Leader-Member Exchange theory revolves around the nature and quality of the relationships amongst leaders and their specific members.
Successful leaders should always try to develop as many high-quality relationships as possible.
It plays a pivotal role in increasing organizational citizenship, productivity, sense of job satisfaction, and organizational objectives. This post will take you deep into the world of Leader-Member Exchange Theory (LMX) and help you understand how leaders can use it for continuing growth or hindering development.
What is the leader-member exchange theory?
The leader-member exchange theory deals with the foundation relationships between the team leaders and team members in an enterprise. It looks over the bonds among all team members and leaders, and how this bond can be improved leading to an expected growth or hike in its profits.
Leader-member exchange doesn’t only look over the traits of the followers, but also at the various interactions happening in the team. The interactions are looked at and analyzed carefully before coming to any conclusion.
LMX adds extra points to the leadership qualities of any individual. It was introduced in the mid-1970s that underwent refinement in the 20s. It has evolved with the increasing phase of companies in the corporate world.
And now, leader-member exchange theory is regarded as one of the dominant approaches to understand leadership. It is also helpful in getting familiar with the work culture of any organization.
Understanding the Leader-Member Exchange Theory Concept
A successful enterprise is made up of all employees and their team leaders.
They productively work day and night to gain a common goal for the company.
The enterprise holds two types of members: the first one who works very hard, completes everything on time and never lets you down, and the second one is those who work daily but are not right up to your expectation or company’s ventures.
The latter ones always lack behind and are not worthy of promotions or any additional perks.
On the other hand, the former is good and can be given promotions to sustain their work quality. But this does not mean the latter ones will be fired from the company. The team leaders implement the exchange theory to come out of this situation.
Here in this scenario, the leader-member exchange theory comes into action.
This exchange process is also called LMX or the vertical dyad linkage theory. The whole theory revolves around making healthy relationships between the team leaders and employees in the team.
Let us now dive deeper and understand the working of Leader-Member Exchange theory-
How does a Leader-Member Exchange theory work?
The theory of leader-member exchange works in a very structured way.
It has some attributes that are strictly followed to gain an advantage from this.
According to this theory, all relationships and interactions within the team are essential for its growth.
The team leaders and their subordinates should have an excellent relationship to make more profits from their teamwork.
LMX has some key elements that drive its mechanism in any organization. Let us look over them in the following section.
1. Role-taking of various works
He or she analyzes every employee as per the organization’s rules and then assigns them their respective job work in the team. The team making is also done in this step as per the employee’s abilities.
Various roles related to the job profile are included in the job design to understand the company. It makes the job profile more accurate and clear with the surroundings.
A successful leader exchange theory works in this regard more effectively.
2. Role-making in the team
After assigning the team to all fellow new employees, the next step is to assign them their works and roles. Every employee is different, so the roles and projects are also different for them.
In this stage, the managers assign them projects to accomplish. All members are expected to do the projects on time and work hard to accomplish their roles.
As per the theory, this stage allows the managers to sort all new members into two types of teams. These two teams are:
This group team member comprises highly-skilled members that are trusted most by the managers. Suppose any new employee shows excellent dedication, loyalty, and skills to the manager.
He or she will be rewarded by putting them on the in-group team of the company.
This group does more challenging work than the other groups or teams of the organization. Moreover, in-group members are more indulged in all the big decisions of the company.
The in-group team is proved as a more prospective and opportunity-driven team for the full development of the new employees. It also has exposure to additional training and advancement.
This out-group team mainly comprises employees who are less competent and are less trusted by the manager. If a new employee does not show any dedication and loyalty to the company, they are placed in this group.
These group members are unmotivated and have fewer grounds for exposure.
Out-group team members have less access to the managers and get low exposure to challenges and projects because of their lack of dedication or competency.
3. Routinization of the work
It is the last stage of the leader-member exchange theory. Here in this stage, the various team leaders and members create a routine for their roles and responsibilities.
All employees work with passion, persistence, and hard work to impress their team leaders.
According to recent studies, it is seen that the out-group members have to work double hard to get out of the team. – Because the perception is made, and it is hard to change.
Hence, the in-group team has more challenges and exposures than the out-group teams.
How to put Leader-Member Exchange Theory into action in the organization?
Executing the leader-member exchange theory is a helpful thing in the corporate world. It makes it all easy and manageable.
The following are the practical steps through which a manager can implement the leader-member exchange theory.
1. Identify the out-group in your organization.
Keep track on every team formed within your company. Check their proceedings and other things. Analyze and note down the employee’s name in the categories: “who is doing well?” and “who is not doing well?”
This analysis makes our work significantly more accessible and simple.
You get to know where to put the employees according to their skills and abilities. Managers can also make a record of bad behavior. It also affects the judgment process of team building.
2. Re-establish the relationship that faded long
After the identification of the out-group, the next step is establishing the relationship or interaction with them. It is proved that the persons who have great relationships with fellow members tend to have good morale and attitude.
They are even more productive towards their goals. So, as a manager, you should re-establish the relationship with all members for the sake of the company’s profit.
To do so, you have to meet the members to determine whether they are happy with their job. Interact more out of the box to form an impactful relationship. Some of the psychological signs will also help in identifying the person.
3. Please give them the training and development opportunities.
One of the most significant advantages of leader-member exchange theory is that it alerts the manager about the biasedness he or she does in the company. He or she can be possibly unfair to some team members.
This theory allows the manager to look forward to all employees and create a good interaction with them.
As a manager, you can offer all out-group members training and development in the form of mentoring. You may also provide them with some low-risk projects to try their hands on.
It instills confidence in them and further helps in future endeavors.
You can also set goals for your team roles for a clear picture of the company’s goals.
Strengths of the Theory
LMX is regarded as an exceptional theory for the leadership approach and understanding.
It revolves around the various roles and relationships developed between the team leaders and members. It is suitable for the company.
The theory holds a robust explanatory foundation for all teams of a company.
Moreover, the theory is focused on the communication part of the company. We know that communication is the medium through which leaders and subordinates develop beneficiary plans for company growth.
LMX bridges the gap very efficiently with the right practice. When the theory is practiced thoroughly, it will generate more powerful results for the company.
The practical approach of this theory makes it more approachable to everyone in the corporate world.
The success factors of LMX
It is no doubt that the leader-member exchange theory is a success.
It has influenced many operations at the company’s site. All successful members are familiar with each other and also share some common interests.
They also are good prospective leaders. Some of the success factors of this theory are:
- The leaders are empathetic, patient, reasonable, sensitive, and good at their work. It makes the profits more assertive in the situation.
- This theory leads to the proper management of employees at a particular time. They work very hard to make the management accessible and good.
- The overall quality of the leader-member exchange theory makes the process more smooth and easy for everyone.
- The curiosity of team leaders and members who are in the firm for work and roles. It drives the theory process and makes it more reliable for all members.
Some criticisms also arise from the theory that is stated by many leadership experts. These people have put forward many criticisms and things.
Although the Leader-Member Exchange Theory is building better relationships with all members of a team of the organization, one of the most common criticisms is that the team leader does blatant favoritism in the firm.
It may stand right at some points and may not at some point.
The in-group and out-group concept has ignited this unfair practice. It may also harm the entire group of the organization. It may look unfair in some matters and fair in some matters. It all depends on the perception of the team.
The Leader-member exchange theory is seen to operate on a single basis that violates some of the fundamental human values. Fairness value gets violated by this theory. LMX advocates the concepts of in-group and out-group teams in an organization.
When the various employees are divided into these teams, they are not treated equally. They may feel bad for themselves and articulate a sense of low spirits in them. Moreover, the theory does not lay its emphasis on the empirical studies that lack here.
The Leader-member exchange theory captures all attributes of leadership. It also has all realms of management in it.
We can say that the theory also has an impact on the psychological brain of the members.
Many organizations are implementing leader-member exchange theory to maintain their work balance and interactions with the team members.
The team leaders do keen observation for a better understanding of the teams in the company.
How effective do you find the Leader-Member Exchange theory in optimizing the performance of an organization?
On the concluding note, we hope you would have understood LMX theories comprehensively, so what Leader-Member Exchange Theory definition would you suggest? Share with us in the comment section below.