Leader Member Exchange Theory

The Leader-Member Exchange Theory first emerged in the 1970s. It focuses on the relationship that develops between managers and members of their teams.

The theory states that all relationships between managers and subordinates go through three stages. These are:




Let’s look at each stage in greater detail.

1.  Role-Taking

Role-taking occurs when team members first join the group. Managers use this time to assess new members’ skills and abilities.

2.  Role-Making

New team members then begin to work on projects and tasks as part of the team. In this stage, managers generally expect that new team members will work hard, be loyal and prove trustworthy as they get used to their new role.

The theory says that, during this stage, managers sort new team members (often subconsciously) into one of two groups.

In-Group – if team members prove themselves loyal, trustworthy and skilled, they’re put into the In-Group. This group is made up of the team members that the manager trusts the most. Managers give this group most of their attention, providing challenging and interesting work, and offering opportunities for additional training and advancement. This group also gets more one-to-one time with the manager. Often, people in this group have a similar personality and work-ethic to their manager.

Out-Group – if team members betray the trust of the manager, or prove that they’re unmotivated or incompetent, they’re put into the Out-Group. This group’s work is often restricted and unchallenging. Out-Group members tend to have less access to the manager, and often don’t receive opportunities for growth or advancement.

3.  Routinization

During this last phase, routines between team members and their managers are established.

In-Group team members work hard to maintain the good opinion of their managers, by showing trust, respect, empathy, patience, and persistence.

Out-Group members may start to dislike or distrust their managers. Because it’s so hard to move out of the Out-Group once the perception has been established, Out-Group members may have to change departments or organizations in order to “start over.”

Once team members have been classified, even subconsciously, as In-Group or Out-Group, that classification affects how their managers relate to them from then on, and it can become self- fulfilling.

For instance, In-Group team members are often seen as rising stars and the manager trusts them to work and perform at a high level. This is also the group that the manager talks to most, offering support and advice, and they’re given the best opportunities to test their skills and grow. So, of course, they’re more likely to develop in their roles.

This also holds true for the Out-Group. The manager spends little, if any, time trying to support and develop this group. They receive few challenging assignments or opportunities for training and advancement. And, because they’re never tested, they have little chance to change the manager’s opinion.

Using the Theory

Leader-Member Exchange Theory can be used to be aware of how we perceive members of our own team.

1.    Identify Your Out-Group

Chances are, you know who’s in your Out-Group already. Take a moment to note their names down.

Next, analyze why these people have fallen “out of favor.” Did they do something specifically to lose your trust? Do they exhibit bad behavior at work ? Are they truly incompetent, or do they have low motivation?

2.    Re-establish the Relationship

It’s important that, as the leader, you make a reasonable effort to reestablish a relationship with Out-Group team members. Research published in the Leadership Quarterly journal in 1995 showed that team members who have high quality relationships with their leader have higher morale, and are more productive than those who don’t. So you, and your organization, can benefit from creating a better relationship.

Keep in mind that this group will likely be wary of any attention or support from you; after all, they may not have had it in the past.

First, meet each team member one-on-one. Take the time to find out if they’re happy with their job. What are their career goals? What can you do to make their work more challenging or engaging?

A one-on-one meeting can also help you identify that person’s psychological contract with you – that is, the unspoken benefits they expect from you, as their leader. If they’re in the Out-Group, they may feel that the psychological contract has been broken.

Once you’ve had a chance to reconnect with your team members through one-on-one meetings, do what you sensibly can to continue to touch base with them. Practice management by walking around , or drop by their office to see if they need help on projects or tasks. Work on getting to know these team members on a personal level.

3.    Provide Training and Development Opportunities

Remember, the biggest advantage to the Leader-Member Exchange Theory is that it alerts you to the preference you might unconsciously – and possibly unfairly – be showing some team members; this allows you to offer all of your team members appropriate opportunities for training, development, and advancement.

Your Out-Group team members may benefit from a mentoring or coaching relationship with  you.

You may also want to provide them with low risk opportunities to test and grow their skills. Use task allocation strategies to make sure you’re assigning the right task to the right person. Also, take our Bite-Sized Training session, Setting Goals for Your Team , to learn how to set effective and realistic goals for these team members.

You can also use the Nine-Box Grid for Talent Management to re-assess their potential from time to time, and to give them the right development opportunities.


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Organizational Behavior by Icfai Business School is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.