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Exchange theory

Essay Topic:

Roe (2014) argues that according to leader member exchange theory, followers who experience high
quality relationships with the leader are in receipt of higher tangible rewards, such as pay, bonuses and

more challenging assignments.

Critically assess whether leader member exchange theory provides an effective framework for assessing

the relationships between leaders and followers.

Marking schedule for Part B:

10% of marks are allocated to the presentation of the essay. The student�s work should be typed with
clear use of paragraphs and headings. Typographical and spelling errors should be avoided.
10% of marks are allocated to appropriate referencing of content. Students should familiarise themselves
and make use of the Harvard referencing system and should cite and reference material properly.
Students should make use of a range of resources (books, journal articles etc) and the literature used

should be appropriate to the arguments made.

60% of marks are allocated to the analysis presented in the essay. Students should examine appropriate
theoretical concepts and frameworks. Students should demonstrate an awareness of the wider context
and present an in-depth discussion of current issues. Better students will demonstrate critical analysis

skills and communicate their arguments in a clear and coherent manner.

20% of marks are allocated to the conclusions drawn. The conclusions should identify the key themes or
issues under consideration. Conclusions should be well supported from the analysis and highlight the

significance of arguments, evidence and insights


The Leader Member Exchange Theory as a Framework for Assessing Leader-Follower



The leader member exchange (LMX) theory does not qualify as an effective framework for
assessing the relationship between leaders and followers. Roe (2014) in defining the LMX theory
postulates that followers whose relationship with leaders are of high quality tend to receive
higher tangible rewards including pay, bonuses and superior assignments. While this theory is
praised for being the only leadership theory that brings dyadic relationship as a core of the
leadership process and thus explains how people relate with each other and with leaders within
organisations, it fails to explain how the leader-member relationships are created and what
underlies how respect, trust and obligations are built. The theory is also denigrated because it
tends to only support privileged groups within the organisation and therefore appears
discriminatory and unfair. In this paper, the LMX theory is critically assessed with an objective
of demonstrating that it is not an effective framework to assess leader-follower relationships.

Understanding the leader member exchange theory

The LMX theory was first introduced by Dansereau, Graen, and Haga (1975) and is based on the
idea that leadership is built based on dyadic relationships between a leader and his/her followers
(Sparrowe and Liden, 1997). According to Graen and Uhl-Bien (1995), leaders tend to create
higher quality relationships with selected followers; who are consequently accorded higher
tangible rewards and more superior assignments. This can be explained by the formation of in-
groups and out-groups which represent those with higher quality relationships versus those with
lower quality relationships respectively (Van Breukelen, Konst and Van Der, 2002).

A closer look at the application of LMX theory

The LMX theory has in the past received an almost equal share of support and criticism as far as
its ability to assess leader-follower relationships is concerned. This is mostly pegged to its
potential to promote effective relationships and consequently lead to a productive workforce
(Jones, 2009).


A number of strengths are associated with the LMX theory. To begin with, it is the sole theory
that explains leadership based on dyadic relationships (Chen, Lam and Zhong, 2007). Secondly,
it establishes the importance of communication in the organisation and consequently validates
our understanding of why people and leaders interact as they do within organisations (Fix and
Sias, 2006). Thirdly, the LMX theory can be used to explain how leadership networks are created
by individuals within the organisation and how these translate into future working relationships.
The LMX theory is applicable in different types of organisations and at all management levels

(Becker, Halbesleben and O’Hair, 2005). Lastly, the LMX theory has been found to influence
surbodinates’ level of creativity, motivation and positive organizational outcomes. In a study of
26 project teams in high-technology firms however, the frequency of negative LMX was as high
as that of positive LMX (Tidd and Bessant, 2011). This denotes that it may either enhance or
undermine the sense of competence and self-determination among subordinates.


The LMX theory has been criticised over its ability to create meaningful relationships, with
questions being raised as to how members of the in-group are selected and whether personal
interests could challenge professionalism where this theory is applied (Murph and Eshner, 1999).
Secondly, the theory is seen to be discriminatory as it tends to alienate members of the out-
group; given that the most important tasks, assignments and rewards go to the in-group (Becker,
Halbesleben and O’Hair, 2005; Chen, Lam and Zhong, 2007). Thirdly, the LMX theory does not
address the question of personal characteristics and how they could affect relationships. In this
relation, it has been established that such characteristics may affect the nature of relationships
due to differences in perception, interaction and communication exchanges (Chen, Lam and
Zhong, 2007). LMX theory according to Sherony and Green (2002) could have a significant
impact on the level of trust, respect and openness in the organization; leading to hoarding of
resources by employees who do not feel appreciated. Lastly, culture plays an imperative role in
determining the nature and quality of relationships; yet this is not addressed in the LMX theory
(Graen, G. B.; Uhl-Bien, 1995).

Why the LMX theory is not effective in explaining leader-follower relationships

The discussion above establishes that LMX theory has its pros and cons as far as assessing
leader-follower relationships is concerned. A majority of the strengths however dwell on the
validation of the theory itself as opposed to its application in relationship development. In
essence, the LMX theory can be considered ineffective in explaining leader-follower
relationships. This section is a discussion of the weaknesses of LMX theory outlined above; with
an objective of demonstrating its ineffectiveness in explaining leader-follower relationships.

The question of how the high quality relationships between leaders and members are developed
is among the most debated about factor in this theory. The LMX theory fails to illustrate any
guidelines that would ensure that the strong relationships are based on a high the level of
professionalism (Sparrowe and Liden, 1997). Are the relationships based on performance where
the leader tends to build better relationships with high performers? Is it at a personal level where
the leader creates good relationships with people they know or who are easy to deal with
depending on personality compatibility? Or is it at an intellectual level where individuals get
along because they have common interests? These questions point to the fact that there is no
effective means of establishing how these relationships are created (Sherony and Green, 2002;
Tierney, Farmer and Graen, 1999).

. Furthermore, it is difficult to determine whether such relationships are authentic and
professional; given that human beings tend to have better relationships with people who are
considered ‘useful’ in their lives (Sagie, 1996). This again leads to the issue of followers who do
not have qualities that the leader would ‘admire’ and this implies the possibility of poor relations
with this group (Sherony and Green, 2002).

Based on the above argument, the plight of the out group who do not have close links with the
leader is not addressed in the LMX theory. This brings out the theory as discriminatory as it only
concentrates on members who have a higher quality relationship with leaders (Fix and Sias,
2006). The LMX theory does not address issues associated with unfairness and distributive
justice and how these could impact on the overall relationship situation in the organisation
(Becker, Halbesleben and O’Hair, 2005). Does this mean that the leader does not strive to
establish good relationships with other followers? Is there a possibility that the low quality
relationship are likely to deteriorate further because the followers in this group are not well
motivated? The LMX theory according to Murphy and Ensher (1999) tends to favour the group
with the higher quality relationships; such that they get all the superior privileges and this raises
the question on whether the other group receives similar attention. It appears as though followers
who do not enjoy good relationships with the leaders are unimportant and is hence highly
discriminatory. Consequently, it is only natural that the remaining group will feel left out and
demotivated; which may further degrade the leader-follower relationship and create tension
within the organisation (Becker, Halbesleben and O’Hair, 2005). Using the LMX theory to
assess leader-follower relationships thus creates room for matters of inequality to cast doubt on
the effectiveness of the theory.

The theory fails to illustrate how personal characteristics could affect the relationship between
leaders and followers. George and Jones (2008) seeks to explain why some employees may
appear to have better relationships with supervisors while others have low quality relationships
and narrows this down to the role of personality and personal characteristics in influencing
communication exchanges. They note that such characteristics may impact on the nature of
interaction, perceptions of one another and interpersonal communication.

In an example demonstrating a link between personality traits and communication, Schaubroeck,
Lam and Cha (2007) compare extroverts and introverts. They note that extroverts are more
outgoing, open to interaction, assertive, accommodative to arguments and have a higher
tolerance for disagreement; while the opposite is true for introverts. This could explain why
different forms of relationships are likely to emerge based on personal traits. The LMX theory
does not bring into consideration such traits and how they are likely to impact on the quality of
leader-follower relationships; yet they would serve as the utmost predictor of the quality of LMX
between leaders and followers (Tierney, Farmer and Graen, 1999). It would be natural for
example for a leader to have better relationships with followers who are outgoing and aggressive
as opposed to those who are reserved and quiet. This means that the latter not only fail to enjoy a
good relationship with their leaders but their potential may also go unnoticed (Sparrowe and
Liden, 1997). The LMX theory therefore appears incomplete and does not form a good basis for
analysing relationships between leaders and followers.

The LMX theory fails to address the importance of trust, respect and openness in building
relationships and how the leader can effectively maintain the trust of the ‘out-group’. According
to Tidd and Bessant (2013), these values exist where there is emotional safety; such that
everyone in the organisation is free to air their ideas and opinions. They further note that where
trust and openness are too low, the possibility of people hoarding resources including
information is high. Given that the LMX theory has been criticized for creating trust, respect and
openness issues among employees who feel alienated, how then does a leader ensure that he can
bring out the best out of each employee based on the LMX theory? (Zaccaro, Rittman and
Marks, 2001). A critical look at the theory would therefore indicate that the theory has a
significant level of gaps; especially in how the leader manages relationships to ensure that trust

levels are maintained within the organisation and that the potential of all employees is utilised
(Taggar, 2001).

Research has shown that some dyads experience difficulty in forming high quality LMX
relationships; given their cultural characteristics. Cultural aspect not only determine the kind of
relationship a person has with others Jones (2009), use gender dissimilarity as a means to explain
this phenomenon; arguing that members of the same gender are more likely to have high quality
exchange relationships than when the opposite is true. This denotes a skewed position and
further questions the factors underlying the development of relationships within organisations.
The LMX theory fails to illustrate how gender similarity may influence the nature of
relationships and how this would impact on the organizational outcomes (Jones, 2009). The same
is applicable for other cultures where members of one culture are likely to have common
interests, understand each other better and even tolerate each other (Sparrowe and Liden,
1997).Van Breukelen, Konst and Van Der (2002) note that individual interactions are driven by
common bonds such as cultural characteristics, beliefs, religious and gender orientation among
others and that people from the same cultural affiliation are likely to enjoy better relationships
because they understand each other better. This has a significant implication on the nature of
relationships in the organisation; yet the LMX theory fails to address the influence of culture in
its theoretical framework. The theory is thereby ineffective in assessing leader-member


The LMX theory inadvertently favours the development of privileged groups in the
organizational setting and therefore appears discriminatory. This gives rise to a significant

number of issues which the LMX theory does not address as far as relationship building is
concerned. Issues arise on the underlying procedure of how relationships are created, whether
they are out rightly professional and whether personal traits, cultural characteristics and gender
similarity among others have an impact on the kind of relationships created within the
organisation. These are conspicuously ignored in the theory despite their significance in
determining the nature of relationships within groups. There is also the possibility of straining
relationships within the workplace as members who have lower quality relationships begin to
feel the alienation. Lastly, the LMX theory fails to explain how a leader can maintain healthy
relationships with all members and thus eliminate the possibility of trust issues emerging within
the organisation. Despite the strengths identified for the LMX theory, these mostly explain
application of the theory but do little in providing a framework that effectively assesses
relationships in the workplace setting. In conclusion, it is possible to affirm that the leader
member exchange (LMX) theory does not qualify as an effective framework for assessing the
relationship between leaders and followers



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