Leadership Member Exchange Theory

LMX theory proposes that leaders develop different type of relationship with members and do not treat everyone equally. Understanding how the different relationships are formed provides insight on how leaders and members influence each other. Relationship between leaders and members are group into high-quality (in-group) or low-quality (out-group).

The characteristics of an in-group:

1. Counted on to perform unstructured task
2. Volunteer for extra work
3. Take on additional responsibilities
4. More influence in decision making
5. Leader assign more resources to members
6. Leader display more attention and support

The characteristic of an out-group:

1. Formal relationship
2. ‘just here to do a job’
3. Given little support
4. Minimal influence in decision making
5. Less responsibilities
6. Low level of trust

Leadership = Fairness?

LMX theory is proposed to challenge the notion that leaders treat everyone the same. In reality, no relationships are equal. A leader will consciously (deliberate) and unconsciously (unknowing) treat some better than others.

Conscious – Leaders knowingly treat some better to improve job satisfaction and performance. In the real world, a leader does not have the resources to give each of his member equal attention. Through a series of exchanges, certain members are identified as ones who will produce more than others. These members are then given more attention and resources, and in return, produces more for the leader/organization. It is here that leaders find leverage, concentrating on a few members who could influence the rest of the team.

Unconscious – People like people who are liked them. If both leader and member share the same personality, most probably, they would enjoy each others company and spend more time together. The more time spent, the more exchanges take place, the better the relationship. The problem with this form of unconscious exchanges is that, blinded by ‘likeness’, the leader might inadvertently and unconsciously make decisions that favors some over others. When questioned by others, the ignorant leader might turn defensive and reject any notion of biasness and this put the leader’s credibility at stake.

3 Relationship Factors

Competency, Compatibility and Personality – these are the 3 main factors that determines the quality of relationship between leaders and members. Competency – Members past accomplishments, current performance level and potential.

Compatibility – How well leader and members work together. Fit between the member and the team culture.

Personality – Initiative, positive attitude and outlook.

Positive perception of these factors will see member fall under the ‘in-group’; members who are viewed negatively moves to the ‘out-group’.

Members are not the only one being evaluated in this relationship, leaders too are evaluated and members have the choice to accept the ‘invitation’ into the group or not. It is obvious why members aspire to be in the high-quality relationship in-group, but, there are also various reasons why members would not be keen:

1. Genuinely dislike the leader
2. Do not value the rewards of being in the ‘in-group’
3. Leader is abusive or unethical; being close to such a person may imply guilt by association.
4. No interest in advancing further in current company
5. Just want to do what is required.

Taking, Making and Routinization

The relationship develops over time, through a series of exchanges and interactions, and the formative period is the most crucial. According to the theory, the development of role is the corner stone of the relationship forming process. This process consists of 3 phases:

1. Role Taking (Stranger phase) – A formal stage in the relationship where the leader assesses the member’s abilities and talent. Leader defines clear responsibilities and member does what is prescribed.

2. Role Making (Acquaintance phase) – Based on the works in the 1st phase, either party will initiate an offer to improve the working relationship. Relationship (trust) will develop both professionally and personally. It is this stage where member start to ‘make’ their own role.

3. Role Routinization (Maturity) – Exchange patterns start to emerge in a reciprocal manner.

Benefits for All (even the out-group)

4 stakeholders (Leader, In-group Member, Out-group Member, and Organization) are involved in this theory and here are the benefits each group can draw:

Leader and Organization:

1. Member commitment
2. Loyalty towards leader, team
3. Higher productivity
4. Positive influence on others
5. Find leverage

Members of the in-group:

1. Higher mutual trust
2. Closer bond
3. Independence
4. Job satisfaction, positive attitude
5. Open communication
6. Confidence
7. Respect, rewards & recognition

Out-group member:

1. Examine reasons for being in the out-group and question the ‘fit’ between self, leader and organization.
2. Identify improvement gaps.

Critique Vs Support

Like any management theories and models, there is always a fair share of supporters and opposition. Those in a favor of what LMX theorize say it reflects reality – people will never treat everyone equally. And also, LMX advocates leverage. Resources are scarce, thus, leaders are always looking for best ways to maximize what they have.

For those against what the theory proposes, the arguments are that it discriminates, it questions the ethics of the leader and lastly, LMX emphasize too much on the leader instead of the leadership.


No relationships are equal. LMX theory reflects the reality in leadership and organization – leaders treat people differently; some will be treated better than others. Most, if not all, members would like to fall under the in-group for obvious reasons, but, the presence of out-group also serves many benefits: for the leader, if members prefer to stay in the out-group, perhaps the question is on his leadership. For those who are in the out-group, the reasons they are there could help them identify performance gaps to work on, or, it could be the case of non-fit between themselves and the leadership. In the latter case, perhaps moving on to another organization where they are more likely to be in the in-group could be better for everyone.

For leaders and in-group members, this model represents a winwin situation. With the leader is a group of individuals who exceeds expectations, and for the individuals, more opportunities to develop themselves. Over time, the leader-member exchanges feed on each other and result in an upward spiral for the leader, the members and organization.


1. http://www.flatworldknowledge.com/node/29104#web-29104
2. http://changingminds.org/explanations/theories/leader_member_exchange.htm
3. http://leadershipchamps.wordpress.com/2008/04/21/leader-memberexchange-lmx-theory/
4. http://www.bealeader.net/109/the-lmx-leadership-theory