Leader-member exchange theory propounded by Graen, Haga, and Dansereau in 1975 tries to explain a dyadic relationship between leader and subordinates. This relationship between leaders and members passes through three phases for its establishment. This theory also tries to explain two forms of leader-member arrangements: ‘in-group’ and ‘out-group’. Exchange theory at first charts the path of leader-member relationship growth that ultimately ends in the two mentioned forms of leader-subordinate arrangements.
About the Theory
In this LMX theory a relationship grows in three stages: organizational stage, role development, and regularization. The objective of this theory is establishment of leader-member relationship where there is an exertion factor in maintaining leadership. A leader must always know to exert his position for which there needs to be associates, trusted persons, and supporters within a larger group. LMX theory also termed as ‘Dyad Linkage Theory’ examines a two way relationship. Here ‘dyad’ implies ‘two’ while ‘linkage’ refers to ‘type’. The type is indicated by the level of closeness between leader and his or her members. An ‘inner circle’ of close members and an ‘outer circle’ of less favored members are formed who are treated and rewarded differently. Prior to explaining ‘inner’ and ‘outer’ circles it is necessary to understand stages of group formation.
Organizational or ‘Role Taking’ Stage
In ‘organizational’ or ‘role taking’ stage a member just joins an organization or team. After introduction, a leader sets a task which becomes the target for new members. The way of completing a task and the time taken are parameters of judging a new member. There could be instances where members are not required to sit for any trial or test. This stage is a discovery phase where both leader and members gauge one another. Opinions are formed and members try and create a sense of belonging for the company. Socializing for companionship or creation of a sense of belonging are the principal motivators for members.
‘Role Development’ Stage
Role development is a critical phase in LMX theory. In dynamics of group formation this is the second stage. A member is really tested and opinions formed. Members could be assigned tasks, though this is not mandatory. Role development could have multiple origins with tasks defining role plays. These roles are often rewarded or reprimanded by leaders. In this phase, division of labor is well pronounced and distributed among members in a group. The essence of this stage is creation of dedicated teams.
This ‘role development’ phase is critical in group dynamics. With division of labor introduced in this stage, delegation of tasks becomes consequential. This is exactly where a leader or manager is actually tested for his acumen and capability. The amount of work to be delegated and the portion to be kept by the leader is a difficult decision for many leaders. With delegation accountability and responsibility is automatically transferred. Too much of delegation could lead to excessive transference of responsibility which in turn could reduce the authority and importance of a leader.
In contrast, if a leader fails to delegate task to members then uneven distribution of responsibility could lead to unused resources group resentment. It is thus very important to make a feasible distribution of assignments. In distribution of tasks or responsibilities a leader could become biased. Formation of ‘in-group’ and ‘out-group’ are creations in this ‘role development’ phase.
In-group members – In-group members are closer to a leader in LMX arrangement. These are trusted members who are given more responsibilities and have access to more resources. They are committed to their leaders and also share some administrative duties. More challenging and remunerative tasks are assigned to these members as they are nearer to their leader. The relationship between leader and members in this arrangement depends on the nature of task delegated, member quality, and company support. Generally in-group members comprise people of similar nature, coming from same background, or having same work ethics.
Out-group – Members included in a team but not forming the in-group form the out-group. These members are not favored by their leaders and are not given adequate responsibilities. These members are somewhat incompetent in a leader’s eye and are entrusted unimportant tasks. These members are not allowed to come too close to a leader and are kept away from important meetings and discussions. They also are deprived from adequate opportunities as compared to in-group members.
Routinization is the third stage in LMX Model of group dynamics. In this process leader-managers team in already formed and tasks assigned. Tasks assigned are supposedly understood and responsibilities distributed. Teams begin functioning and carry out responsibilities.
In-group members work diligently to stay in focus of their managers. There is perfect show of bonding between members and each one is respectful to the other. Persistence in efforts, empathy in attitude, and patience in behavior are attributes exhibited during this ‘routinization’ phase.
The attitude of out-group members is opposite to those of in-group candidates during execution of a task. These members are indifferent to their tasks and often neglect them. More often than not, these tasks are delayed and executed casually.
Benefits of LMX Theory
The theory is a good exercise in group dynamics. It works as an excellent guideline to leaders looking for setting up teams with different objectives within a large organization. The basis of team formation being based on trust and mutual liking is purely at an emotional level. Teams thus created are always respectful to their peers and leader. Task allocation, goal setting, and mentoring are achieved effectively while following LMX theory.
To Sum Up
This theory fails to classify a leader as an ideal human being. The leader is looked upon as being manipulative and biased. This theory though based on emotional strengths not much has been said about human values. This aspect has been totally ignored in this theory. The theory further assumes that every member is equally receptive to good ideas and that each one is equally trustworthy. This model also indicates that talented people are entitled to better opportunities and draw more attention towards them as compared to less talented members.