Leader-Member Exchange (LMX) theory proposes that leaders form different quality relationships with each subordinate, ranging from high-quality exchanges with an "in-group" to lower-quality exchanges with an "out-group." Early research found that in-group members receive more support and responsibilities. Later studies showed high-quality LMX relationships result in better job attitudes and performance. LMX theory describes leadership as developing through three phases - stranger, acquaintance, and mature partnership - moving from lower- to higher-quality exchanges over time. The theory focuses on the dyadic relationship between each leader and member.

1. Leader-Member Exchange Theory Approach Leadership Theory and Practice, 3/e Peter G. Northouse, Ph.D. William Kritsonis, PhD Presenter

2. LMX Theory Approach Perspective Early Studies Later Studies Phases in Leadership Making How Does the LMX Approach Work? Overview

3. LMX Theory Approach Description Development - LMX theory first described by Dansereau, Graen, & Haga (1975), Graen & Cashman (1975), and Graen (1976) Revisions - Theory has undergone a number of revisions since its inception and continues to be of interest to researchers Assumption - LMX theory challenges the assumption that leaders treat followers in a collective way. LMX theory conceptualizes leadership as a process centered in the interactions between leaders and followers. Perspective Definition

4. Early Studies Leader’s work unit as a whole was viewed as a series of vertical dyads; leader forms unique relationship with each subordinate Researchers found two general types of linkages Expanded/negotiated roles = in-group Relationships marked by mutual trust, respect, liking, and reciprocal influence Receive more information, influence, confidence, and concern than out-group members Formal employment contract = out-group Relationships marked by formal communication based on job descriptions L S Dyadic Relationship The Vertical Dyad

5. Early Studies In-group/out-group status based on how well subordinate works with the leader and how well the leader works with the subordinate How subordinates involve themselves in expanding their role responsibilities with the leader determines whether they become in-group or out-group participants Becoming part of the in-group involves subordinate negotiations in performing activities beyond the formal job description L S L S In- Group +3 +3 +3 +3 L S L S Out- Group +0 +0 +0 +0

6. Later Studies Initial research primarily addressed differences between in-groups and out-groups; later research addressed how LMX theory was related to organizational effectiveness Researchers (Graen & Uhl-Bien, 1995) found that high-quality leader-member exchanges resulted in: Less employee turnover More positive performance evaluations Higher frequency of promotions Greater organizational commitment More desirable work assignments Better job attitudes More attention and support from the leader Greater participation Faster career progress

7. Phases in Leadership Making Graen & Uhl-Bien (1995) Phase 1 Phase 2 Phase 3 Stranger Scripted Acquaintance Partner Roles Influences Exchanges Interests One Way Low Quality Self Tested Mixed Medium Quality Self / Other Negotiated Reciprocal High Quality Group TIME

8. Phase 1 Graen & Uhl-Bien (1995) Stranger Interactions rule bound Rely on contractual relationships Relate to each other within prescribed organizational roles Experience lower quality exchanges Subordinate motives directed toward self-interest Phase 1

9. Phase 2 Graen & Uhl-Bien (1995) Acquaintance Offer by leader/subordinate for improved career-oriented social exchanges Testing period of taking on new roles and leader providing new challenges Shift from formalized interactions to new ways of relating Quality of exchanges improve along with greater trust and respect Less focus on self-interest, more on goals of the group Phase 2

10. Phase 3 Graen & Uhl-Bien (1995) Mature Partnership Marked by high-quality LMX exchanges Experience high degree of mutual trust, respect, and obligation toward one another Tested relationship that is dependable High degree of reciprocity between leader and subordinate May depend on each other for favors and special assistance Highly developed patterns of relating that produce positive outcomes Phase 3

11. How Does the LMX Theory Approach Work? Focus of LMX Theory Approach Strengths Criticisms Application

12. LMX Theory Approach Essential to recognize existence of in-groups & out-groups Significant differences in how goals are accomplished using in-groups vs. out-groups Relevant differences in in-group vs. out-group behaviors Best understood within the Leadership Making Model Leader forms special relationship with each subordinate Leader should offer each subordinate an opportunity for new roles/responsibilities Leader should nurture high-quality exchanges with all subordinates Rather than concentrating on differences, leader should focus on ways to build trust Descriptive Prescriptive

13. Strengths LMX theory validates our experience of how people within organizations relate to each other and the leader LMX theory is the only leadership approach that makes the dyadic relationship the centerpiece of the leadership process LMX theory directs our attention to the importance of communication Solid research foundation on how the practice of LMX theory is related to positive organizational outcomes

14. Criticisms Inadvertently supports the development of privileged groups in the workplace; appears unfair and discriminatory The basic theoretical ideas of LMX are not fully developed Because of various scales and levels of analysis , measurement of leader-member exchanges is being questioned

15. Application Applicable to all levels of management and different types of organizations Directs managers to assess their leadership from a relationship perspective Sensitizes managers to how in-groups and out-groups develop within their work unit Can be used to explain how individuals create leadership networks throughout an organization