The focus of leader-member exchange theory is on “the interactions between leaders and followers” (Northouse 2013 p. 161). The theory assumes that leaders treat followers in different ways based on differences between the leader and each follower. The dyad between leader and follower is shaped by the working relationship that is established. The relationship develops through phases called: stranger, acquaintance and partnership (Northouse 2013).
In-groups and out-groups of employees can form. Out-group employees are those that are comply with the rules at the minimum standard in order to achieve the desired economic reward. These employees are not interested in expanding their roles beyond the employment contract. In-group employees will negotiate with a leader, for those activities and rewards that go beyond the formal employment contract. Having built good solid working relationships leaders and followers can produce positive outcomes for both themselves and their employers (Northouse 2013).
There is a manager at work that has an in-group and an out-group. One foreman had been hired for a relatively easy assignment, training coordinator. He tired of that and moved to another position with a crew of four. The foreman also was responsible for contractor oversight. During periods when the plant was shut down, the foreman demonstrated his desire to perform nothing more than the minimum required of the employment contract. The manager learned this fact about him and the foreman became part of the out-group. He was subsequently reassigned to a position where overtime was not required.
In-group foreman have been hired from outside the company. After moving through the phases of leadership with them, the manager has established partnerships with those foremen. The manager has been able to count on these foremen to accept extra assignments and create a higher quality product for the mutual gain of the employee and employer. More work gets completed because of the in-group participation (Northouse 2013).
The formation of the leader-follower relationship affects goal achievement from either the in-group or the out-group. Innovation and creativity often come from working on an in-group with the result being the accomplishment of more work. For this in-group employees reap benefits that out-group employees do not. Out-group employees are treated fairly, within the bounds of the employee contract but do not reap the same rewards as in-group employees (Northouse 2013).
References
Northouse, P.G. (2013). Leadership: Theory and Practice. Los Angeles: Sage Publications.