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Analysis of the Leader-Member Exchange Theory Case Study

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Development of LMX Theory

How lmx theory works.

Leader-member exchange (LMX) theory, just like other leadership theories, focuses on leadership from a leader’s perspective, such as the style and trait approaches, and from a point of view of the subject and the context. However, the LMX theory has taken a step further to explain leadership as an act that mainly focuses on the interactions between a leader and his subjects. This paper will analyze the LMX theory based on its development, how it works, its weaknesses and strengths.

The LMX theory was first developed as the vertical linkage (VDL) theory. In the VDL theory, leadership is viewed as vertical linkages that leaders establish between them and their followers. The relationship that exists between leaders and their followers is merely a series of vertical dyads that keep the two together.

In the VDL theory, two kinds of relationships exist between the leaders and their followers. They include the out-group, which is based on a formal recruitment, and in-group that describes the expanded and negotiated roles that the leaders assign their followers. A follower in an organizational setup that can belong to either the in-group or the out-group and this depends on how well, he or she associates with the leader. The followers, who work well with the leaders, normally have the highest chance of falling in the in-group.

The LMX theory was developed by modifying the VDL theory. In the LMX theory, the relationship between the leader and the follower is established in two stages. The first stage, the acquaintance phase, involves the leader coming close to the follower with an aim of enhancing career-development social exchanges, which entail sharing information and resources at work.

The second stage, mature partnership, is characterized by leader-member exchanges that are of high quality. In the second stage, the leaders and the followers have at this point assessed their relationship and found out that they can benefit from each other.

The LMX theory works based on two principles; the first principle entails leadership description. In leadership description, LMX outlines the way followers in the in-group and out-group operate. The followers in in-group are closer to the leaders and for that reason, are entitled to more benefits at the workplace. The followers in this category, through the guidance of their leaders, are willing and capable of doing more than what is stated in their job description in order to help the company achieve its goals.

Unlike the in-group members, the followers in the out-group category do not go beyond what is prescribed in the job contract. The out-group members do not perform any work that falls out of their job description. The leaders give fair treatment to the out-group members as provided for in the formal contract. Since these members do not employ any extra effort in their operations, they are only entitled to benefits that are listed in their formal contract.

The second principle, the leadership prescription, explains the efforts that leaders employ in availing various forms of opportunities to help the followers adapt to their new jobs. The principle encourages the leaders to develop ways that can assist them build trust between them and the followers to avoid the coming up of the in-group and out-group categories. The principle ensures that the entire unit of a particular work is made an in-group affair to bring the leaders closer to their followers.

The LMX theory has made significant contributions in the way people perceive the concepts of leadership. Unlike other theories of leadership that do not touch on dyadic headship, the LMX theory addresses the dyadic relationship and describes how the relationship influences the leadership process. Secondly, the LMX theory through its description principle outlines the issues of work units by describing the contribution of every category of followers.

It is through the LMX theory that leaders can be motivated to develop a good relationship with their followers. The theory warns the leaders to desist from exercising biased leadership and to treat their followers equally.

The theory is the only one of its kind given that it describes how the general performance of a workplace is influenced by the relationship that exists between leaders and their subordinates. The theory also explains how communication influences leadership; this is evident in the high-quality exchanges that are described in the theory.

Even though the LMX theory has addressed the most important aspects of leadership, it has a number of shortfalls. The theory does not explain some of the important aspects of leadership, such as decision-making rules and promotions that are also known to affect how an institution is managed. The theory addresses the out-group and the in-group issues, but it does not explain how a follower can shift from one group to the other. In that case, it is difficult to create inequalities using the LMX theory.

The LMX theory is seen to operate on a basis that violates some of the basic human values such as fairness. The theory advocates for creation of in-group and out-group options in a workplace. When the subordinates are divided into these options, they are certainly not be treated equally by their leaders. Lastly, the theory does not mention any empirical studies that it uses to reach the conclusions that it makes.

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Editorial: The Future of the Leader-Member Exchange Theory

Erich c. fein.

1 School of Psychology and Counselling and Centre for Health Research, University of Southern Queensland, Toowoomba, QLD, Australia

Aharon Tziner

2 Schools of Business Administration, Netanya Academic College and Peres Academic Center, Netanya, Israel

In considering the Frontiers Research Topic “The Future of Leader-Member Exchange Theory” we present a retrospective overview of the key topics and organizing themes across the multiple articles within this special issue of Frontiers in Psychology.

There is no doubt we live in trying times because of effects related to the lingering COVID-19 pandemic. Accordingly, the difficulties related to life at work, both in traditional offices and when working remotely and online, has increased the importance of organizational leaders in mitigating the effects of dysfunctional workplace environments, and in compensating for incomplete or developing workplace systems. In addition, we find the workforce in today's world more diverse in terms of culture and respective value orientations, personality traits, and other individual differences. However, less is known about the effects of individuals' dispositional differences on LMX (e.g., Maslyn et al., 2017 ). In addition, even less is known about the effects of cultural and demographic parameters on leader–member interrelations, and their impact on job performance. We expect that such diversity will only increase as the continuing effects of COVID-19 change national and international economies, and the composition of the workforce, in unexpected ways.

One proposition underlying leader-member exchange (LMX) theory is that managers tend to employ different management styles for each of their subordinates [Graen and Uhl-Bien, 1995 ; see also Waismel-Manor et al. ( 2010 )]. In turn, each specific relationship and corresponding management style induces corresponding differential responses and attitudes in subordinates, including different performance behaviors (Ilies et al., 2007 ).

Within this Frontiers Research Topic special issue, there are 13 articles that address these very timely phenomena. Based on comprehensive reading of these articles, we suggest that four themes or meta-narratives can be used to organize the research within this special issue of Frontiers in Psychology.

First, we have several authors who present refinements and ideas that consider types of leader-member exchange. Andersen et al. present work that considers the underpinning theoretical perspective of social exchange by presenting descriptions of social-based leader-member exchange and economic-based leader-member exchange as types of sub-constructs. Second, Zhou et al. present the concept of “currencies of exchange” as a way of viewing manifestations of LMX. Here, social currency and work-related currency are the types of exchange constructs that actualize leader-member exchange.

In addition, there are a host of papers, which discuss the role of covariate constructs that play vital roles in how LMX is manifested in workplace environments. Within this issue, constructs as diverse as knowledge sharing behavior (Hao et al., 2019 ), and various levels of work engagement involving psychological empowerment and psychological withdrawal behavior ( Aggarwal et al. ), appear as critical behaviors related to leader-member exchange. In respect to individual differences found among employees, this Research Topic includes articles that highlight and add to the literature concerning the critical roles of organizational justice perceptions (Tziner et al., 2012 ; Fein et al., 2013 ; Shkoler et al., 2021 ; Tziner et al. ), locus of control ( Robert and Vandenberghe ), and leader communication styles ( Brown and Paz-Aparicio ), which have been used to extend the efficacy of leader-member exchange in its association with valued organizational phenomena and outputs.

A third focus of papers within this special issue concerns negative workplace behaviors such as counterproductive work behavior, as well as unethical intentions both from the pro-employee and pro-leader perspectives. Capitalizing on reciprocity theory (Gouldner, 1960 ), employees in good or bad relationships with their managers (i.e., with high or low LMX) will feel obliged or reluctant to reciprocate mutually to these respective relationships [see also Adams ( 1965 )]. Thus, high- or low-quality LMX results in correspondingly high or low levels of mutual trust, respect, and commitment. Accordingly, subordinates with high LMX relations are likely to receive more rewards (both formal and informal) than their colleagues with lower LMX relations. These benefits include tangible resources, career opportunities, and emotional support (including emotional encouragement), and enhanced feedback (Graen and Uhl-Bien, 1995 ; Zagenczyk et al., 2015 ). Consequently, high LMX employees are more likely to engage in more positive behaviors, while those low on LMX will be more prone to negative behaviors (Tziner et al., 2010 ; Breevaart et al., 2015 ). Conversely, and in respect to enlarging the network of constructs investigated in this study, it is important to note that poor relations between managers and their employees will almost certainly result in reciprocal counterproductive behavior (Chernyak-Hai and Tziner, 2014 ). In this issue, counterproductive work behaviors are related to valued organizational outcomes via profiles with differing levels of emotional intelligence, as well as cultural value orientations and LMX ( Tziner et al. ). In respect to negative workplace behaviors, positive and negative reciprocity also occurs as a fundamental construct linked to pro-leader and pro-self-orientations of unethical behavior (Skinner et al., 2018 ; Vriend et al. ) and such forms of reciprocity can also be linked to other global performance dimensions (Fein, 2009 ).

Finally, there are a number of papers that relate to the focal role of leader-member exchange as a mediating construct. While LMX's role as a potential mediator of workplace misbehaviors has been investigated (e.g., He et al., 2017 ), most previous studies have emphasized contextual-level or job-level predictors (e.g., He et al., 2017 ; Sharif and Scandura, 2017 ). Specifically, we see in this issue that leader-member exchange is critical in linking job insecurity to job satisfaction and turnover intention ( Di Stefano et al. ), as well as in lowering the tendency of employees to engage in counterproductive work behaviors ( Götz et al. ; Tziner et al. ).

In summary, this issue includes several important contributions to the literature that may be arranged according to these four themes.

Author Contributions

All authors listed have made a substantial, direct and intellectual contribution to the work, and approved it for publication.

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

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What is the Leader–Member Exchange (LMX) Theory?

• First Online: 15 April 2021

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• Leah M. Omilion-Hodges 5 &
• Jennifer K. Ptacek 6  

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This chapter introduces leader–member exchange theory and speaks directly to the following question: Why does this theory matter to me? The authors review and summarize the over four decades of related research and tell employees and formal leaders how this theory can help them predict their organizational experience. Additionally, we provide prescriptive suggestions for employees and address how they may make minor changes that may result in major changes to their leader–member relationship quality. This chapter also takes readers on a historical tour of the evolution of LMX from its conception as vertical dyad linkage theory to the dynamic, interdependent relational phenomenon it is today (Sheer, 2015 ) This chapter also addresses how leader–member relationships are likely to flourish or flounder based on power enactment. French and Raven’s ( 1959 ) five sources of power (i.e., reward, coercive, expert, legitimate, and referent) are considered with the role of a formal leader. We also highlight how in-group and out-group members may interpret the same situation in different ways. This shows leaders how even their best-laid plans may go awry if they are not mindful of relational differences in their ranks.

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Omilion-Hodges, L.M., Ptacek, J.K. (2021). What is the Leader–Member Exchange (LMX) Theory?. In: Leader-Member Exchange and Organizational Communication. New Perspectives in Organizational Communication. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-68756-4_1

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