Originally referred to as the “vertical dyad linkage theory,” Leader-Member Exchange (LMX) has been the subject of much research (and an upgraded name). LMX focuses on the interactions between leaders and an individual follower. The leaders relationship to the follower unit as a whole is viewed a series of these individual relationships. These relationships are referred to as vertical dyads. Leadership’s focus, then, should be on developing these dyads.
LMX separates these relationships into two groups: the in-group and the out-group. Researches have found that those classified as part of the leaders in-group are often more productive. They are given more trust and take on extra roles within the organization. In contrast, out-group members receive the standard job benefits and respond by performing up to the standard job description. More recent research has identified three phases that each leader-follower dyad goes through as one moves from out-group to in-group: stranger, acquaintance and partner. As the relationship moves from stranger to partner, mutual trust, respect and obligation toward each other develops.
LMX is widely researched and accurately depicts leader-member relationships. It explains why leaders often develop “go-to” people and utilize their skills more than others. LMX was also the first theory to focus its study on the leader-member relationship, rather than just the leaders attributes or behavior. However, LMX is merely a descriptive theory. While it explains that mutual trust and respect develop as dyads progress, it fails to explain how or why this occurs. Likewise, it accurately explains leader-member interactions but it does not prescribe any method or model for developing in-group relationships.