The basic premise of the Leader- Member Exchange (LMX) theory helps to explain the nature of relationships that exist between managers and the people on their teams. It helps to explain the psychological relationship and foundational element that underscores team dynamics. The division of the "in- group" and the "out- group" are vitally important to the theory. Research has found that the "in- group" are people that the manager believes to be stronger workers and more competent. This results in these members bearing "more responsibility and decision-making influence than those in the out-group." In contrast, the behaviors of those in the "out- group" consist of a perceived lower level of competency and/ or trust in their relationship with the leadership. For these individuals, the lack of connection with their managers results in being "given little support or responsibility, along with minimal influence in decision-making."
The LMX model calls into question why these relationships exist and bring attention to how the manager can resolve such imbalances. The model seeks to develop lines of communications in which managers can recognize their marginalization of employees to members of "the out- group," moving them to the "in- group."