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Many leaders do not realize that each member has their own perception of the relationship they have with the leader. LMX Theory helps leaders understand the importance of developing positive interactions with members and improving members’ experiences with the group. Improved experiences will lead to a more productive group.
Leader-Member Exchange Theory (LMX) emphasizes the interactions between the leader and the follower. Instead of believing that the leader treats all followers the same way, LMX theory looks at each relationship between followers and the leader (Northouse, 2016).
Dansereau, Graen, and Haga (1975) first described LMX theory using the term “Vertical Dyad Linkage.” The dyad refers to the leader and a follower, and the linkage refers to the type of relationship between them. LMX Theory posits that when there is a mature relationship between the leader and followers there is a positive outcome for the group (Graen, Uhl-Bien, 1995).
LMX is both transactional and transformational. Transactions occur as both material and social exchanges. For example, money may be paid to complete the terms of the contract, (transactional) but there also may be a social transaction, such as support or favors (Graen, Uhl-Bien, 1995).
Transformation takes place when the follower changes from having only self-interest, to being interested in the outcome of the group. This transformation occurs when there are high-quality exchanges between the leader and the follower (Graen, Uhl-Bien, 1995).
Pros of LMX Theory include the research that shows that leaders have relationships with followers that lead to in-groups and out-groups. Leader-follower relationships have been analyzed, which has highlighted the importance of communication between leaders and followers. Also, there is empirical evidence that supports LMX Theory (Winkler, 2010).
Cons include the vagueness of what constitutes a high-quality interaction and a low-quality interaction. Also, there is little information on what leaders should do to develop high-quality interactions. Finally, the theory does not address the unexpected, which would disrupt the way the theory operates (Winkler, 2010).
Using this theory would benefit student leaders by helping them understand that the organization is not one entity, but made up of individuals, each with unique experiences and strengths. By understanding LMX Theory leaders can be aware of the importance of relationships and learn how to improve relationships so that all members contribute to the success of the group.