Understanding the Theory
The Leader-Member Exchange Theory first emerged in the 1970s. It focuses on the relationship that develops between managers and members of their teams.
The theory states that all relationships between managers and subordinates go through three stages. These are:
Let's look at each stage in greater detail.
Role-taking occurs when team members first join the group. Managers use this time to assess new members' skills and abilities.
New team members then begin to work on projects and tasks as part of the team. In this stage, managers generally expect that new team members will work hard, be loyal and prove trustworthy as they get used to their new role.
The theory says that, during this stage, managers sort new team members (often subconsciously) into one of two groups.
In-Group - if team members prove themselves loyal, trustworthy and skilled, they're put into the In-Group. This group is made up of the team members that the manager trusts the most. Managers give this group most of their attention, providing challenging and interesting work, and offering opportunities for additional training and advancement. This group also gets more one-to-one time with the manager. Often, people in this group have a similar personality and work-ethic to their manager.
Out-Group - if team members betray the trust of the manager, or prove that they're unmotivated or incompetent, they're put into the Out-Group. This group's work is often restricted and unchallenging. Out-Group members tend to have less access to the manager, and often don't receive opportunities for growth or advancement.https://www.mindtools.com/pages/article/leader-member-exchange.htm