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Posted on January 12, 2018
Updated on September 3, 2020

What is the Leader-Member Exchange Theory (LMX)?

The Leader-Member Exchange Theory (LMX) is a process that explores how leaders and members develop relationships that can either contribute to growth or hinder personal development. The theory is divided into a three-step process, as outlined below.


The Three Steps of Leader-Member Exchange Theory (LMX)

This theory involves a three-step process:

  1. Role Taking
  2. Role Making
  3. Routinization


1. Role Taking

  • This takes place when a new member joins a team and their abilities are initially assessed by the leader.


2. Role Making

  • Evidently, this is where a role is created for the member. 
  • Building trust is a key factor in this stage. 
  • The member is classified into one of two groups - the IN-group or the OUT-group. With reference to these groups, the manager subconsciously categorises members into either group based on perceived similarity. 
    • Members that fall into the IN group are trusted by the manager and will, therefore, receive high-risk tasks, plenty of opportunities for career and skill development and ongoing support and guidance. 
    • Contrarily, employees that fall into the OUT group will be given unchallenging work as the manager doesn’t have a high level of trust in them and consequently, they will not be exposed to many opportunities for them to develop their skills and abilities. 
  • However, a leader should strive to get the best possible results from his/her team and therefore should aim to eventually have the same level of trust in every member in order to work as an entire IN-group unit.


3. Routinization

  • This is where routines, norms and expectations are established and both parties get an insight into how they both work.
  • The benefits from a manager's point of view are that this process enables you to identify where you might be unfair and help you in avoiding unconscious bias. 
  • From here, the water can be slowly tested by offering the same opportunities for development. 

The Benefits of Having High LMX Relationships

It is advisable for leaders to have a high LMX relationship with team members as there are numerous benefits of having high LMX relationships. Amongst others, a high LMX relationship has been shown to result in:

  • Increased job satisfaction and productivity
  • Increased confidence
  • Stronger mutual trust
  • Increased respect and recognition
  • More independence
  • Easy and open communication
  • Increased commitment to the job and business