The more recent studies applied the social exchange theory to understanding leader member exchange. It describes two types of exchanges: 1) social – characterized by unspecified obligations; trust and interpersonal attachment; and 2) economic – characterized by specific, discrete and tangible transactions.
Full Answer
So, what is “Leader-Member Exchange Theory”? The LMX theory is based on the idea that a leader will trust certain employees and reject others. This is based on their own subconscious biases and personality preferences. You’re probably reading this thinking that you treat every employee with the same amount of attention and respect.
The LMX theory is based on the idea that a leader will trust certain employees and reject others. This is based on their own subconscious biases and personality preferences. You’re probably reading this thinking that you treat every employee with the same amount of attention and respect.
According to Graen & Uhl-Bien, the founders of this social exchange theory, disregard of the LMX Theory can result in negative employee outcomes. These can include a higher turnover rate, lack of job commitment, low employee job satisfaction and conflict amongst staff.
The Leader-Member Exchange Theory (LMX), also called the Vertical Dyad Linkage Theory, describes how leaders maintain their position in groups and how relationships develop with other members of a team that can contribute to growth or hinder development.
The initiation and shaping of these relationships begins immediately after a new member has been introduced in the group under the leader and includes three steps.
Because the new group members have automatically been classified, this classification affects how the leaders are dealt with and how these become self-fulfilling, right from the start. The ingroup members are often viewed as talents, the rising stars.
Half the team not being able to be used adequately and to their full capacity because of the leader’s preference can be harmful. The leader has an important role in changing this and to get the most out of himself and his employees according to the Leader Member Exchange Theory.
Graen, G. B., & Uhl-Bien, M. (1995). Relationship-based approach to leadership: Development of leader-member exchange (LMX) theory of leadership over 25 years: Applying a multi-level multi-domain perspective. The leadership quarterly, 6 (2), 219-247.
In this preliminary stage, the team is formed and roles are assigned. Some of these team members are well-known to you whereas others are brand new. It doesn’t matter how long you’ve known someone on your team, it's your personal biases that will decide who you will trust with the more important tasks.
What happens when the Leader-Member Exchange Theory gets out of hand?? Is it that big of a deal? According to Graen & Uhl-Bien, the founders of this social exchange theory, disregard of the LMX Theory can result in negative employee outcomes.
Graen & Uhl-Bien discovered that more opportunities to connect reduced the chance of being categorized into in and out-groups. Planning a social gathering would be a great way to level the playing field and give everyone an opportunity to make a good impression on you.
The Leader-Member Exchange Theory or “Vertical Dyad Linkage Theory” is nothing to be afraid of. As long as you know what to look out for, it’s totally in your control to make sure that your workplace doesn’t become an example of it.