertical linkages leaders formed with each of their followers. A leader’s relationship to the work unit as a whole was viewed as a series of vertical dyads. In assessing the characteristics of these vertical dyads, researchers found two general types of linkages (or relationships). First were those that were based on expanded and negotiated role responsibilities (extra-roles), which were called the in-group. Then there were those that were based on the formal employment contract (defined roles), which were called the out-group.
Within an organizational work unit, followers become a part of the in-group or the out-group based on how well they work with the leader and how well the leader works with them. Personality and other personal characteristics are related to this process. In addition, membership in one group or the other is based on how followers involve themselves in expanding their role responsibilities with the leaders. Followers in the in-group receive more information, influence, confidence, and concern from their leaders than do out-group followers. In addition, they are more dependable, more highly involved, and more communicative than out-group followers.
After the first set of studies, there was a shift in the focus of LMX theory. Whereas the initial studies of this theory addressed primarily the nature of the differences between in-groups and out-groups, a subsequent line of research addressed how LMX theory was related to organizational effectiveness. Specifically, these studies focus on how the quality of leader-member exchanges was related to positive outcomes for leaders, followers, groups, and the organization in general. Researchers found that high-quality leader-member exchanges produced less employee turnover, more positive performance evaluations, higher frequency of promotions, greater organizational commitment, more desirable work assignments, better job attitudes, more attention and support from the leader, greater participation, and faster career progress over 25 years.