Leader-Member Exchange Theory or LMX Theory is a two-way relationship or a dyadic relationship between the leaders and their team members that focus on how the leaders’ relationships with subordinates or followers vary and how it affects the resource allocations and outcomes.

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The LMX ways of relationships give rise to two sides of employees- in-group & out-group. Leaders let in-group members work within their personal circle by doing some favors while they give less attention or favor to the out-group members.

All in all, the Leader-Member Exchange LMX theory suggests that the quality of the relationship between leaders and their team members ultimately decides the degree of loyalty, mutual trust, respect, obligation and


Table of Contents


What is the process of LMX Theory of Leadership?Four Stages in the development of LMX Theory4 Tips to Build Stronger Relationships with Team MembersLimitations of Leader-Member Exchange Theory

What is Leader-Member Exchange Theory?

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Emphasizes the specific relationships between the leader and each subordinateIt is considered a robust explanatory theory to describe the role of quality relationships between leaders and followersTalks about the significance of communication in leadershipIt is highly practical and valid in its approach

Criticism of the LMX Theory

One of the biggest criticisms of the leader-manger exchange theory is that it is perceived as unfair. The distinction between in-group and out-group in itself is discriminatory. It may hurt everyone in the organization as it may harbor unhealthy competition.

This theory also fails to explain how to build and create high-quality exchanges in the first place. It simply suggests that such a relationship is established automatically.


The research of this theory does not specify why or what behaviors lead to forming a high-quality relationship. It focuses on the nature of the relationship rather than the why or how of the relationship.

Limitations of Leader-Member Exchange Theory

1. Identifying Your Out-group

It is imperative to identify the out-group members and give them a chance. Re-evaluate what it is they did to lose the trust of the manager.

Are they incompetent, or are they not motivated to be assigned important tasks? A manager should check facts and compare the same with their perception of the follower.

2. Reestablishing Relationships

The leader should make an effort to re-establish their relationship with the out-group members. Research shows that members that have a good relationship with their leader show higher morale and are more productive. So to reestablish relationships, leaders may use one-on-one meetings to identify his or her psychological contract and what really motivates them.

Using McClelland’s Human Motivation Theory or Herzberg’s Motivators and Hygiene Factor Theory can also be useful in finding what drives the out-group members to succeed.

3. Provide Training and Improvement Opportunities

One way to help followers transition from out-group to in-group is to provide them with training and other opportunities to grow and develop and be worthy of being included in the in-group. One way to test their abilities is to provide them with low-risk opportunities to assess their progress.

This way, the manager can no longer be labeled as unfair. Equal opportunities and growth opportunities are provided to all, which can balance the favoritism received by members of the in-group.

Conclusion

It is clear now that leadership is all about relationships between leaders and followers. Therefore leaders should know how to build solid relationships across their team to optimize organizational as well as individual growth.

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The leadership-member exchange theory emphasizes this aspect of leadership. Plus, it also suggests that leaders should keep on checking their own behaviors and biases to develop a productive relationship with every member of their team.