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Leader-Member Exchange Theory: In a team of workers working towards achieving a common goal, there is a leader, and then there are followers. In this team of yours as a leader, you have some team members you are very close to and have developed a great relationship with over the past years with which you have been working together.

This implies a level of trust between the two of you that allows you to trust their decisions, level of expertise, loyalty, and obedience to the Job. The same logic applies to other members of the team that you don’t trust as much. These employees may be shallow goal-getters and less competent, and therefore your trust in them diminished over time.

Here are some questions to consider: Have you ever stopped at some point and evaluated the situation you are dealing with? The reason why you don’t trust some team members? Either right or wrong, how does this sentiment affect your relationship with them when it comes to job responsibility and team assessment? Do you at times deny them some opportunities which could make them grow?

All these questions are in the Leader-Member Exchange Theory(LMX) or the vertical Dyad Linkage Theory. This theory examines how team leaders and managers develop cordial relationships with their team members. This kind of relationship is very vital to the growth and progress of individuals present in the team.

The Leader-Member Exchange Theory (LMX) is a relationship-based approach to leadership that focuses on the two-way (Dyadic – interaction between a pair of individuals) relationship between leaders and team members, according to Wikipedia. The Leader-Member Exchange theory focuses on how leaders relate with their team members on a different basis in terms of the quality of the relationship they have shared in the past.

FOUNDATION OF THE Leader-Member Exchange Theory (LMX)

The Leader-Member Exchange Theory was developed from the vertical dyad linkage (VDL) theory. It first emerged in the 1970s. This theory suggested that this theory passes through three stages Graery and Scandura in the year 1987 for proper testing and development. These stages are listed below:

  1. Role-Taking Stage
  2. Role-Making Stage
  3. Role-Routinization Stage

Lets now take a look at the steps involved in the theory

  1. Role-Taking Stage: This is when members are recruited into the team. At this time, the team leader or manager assesses new members’ skills and abilities toward the team’s goal. This is when the manager gets to meet the team members and evaluate their abilities to see if they meet the basic or the minimum requirement to be on board.
  2. Role-Making Stage: After the assessment stage, new members work on the team’s project and tasks as one team working together to achieve a common goal. The team leader expects the members to be Hardworking, trustworthy, and loyal as they do on the projects. At this point, the team leader subconsciously divides into two groups:
  3. The Loyal Group (In-Group): Loyal, competent and trustworthy members are in this group. The manager has assessed them well and has found the required traits in them. This set of people gets the team leader’s attention and is open to more tasks and opportunities. These people are, in most cases, offered additional training and seminars for advancement.
  4. The Disloyal Group (Out-Group): These are the team members who have betrayed the team leader’s trust. The manager does not trust them to go far with the team’s goals. The manager has seen them be incompetent and not motivated by the team’s shared vision and goals. These people are not often reckoned with such that they don’t get proper roles and are not in a good position of handling a more significant part of leading the team in the future. These team members do not get the attention of the team leaders.
  5. Role-Routinization Stage: The relationship between team members is further established. The Loyal team works harder and continually gains the trust of the team leader. They tend to show resilience, confidence, persistence, patience, and empathy towards the team leader’s opinion. And on the other end, the disloyal team members begin to find it challenging to work with the team leader due to the manager’s lack of affection and attention. This will make them grow frustrated and begin to question the leadership. In the long run, they tend to resign from such a group or organization.
Leader-Member Exchange Theory

The manager doesn’t have to group them virtually, once they have been classified subconsciously in the mind of the team leader, this will affect the relationship with the different individuals that make up the team.

ADVANTAGES OF Leader-Member Exchange Theory (LMX)

  • It increases job satisfaction and productivity: When jobs and tasks are handled by the team’s loyal and competent members, the team manager is assured that they will deliver to his/her satisfaction.
  • It increases team morale and confidence: The team’s morale is increased when the team leader gives more attention to this set of members. The team leaders instill confidence in them.
  • It increases respect and trust: With the team recording success, it increases the respect and trust within the team.
  • It increases commitment to the Job
  • And, It facilitates learning from the team leader: This thereby prepares the team members for future leadership tasks.

LIMITATIONS TO Leader-Member Exchange Theory

The Leader-Member Exchange Theory might not be the best leadership model to practice in most organizations because it violates the rules and characteristics of a good leader to research. A good leader must be able to work to the team members’ strengths irrespective of their skills and knowledge. It is tough to maintain harmony in the team when the Leader-member exchange theory is practiced. Segregating a  set of the group as incompetent might attract personal sentiment to withhold future developmental opportunities.


  1. Identify the out-group members
  2. Re-establish your relationship with them
  3. Subject them to training and development
  4. Try them out with more tasking roles

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