How to Use LMX Theory to Improve Relationships, Trust and Productivity

LMX theory, or Vertical Dyad Linkage Theory as it’s often called, defines how leaders maintain their position within a group and relate to other members in the group.

The leader-member-exchange model theoretically assumes that leadership consists of several two-way relationships the leader has with his or her subordinates. The strength of each relationship is measured by a variable measurement of trust, respect, support and loyalty.

Differing Relationships & Levels of Trust

It is important to take into consideration the individual needs, values, and goals of your employees when managing them – and so it’s not always the right thing to do to treat everyone the same way.

For instance, you probably have team members that you trust and enjoy working with: when they do something for you, it’s always done well. You try to give these team members challenging projects because they are the most valuable.

Equally, you may not think as highly of other team members because they don’t have the same career goals, they’re unqualified, they don’t seem motivated enough or you just don’t trust them.

As a result, these team members tend not to be given opportunities for promotions or challenging tasks. Instead, you give them more daily responsibilities for repetitive work.

Understanding Why You Treat People the Way You Do

It’s important to understand why you don’t trust certain team members and why you do trust others. Have you been letting your doubts about their reliability affect how you interact with them?

Do you spend less time with them, favouring other more positive team members? Do you do this consciously or subconsciously? – Both are equally applicable ways of segregating employees.

The problem is, doing it subconsciously is harder to diagnose, because you may not consciously even know you’re doing it until someone points it out.

Now is the time to objectively see if you do treat some employees differently than others.

This scenario is at the heart of the Leader-Member Exchange Theory. LMX explores how leaders develop relationships with team members and it explains why those relationships can either promote growth or hold people back.

The relationship that develops, strongly influences responsibility, decision making, access to resources, and performance.

The LMX Theory

The Leader-Member Exchange Theory came to light in the 1970s. This model focuses on how manager-member relationships evolve.

The theory is that all relationships between managers and subordinates experience three stages. These are:

  1. Role-Taking;
  2. Role-Making;
  3. Routinization.

Let’s look at each stage in greater detail.


When new employees start work, their supervisor conducts a formal review to determine which tasks they are capable of completing. They take the role of analysing and observing to see their skills and abilities.

The manager’s role is to determine what the employee can do and then offer feedback.


New team members get up to speed by tackling tasks and projects. The manager expects new team members to work hard, be loyal, and prove trustworthy as they do their job.

During the process of being assimilated into their new team, managers often subconsciously, sort newcomers 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. The thing is, Managers are disproportionately invested in this group of employees. They provide challenging work and opportunities for training and advancement to them. Members of this group often share their manager’s traits in terms of personality or work ethic and so there is more of a close-nit relationship, built around trust and rapport;
  • Out-Group – When team members disappoint the manager for betraying their trust or just proving to be unmotivated and incompetent, they are ‘put’ into an Out-Group. The Out Group is often given uninteresting work with very few opportunities to grow or advance in the company. Quite literally, these employees have often been left behind others and miss out on development and promotion.


During this last phase, team members and their managers work to establish routines.

As time passes, In-group members try to live up to expectations and maintain the allegiance they have with their manager, often showing empathy, good work ethic and persistence.

Alternatively, Out-group members may start to dislike or distrust their managers. Because it’s so hard to invariably escape the Out-group after being seen as different, Out-group members may well have to change departments or organisations in order to start over. – The relationship between employee and boss has broken down.

Once team members are labelled as being part of the In-Group or Out-Group, even if it is a subconscious thing, that label affects how they are managed. These labels can become self-fulfilling prophecies.

For example, managers often choose employees from this group to be their rising stars. These subordinates are trusted with high-level work and the manager often discusses issues with them, providing support and advice.

Because they’re given more opportunities to test themselves, they have a higher chance of developing in their roles.

We already know that Managers don’t spend much time supporting or developing the Out-group. As a result, they tend to receive few challenging assignments or opportunities for training and advancement.

And because they’re never tested, there’s not a lot of chance to change the boss’s opinion and advance themselves. They become stuck in the rut and the very nature of their work keeps them where they are.

Benefits of Looking at Your Relationships Through the LMX Filter

It’s important to remember that the follower-leader relationship is predominantly about the quality of your interaction with one another rather than just gaining followers.

Because of its focus on quality relationships with all team members, research has linked the Leader-member Exchange Theory with numerous positive  results, including:

Quite simply, it’s a practical theory with massive amounts of research to support it. It also allows managers to observe their own relationships to see if they can improve them, and to be aware of how some people can be overlooked at the expense of others.

How To Use LMX Theory to Improve Relationships

The LMX Theory can be challenging in that it is vague on how leaders can develop and nurture better relationships with all of their team members—particularly those in the Out-Group. The great news is that there is an abundance of information and research out there that can help you improve working relationships across your team.

This results to simply good leadership practice like mastering some of the following:

  • Coaching;
  • Setting goals;
  • Consistently developing others;
  • build win-win relationships;
  • Develop collaboration;
  • Encourage ideas and continuous improvement;
  • Empowering employees to make decisions.

These are a few of the many tools for you to explore further. For now, let’s focus on some simple steps to take, below.

Firstly, use the Leader-Member-Exchange Theory to identify how you personally perceive each member of your own team. Do you have subtle biases? It’s important, to be honest with yourself.

Identify Your Out-Group

Take a moment to note your team members’ names down, who fall within your personal out-group.

Next, consider the reasons why these people have fallen “out of favour” with you. Did they do something specifically to lose your trust? Do they exhibit bad behaviour at work? Are they really incompetent or do they have the low motivation?

Taking a closer look can help you get real about what has actually happened and compare it to your perception.

Improve the Relationship

As a leader, it’s your responsibility to establish relationships with Out-group team members. Better relationships build trust. Trust builds better engagement and productivity.

So, focusing on developing a better relationship with your team can benefit both you and your organisation. For example, research conducted by the Hospitality and Management Academy in Dubai shows that high quality working relationships produce improved morale and productivity in the workplace.

There’s a caveat though. Bear in mind that this group may be wary of any attention or support from you; after all, they may not have had it in the past.

The first step to employee success is meeting with each person individually. Ask them what they enjoy about their work and if there have been opportunities for advancement.

One-on-one conversations are powerful for identifying verbal and nonverbal understanding between yourself and an employee. Gain an agreement of how you will help them and what to focus on next together. Identify what really motivates them too, so you can help them succeed.

Once you’ve had a chance to reconnect with your team members on an individual basis, continue doing what you can to interact with them. Drop by their office or ask if they need any assistance on current projects. Get to know these individuals personally and work one-on-one with them when necessary.

Ensure They Learn and Develop

One of the biggest advantages of the Leader-Member Exchange Theory is that it alerts you to any unconscious bias you might be inadvertently showing some team members; this allows you to offer all of your employees or teammates opportunities for training, development, and advancement.

As a starter, it may be a good idea for you to mentor one of your out-group teammates.

And as your team members learn and develop further, you should also make sure they have opportunities to continuously advance their skills. Consider allocating tasks and delegating responsibility so that people are assessing things and using their own skillset. Participate in Bite-Sized Training sessions and set goals for your team, so everyone can work to the same outcome.

Additional Tips to Improve Trust Using LMX Theory

Here are 3 golden rules to implement and ensure your out of group members move across to your in-group in no time at all.

Don’t Dwell on Weaknesses

As a manager, when you’re constantly spinning all the plates and ensuring output is reached, it can be easy to focus on what team members can’t do and what they don’t do well.

Try to avoid this. Your negative perspective on a colleague may be limiting your knowledge of their potential as an asset to the company. Instead, focus on the positives. What skills are they good at? What can they do well? Look for examples of good practice in each employee.

Focusing on your employees’ skills gives you the foundation to oversee their work, praise achievements and create a more trusting relationship. This in turn builds trust.

Ensure you Run 1-2-1 Reviews

Everyone in your team should be afforded the same opportunities to access guidance, advice and coaching – regardless of whether they are an in-group or out-group.

Scheduling one-two-one meetings with your team members is not only a great opportunity to show appreciation, but also an excellent way to deliver feedback and ask thoughtful questions. Leapsome has a great article on the quantified benefits of regular 1-2-1 coaching sessions with employees.

Use Active Listening Techniques

When you already hold a negative opinion of someone, it’s tempting to jump to conclusions about every single one of their decisions and actions. You assume ill intent – even when it’s not there.

You may not see eye to eye with your colleague on how best to tackle a task. Instead of labelling them as wrong or incompetent, ask them why they chose the approach they did. Asking meaningful questions allows people to lower their defences and discuss situations and ideas in a safe way without recrimination. It also leads to stronger relationships between colleagues.

Use active listening techniques to listen and learn from your employees.

Each time you do this, you can help build relationships and trust.

Use this time to learn what your team want; what motivates them; where they need help and any ideas they have. You can also use this time to coach them effectively and develop their skills, including them in your decision making, too.


You’re a manager, and you’ve got so much on your plate. It’s easy to forget about your out-group team members.

It’s important that you build trust with every one of your team members – no matter what their background is. This will ensure they feel included in the company and motivated to work hard for its success.

Use The LMX Theory to help ensure that everyone is treated fairly.

Building relationships is an important part of your role as a manager. If you can’t trust or gain the respect of your team, it’s going to be difficult to lead a team that gets extraordinary results.