Leader-member Exchange (LME) flows from literature on transformational leadership, extant in the 1970s. A number of fundamental concepts are quite old, such as rewards for supporting leadership being as old as political philosophies from Classical Greek days. The formalization of LME stems from the term "Vertical Dyad Linkage (VDL), a concept developed by Dansereau, Graen, and Haga in 1975, with their paper, "A Vertical Dyad approach to leadership within formal organizations". Leadership is one of the primary areas of study, research, and practice in organizational behavior. Leaders often develop relationships with each member of the group that they lead, and Leader-Member Exchange Theory explains how those relationships with various members can develop in unique ways. The leader-member exchange theory of leadership focuses on the two-way relationship between supervisors and subordinates. These are not the only 2. Also known as LME, LMET or Vertical Dyad Linkage Theory, leader-member exchange focuses on increasing organizational success by creating positive relations between the leader and subordinate. In particular, leaders usually have special relationships with an inner circle of assistants and advisors, who often get high levels of responsibility and access to resources. This is often called the “in-group,” and their position can come with a price. These employees work harder, are more committed to task objectives, and share more administrative duties. They are also expected to be totally committed and loyal to their leader. Conversely, subordinates in the “out-group" are given low levels of choice or influence and put constraints on the leader. These relationships start very soon after a person joins a team and follows these three stages: 1. Role-taking: The member joins the team and the leader evaluates his or her abilities and talents. Based on this, the leader may offer opportunities to demonstrate capabilities.
2. Role-making: In the second phase, the leader and member take part in an unstructured and informal negotiation whereby a role is created for the member and the unspoken promise of benefit and power in return for dedication and loyalty takes place. Trust-building is very important in this stage, and any feelings of betrayal, especially by the leader, can result in the member being demoted to the out-group. This negotiation includes relationship factors as well as pure work-related ones, and a member who is similar to the leader in various ways is more likely to succeed. This perhaps explains why mixed gender relationships regularly are less successful than same gender ones. The same effect also applies to cultural and racial differences.
3. Routinization: In this phase, a pattern of ongoing social exchange between the leader and the member becomes established. Being a successful or in-group member usually includes being similar in many ways to the leader. The members work hard at building and sustaining trust and respect. The members are often empathetic, patient, reasonable, sensitive, and are good at seeing the viewpoint of other people, especially their leader. Aggression, sarcasm and a self-centered view are qualities seen in the out-group.
The quality of the LME relationship varies. It is better when the challenge of the job is extremely high or extremely low. The size of the group, financial resource availability and the overall workload are also important. The theory can also work upwards as well. The leader can gain power by being a member of his or her manager's inner circle, which the leader can then share with subordinates. The main limitation of leader-member exchange research is that it is not particularly helpful in describing the specific leader behaviors that promote high quality relationships. At best it only implies generalities about the need for leaders to show trust, respect, openness, autonomy and discretion.
Every leader and follower...