The Leader-Member Exchange Theory

Getting the Best From all Team Members

(Also known as LMX or Vertical Dyad Linkage Theory)

Seven Surprises for New Managers

Get the best from every team member.

© iStockphoto/kycstudio

As a manager, it's not always right to treat everyone on your team in the same way.

For instance, you probably have team members that you've developed a great relationship with: you trust them, they work hard, and they've never let you down. To you, these team members are invaluable, and you make an extra effort to send challenging projects their way.

It's also likely that you have others on your team who you think less well of. They may not have far-reaching career goals, they're less competent, and you simply don't trust them to the same extent. These team members get everyday responsibilities, and are not considered for promotions or challenging assignments.

However, have you ever stopped to analyze why you don't trust certain team members? Rightly or wrongly, do you let that distrust, or the belief that they're unreliable, influence how you relate to them? Do you, even subconsciously, withhold opportunities that might help them grow and succeed?

This situation is at the heart of the Leader-Member Exchange Theory. This theory, also known as LMX or the Vertical Dyad Linkage Theory, explores how leaders and managers develop relationships with team members; and it explains how those relationships can either contribute to growth or hold people back.

Understanding the Theory

The Leader-Member Exchange Theory first emerged in the 1970s. It focuses on the relationship that develops between managers and members of their teams.

The theory states that all relationships between managers and subordinates go through three stages. These are:

  1. Role-Taking.
  2. Role-Making.
  3. "Routinization."

Let's look at each stage in greater detail.

1. Role-Taking

Role-taking occurs when team members first join the group. Managers use this time to assess new members' skills and abilities.

2. Role-Making

New team members then begin to work on projects and tasks as part of the team. In this stage, managers generally expect that new team members will work hard, be loyal and prove trustworthy as they get used to their new role.

The theory says that, during this stage, managers sort new team members (often subconsciously) into one of two groups.

  • In-Group - if team members prove themselves loyal, trustworthy and skilled, they're put into the In-Group. This group is made up of the team members that the manager trusts the most. Managers give this group most of their attention, providing challenging and interesting work, and offering opportunities for additional training and advancement. This group also gets more one-to-one time with the manager. Often, people in this group have a similar personality and work-ethic to their manager.
  • Out-Group - if team members betray the trust of the manager, or prove that they're unmotivated or incompetent, they're put into the Out-Group. This group's work is often restricted and unchallenging. Out-Group members tend to have less access to the manager, and often don't receive opportunities for growth or advancement.

3. Routinization

During this last phase, routines between team members and their managers are established.

In-Group team members work hard to maintain the good opinion of their managers, by showing trust, respect, empathy, patience, and persistence.

Out-Group members may start to dislike or distrust their managers. Because it's so hard to move out of the Out-Group once the perception has been established, Out-Group members may have to change departments or organizations in order to "start over."

Once team members have been classified, even subconsciously, as In-Group or Out-Group, that classification affects how their managers relate to them from then on, and it can become self-fulfilling.

For instance, In-Group team members are often seen as rising stars and the manager trusts them to work and perform at a high level. This is also the group that the manager talks to most, offering support and advice, and they're given the best opportunities to test their skills and grow. So, of course, they're more likely to develop in their roles.

This also holds true for the Out-Group. The manager spends little, if any, time trying to support and develop this group. They receive few challenging assignments or opportunities for training and advancement. And, because they're never tested, they have little chance to change the manager's opinion.

Using the Theory

You can use the Leader-Member Exchange Theory to be aware of how you perceive members of your own team.

To do this, follow these steps:

1. Identify Your Out-Group

Chances are, you know who's in your Out-Group already. Take a moment to note their names down.

Next, analyze why these people have fallen "out of favor." Did they do something specifically to lose your trust? Do they exhibit bad behavior at work  ? Are they truly incompetent, or do they have low motivation?

Analyze what they've actually done, and compare the facts with your perceptions. Do these match, or have you (perhaps subconsciously) blown things out of proportion?

2. Reestablish the Relationship

It's important that, as the leader, you make a reasonable effort to reestablish a relationship with Out-Group team members. Research published in the Leadership Quarterly journal in 1995 showed that team members who have high quality relationships with their leader have higher morale, and are more productive than those who don't. So you, and your organization, can benefit from creating a better relationship.

Keep in mind that this group will likely be wary of any attention or support from you; after all, they may not have had it in the past.

First, meet each team member one-on-one. Take the time to find out if they're happy with their job. What are their career goals? What can you do to make their work more challenging or engaging?

A one-on-one meeting can also help you identify that person's psychological contract   with you - that is, the unspoken benefits they expect from you, as their leader. If they're in the Out-Group, they may feel that the psychological contract has been broken.

You also need to discover what truly motivates them. Use McClelland's Human Motivation Theory   or Herzberg's Motivators and Hygiene Factor Theory   to find out what drives them to succeed.

Once you've had a chance to reconnect with your team members through one-on-one meetings, do what you sensibly can to continue to touch base with them. Practice management by walking around  , or drop by their office to see if they need help on projects or tasks. Work on getting to know these team members on a personal level.

3. Provide Training and Development Opportunities

Remember, the biggest advantage to the Leader-Member Exchange Theory is that it alerts you to the preference you might unconsciously - and possibly unfairly - be showing some team members; this allows you to offer all of your team members appropriate opportunities for training, development, and advancement.

Your Out-Group team members may benefit from a mentoring   or coaching   relationship with you.

You may also want to provide them with low risk opportunities to test and grow their skills. Use task allocation   strategies to make sure you're assigning the right task to the right person. Also, take our Bite-Sized Training session, Setting Goals for Your Team, to learn how to set effective and realistic goals for these team members.

You can also use the Nine-Box Grid for Talent Management   to re-assess their potential from time to time, and to give them the right development opportunities.


A problem with the Leader-Member Exchange Theory is that it assumes that all team members are equally worthy of trust, prestigious projects and advancement. Although we may like to think that everyone is honest, hard-working and worthy of our esteem, the reality can be different!

Managers need to get the best possible results. This means putting the right people in the right places, and it means developing and reinforcing success. Of necessity, this means that talented people will get more interesting opportunities and may get more attention than less-talented ones.

Use the Leader-Member Exchange Theory to make sure that you're objective in the way that you deal with people, but don't be naïve in the way that you apply it.

Key Points

The Leader-Member Exchange Theory first appeared in the 1970s. It analyzes the relationship between managers and team members.

Team members typically go through three phases in their relationship with their manager: Role-Taking, Role-Making, and Routinization.

Typically, during the Role-Making phase, group members are classified into one of two groups: In-Group, and Out-Group. In-Group team members often receive more attention and support, and more opportunities, from their managers. Out-Group members get very little face time, and few opportunities.

You can use the Leader-Member Exchange Theory to identify and validate any perceptions that you might have of people on your team.

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Comments (3)
  • MichaelP wrote Over a month ago
    Mayc, i feel for you and I continue to wonder at how some managers got to be managers at all! In the situation you describe ganging up on the manager may indeed be all it takes. Confronted with a well performing and unifed team any manager is going to think twice before throwing rocks!

    In your situation giving the manager constructive feedback should have value...something like. "name" i appreciate how you include me along with others in your....confidence? However i have observed "name" appears to be excluded, a recent example can i help you include him?

    Before writing the manager off it is always worth giving them the feedback and opportunity to improve in my opinion.

    Good luck
  • mayc wrote Over a month ago
    I think this is good information for everyone to use and follow, not just managers. It's certainly made me more aware of how people in the out group feel and I'm wondering what I, as a colleague, can do to help them get out of the "out" group. There is one guy in particular who is a very competent worker but he's socially awkward. And he's very smart and I think that intimidates our manager. So he does get treated differently and I don't think there is anything that would motivate our manager to change his ways so it would be up to his colleagues to help him be part of the "in" group. I'm wondering what I could do to kick start this?? This is one of the main frustrations I feel at work - Here I am learning new tools, developing my skills, gaining an understanding of effective leadership and yet the "leaders" around me haven't a clue how they could make our workplace so much better. I know change doesn't have to start at the top but it sure makes things easier!!
  • zuni wrote Over a month ago
    Hi All,

    What I find interesting with all theories such as this one is that they appear to be common sense. That said, the U.S. adult educator, Myles Horton, often said, "There's nothing common about common sense." How true.

    Think back to your childhood. There were "in" and "out" groups all through your school and university years and, perhaps, you have the same dynamics within your family. Not surprisingly, when we take on manager responsibilities, we replicate these same social dynamics in the work place.

    I have been both a member of the "in" group and the "out" group at various stages in my career. Being cast as an "out" was a demoralizing experience. From an "out" perspective, it is very difficult to change/influence the perception of the manager. Once you are typecast, the label sticks. For a time, I tried to understand why I was cast unfavourably, asked the manager what I needed to do to exceed expectations and managed "up" to build a positive relationship. When my efforts failed to change his/her opinion, I cut my losses and found a position with another manager or left the company.

    My experiences have helped me be a better leader. As they say, you often learn more from your worst managers. When leading others, I constantly challenge my assumptions about people. I ask, "Do I know this to be true?"


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