What is the Leader-Member Exchange Theory?

Leader-member exchange (LMX) theory focuses on the relationship between leaders and subordinates and how it influences subordinates. The types of relationships leaders form with employees is categorized as:

• High-Quality - There is a strong relationship marked by mutual trust, respect, and facilitation. The sense of loyalty is strong. Subordinates and leaders will go above and beyond for the benefit of the other. Subordinates feel the need to reciprocate by assisting the leader in achieving her objectives. This relationship gives rise to self-generated motivation. It also serves to mitigate the effects of stressors (such as lack of social fit, conflicting personality traits, and inability to meet expectations). The result is low subordinate turnover in the organization.
• Low-Quality - This is a poor relationship marked by low levels of trust, respect, and facilitation. There is little loyalty to the organization or leader. Subordinates will generally not go outside of their job responsibilities for the benefit of the leader. Motivation is achieved through rewards and punishment.

The negative aspects of fostering high-quality relationships are that it is not scalable. Inevitable, some subordinates will be closer to the leader than others. This can breed resentment and harm loyalty. 

Leader-subordinate relationships develop organically through common experiences and interactions. 

The methods of developing relationships will vary between performance-oriented and people-oriented cultures. 

In a performance-oriented culture, the distribution of rewards tends to be effective in fostering a relationship. 

In people-oriented cultures, how the leader treats the subordinate is more relevant.