The LMX Theory dates back to 1975 when Danserau, Graen and Haga made a first description of dyadic relationships in their work called A vertical dyad linkage approach to leadership in formal organizations. Prior to this work, leadership was seen as something that leaders did toward their followers, furthermore the behavior of the leader showed up as something done to the group of followers as a whole. Thus an average leadership style was used by the leader.

The key point of the LMX Theory is that it challenged the conception of this relationship towards the group, and proposed a different focus over the relationship of the leader and the followers. It made several distinctions.

In Group and Out Group

The LMX Theory focus its attention on the “vertical linkages” that leaders have with every subordinate. These linkages are the dyadic relationships between the leader and each subordinate. The relationships were classified in two groups: the in-group and the out-group.

• In-Group:The relationship between the leader and the follower is based on mutual trust, respect, liking, and reciprocal influence. The group members receive more information, influence than the rest of the subordinates. Additionally they are more dependable, highly involved and more communicative than the rest of subordinates.
• Out-Group:The relationship between the leader and the follower is such that the leader uses traditional supervisory approach, and the employee helps the leader strictly based on his resposibilities as a subordinate, not further. In other words, they come to work, do the job, and then go home.

The LMX Theory attempts to understand the quality of each dyadic relationship and its effects on organizational outcomes over time.

In 1995, Graen & Uhl-Bien, published a study conducted over 25 years which findings revealed that high-quality leader-member exchanges produced less employee turnover, greater organizational commitment, better job attitudes, to name a few of the findings. These conclusions clearly point to the following: organizations have a lot to gain with leaders who can create good working relationships.

The LMX Theory Extended

In later revisions of the theory, researchers proposed that the relationship to become an in-group member had a “life-cicle”. This life cicle has three stages.

1. First Stage:The leader and follower “study and test” each other to identify what kind of behaviors are acceptable. The follower has to make an effort to project a favorable image in order to gain an inmediate benefit or improve long term relationship with the leader. Studies shows a possitive correlation between these efforts of the follower and the liking of the leader for the follower.
2. Second Stage:The leader and the follower become acquainted, they work in refining their roles. Mutual respect, loyalty and trust start to developed between the leader and subordinate. Relationships that deteriorate will remain at the first stage. The follower then will be an out-group member.
3. Third Stage:Only some of the relationships will go to these stage as the roles reach maturity. The exchange between the leader and the follower is one of mutual commitment to the mission and objectives of the work.

Ups and Downs of The LMX Theory

The Up Side

• It reveals a reality in every organization there are in-groups and out-groups. The LMX theory identifies and describes the groups clearly.
• It’s unique it’s the only theory that focus its attention in the dyadic relationship between the leader and the follower in the leadership process.
• Large body of research to support that high-exchange relationships are good to the organization.

The Down Side

• It’s not fair. Recongnizing the existence of the in-group and out-group, it appears to be discriminating against the out-group.
• It’s not a recipe. The theory does not explain how to develop trust or become part of the “in-group

Summary to LMX Theory

The central idea of the LMX Theory is that attempts to understand the quality of each dyadic relationship and its effects on organizational outcomes over time. A dyadic relationship is a relationship between two people.

The theory divides the followers into two groups the in-group and the out-group. The in-group is closer to the leader, and the out-group it’s only interested doing its job.

There’s a cycle model in order to explain how relationships evolve from the out-group to the in-group. First stage, the leader and the follower are “testing” each other. Second stage, they know each other and can collaborate. Third stage, some of the relationships advance to this stage, commitment, the mission and objectives of the work unit are the drivers of the leader-member exchange.

At Last, studies point to conclude that organizations have a lot to gain with leaders who can create good working relationships, and high quality leader-member exchanges.

Further Investigation and References

Northouse, P.G. (2004) “Leadership Theory and Practice” (3rd Ed)
Sage Publications

Lussier, R.N.; Achua, C.F. (2004) “Leadership: Theory, Application, Skill Development” (2nd Ed)
South-Western

Yukl, G.A. (2002) “Leadership in Organizations” (5th Ed)
Prentice-Hall