Ethics for Managers Unit 3 IP" The leader member exchange theory refers to the relationship built due to time pressure by leaders with the small group of followers. These members make in-group are highly trusted, get high privileges and have unbalanced attention of leader as compare to others that fall into out-group category. Relations of out group followers are formal with the leader and based on formal interaction. out-group members do not gain the reward that are controlled by the leader and have a smaller amount of leader’s time. In history when the relationship between leaders and provided followers begun leader categorized their followers into two groups “in group” and “out group” and stability seen in such relationships over time. Leader Member exchange model has been introduced in order to reward in-group employees that are most trusted and close to the leader and punish those who fall in out-group and not close to the leader (Liden, Wayne, &. Stilwell, 1993. Wayne, Shore, Bommer, &. Tetrick, 2002). It has been encountered that there is no such procedure through which leaders chose their in-group member, but they choose on the basis of similarities in characteristics of personality, attitude and demographic or it can be said that on a higher level of competence (Duchon, Green, and Taber, 1986). It has been found that leaders have differential attitudes among followers and members fall into in-group do the hard work, have a rating in higher performers, describe high level of satisfaction with their leaders and engage in citizenship behavior at work (Gerstner, &. Day, 1997).
Workers that are included in the in-group are more engaged, reliable, trustworthy and hardworking as compare to out-group members. In-group and out-group differences bring favoritism and create dissatisfaction among the members of out group. It has been found that favoritism has a damaging impact and costly