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Leader-Member Exchange (LMX) Theory


Explanations > Theories > Leader-Member Exchange (LMX) Theory

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Leader-Member Exchange Theory, also called LMX or Vertical Dyad Linkage Theory, describes how leaders in groups maintain their position through a series of tacit exchange agreements with their members.

In-group and out-group

In particular, leaders often have a special relationship with an inner circle of trusted lieutenants, assistants and advisors, to whom they give high levels of responsibility, decision influence, and access to resources. This in-group pay for their position. They work harder, are more committed to task objectives, and share more administrative duties. They are also expected to be fully committed and loyal to their leader. The out-group, on the other hand, are given low levels of choice or influence.

This also puts constraints upon the leader. They have to nurture the relationship with their inner circle whilst balancing giving them power with ensuring they do not have enough to strike out on their own.

The LMX process

These relationships, if they are going to happen, start very soon after a person joins the group and follow three stages.

1. Role taking

The member joins the team and the leader assesses their abilities and talents. Based on this, the leader may offer them opportunities to demonstrate their capabilities.

Another key factor in this stage is the discovery by both parties of how the other likes to be respected.

2. Role making

In the second phase, the leader and member take part in an unstructured and informal negotiation whereby a role is created for the member and the often-tacit promise of benefit and power in return for dedication and loyalty takes place.

Trust-building is very important in this stage, and any felt betrayal, especially by the leader, can result in the member being relegated to the out-group.

This negotiation includes relationship factors as well as pure work-related ones, and a member who is similar to the leader in various ways is more likely to succeed. This perhaps explains why mixed gender relationships regularly are less successful than same-gender ones (it also affects the seeking of respect in the first stage). The same effect also applies to cultural and racial differences.

3. Routinization

In this phase, a pattern of ongoing social exchange between the leader and the member becomes established.

Success factors

Successful members are thus similar in many ways to the leader (which perhaps explains why many senior teams are all white, male, middle-class and middle-aged). They work hard at building and sustaining trust and respect.

To help this, they are empathetic, patient, reasonable, sensitive, and are good at seeing the viewpoint of other people (especially the leader). Aggression, sarcasm and an egocentric view are keys to the out-group wash-room.

The overall quality of the LMX relationship varies with several factors. Curiously, it is better when the challenge of the job is extremely high or extremely low. The size of the group, financial resource availability and the overall workload are also important.

Onwards and upwards

The principle works upwards as well. The leader also gains power by being a member of their manager's inner circle, which then can then share on downwards. People at the bottom of an organization with unusual power may get it from an unbroken chain of circles up to the hierarchy.

So what?

Using it

When you join a team, work hard to also join the inner circle. Take on more than your share of administrative and other tasks. Demonstrate unswerving loyalty. See your leader's point of view. Be reasonable and supportive in your challenges to them, and pick your moments carefully.

As a leader, pick your inner circle with care. Reward them for their loyalty and hard work, whilst being careful about maintaining commitment of other people.


If you want to be an 'ordinary' member of a team, play your part carefully. There will be others with more power. If you want to lead an equal team, beware of those who curry favor.

See also

Power, Social Exchange Theory


Dansereau, Graen and Haga (1975), Graen and Cashman (1975)

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