Leader-Membership Exchange Theory
. The Leader-Membership Exchange (LMX) theory is a theory that has been proposed to explain the leadership phenomenon. Many dimensions of this theory have been studied by numerous scholars over the years. Leadership-Membership Exchange theory explains that there are two groups that form between a leader and his or her followers. The two groups are differentiated from each other by the exchange relationship that is associated with each group (Pierce & Newstrom, 2008). The two groups consist of an in-group, and an out-group. Pierce and Newstrom (2008) point out that the in-group usually contains a small percentage of the followers and has a high quality LMX relationship, this group is more likely to receive more favorable job assignments and they maintain a closer relationship that is more open to communication with their leader. While out-group usually contains the majority of the followers, this group has a low quality LMX relationship with the leader. These followers are likely to receive less flattering job assignments, more apt to report grievances. Pierce and Newstrom (2008) also explain that “…they (in-group) are often expected to work harder, make more sacrifices, assume great risk, accept more responsibility, be more loyal and committed and give more personal time to the satisfaction of the leader need’s and the attainment of the group’s goals”(p30).
The purpose of this paper is to uncover some of the factors that contribute to in-group and out-group formation within an organization. It will also attempt to explain the implications of being a member of each group. This could be helpful for anyone entering a new career, from the point-of-view of someone entering into a leadership role such as a manager or from the point-of-view of an entry-level employee, so that they understand the reasons that cause individuals to become part of each group. An understanding may empower an individual to be aware of some of the...