Dr. David Smith, the author of How Successful Teams Work, earned his PhD in organizational leadership and developed his own leadership program. In this episode, we talk about how in a lot of business settings, many managers and their employees sort of ignore the fact that one on one is where leadership magic really happens.

David is going to break down the science of effective leadership and how to build these great relationships that produce incredible results for your team. Whether you’re a team leader looking for better results or you’re a team member who is hoping to improve your work life, this is the episode for you.

David Smith: I’m 61 years old, got my PhD three years ago, started my PhD studies about eight years ago, which leads to our financial crisis. A large insurance company I was working for had major problems and management shifts all over the place, and I started thinking about my managers over my career. I had like three managers within six months, and all three were very different.

My position in the company is very low on the totem pole, highly compensated but in sales, you get highly compensated with no managerial authority whatsoever. With the financial crisis, it turns out I had a little more time on my hands, so I started taking my PhD classes for the heck of it.

I started thinking about why are my bosses different? I looked back 32 years previously and they were all different. It had actually make me think about leaving my company, and so forth. That’s really the essence of it, is curiosity into the science behind that leadership. What was the difference? Why were people different?

I didn’t have the academic background to understand it.

I certainly am smart enough to figure out they were different and how they were different, but why? What was the difference in them that affected the difference in me and affected my job performance?

Charlie Hoehn: What did you find? What was the secret to their successful team work creating abilities?

David Smith: That is a great question. It actually took about probably four years into my studies, and this was graduate school where you don’t have – as a distance learning, North Central University out of San Diego, which is not distance to me but still, I didn’t meet in classes and didn’t have professors. We had mentors that were PhDs.

I just basically did a lot of reading. You read all the curvy books, the academic books, the textbooks, papers, and you write papers. So you read and write, and it was about four years of this back and forth of reading information, learning information, distilling it that I finally came across this academic theory called leader-member exchange.

It’s been around a long time, and it’s been studied by social scientists quite a lot.

It just said, “here is what you’ve been looking for. Now, you need to study it in depth and understand it.” That’s where I got to after about four years of my studies.

The Leader-Member Exchange

Charlie Hoehn: Tell me about leader-member exchange. I feel like I might be able to guess the definition but then again, I’ve never heard this phrase. So break it down for me.

David Smith: That’s the challenge. Actually, it’s an incredibly important point to understand that it is called leader-member exchange because there’s so many self-help leadership books or management books that touch on the subject but never call it what it is.

If you don’t call it what it is, you can’t get to the essence of how to use it.

Let’s break it down. It’s an exchange between two people, what’s called a social exchange, which means, if I’m the leader and you’re my team member, we come to an agreement by exchanging what I will want from you and what I will do for you if you, as the team member, agree to do what needs to get done.

You would think it’s almost like an employment contract, and it is, except an employment contract is just piece of paper. The leader-member exchange is when a team leader and a team member actually create an agreement, whether it’s explicit (a lot of talking) or implicit (a lot of understanding) or a combination.

A brand new team member and a team leader, will have a very low quality. Now, that’s not necessarily negative. Just means that’s how social scientists measure it. Quality being like zero, up to five being great. When you and a team member and the team leader get together, as come to understand each other better, about the job, not necessarily about being best buddies, that exchange relationship becomes higher and higher quality. This leads to many things, especially getting the job done that the leader needs done.

We start with the word exchange. It’s an agreement. And then you have leader and member and that’s the important thing. It’s between the leader and one person, the team member. Not a group of team members and not a bunch of leaders, but it’s an exchange between two specific individuals.

When you understand that that is what we’re talking about, you then do not start talking about group meetings, you don’t start talking about how organizations are run.

“A team leader and a team member work together to get whatever needs getting done, done.”

That is so key that when I put on seminars and workshops and I’m seeing the glaze in people’s eyes, they don’t quite get it, I say, “Okay, tell me about your boss.” If it’s a bunch of leaders, “Tell me about how you get your group to do things.”

When they start talking, they start talking about, “We have meetings.”

I say, “Wait. When you have a group meeting, say, there’s 10 people in your group. Are you trying to get 10 people to do the same thing? What you’re really trying to do, I’ll just cut to the chase. What you’re really doing is trying to get 10 individuals to do individual things that add up to a group activity.”

That’s what leader-member exchange is. When I read about that and understood the real definition, I said, that’s exactly it. I had all these bosses, and they each treated me differently than each other and than the other bosses. It’s how they treated me and I reacted to them and how we did the job together that made the difference in how I felt about my job and I how I actually accomplished my job, given the external environment as well.

Charlie Hoehn: There are a lot of leadership books out there. What makes your unique?

David Smith: Well, I know it’s unique because my dissertation work was scientifically based to show the relationship between how a leader acts in five specific ways, how that affects the leader-member exchange and how that affects outcomes. Outcomes being, you know, did the job get done, did people quit, did whatever an outcome is.

Since my dissertation is the first to take the various elements and scientifically prove the relationship versus, “Hey, that makes sense”—it has to be unique.

No one else has done that.

Great Leadership Behaviors

Charlie Hoehn: You mentioned the five behaviors. Let’s dig in to those.

David Smith: The important thing is, how do you act? Not how you think or you know, how smart you are or whatever. It’s really how you as a team leader behave.

What are your actions towards your team member in five specific areas?

Just like the 7 Habits of Successful People, if you, as a leader, make it a habit to work in these five ways, you will affect positively, your leader-member exchange quality, which then affects positively the things you want to get done.

Those five are inclusion, respect, rewarding, improvement, and modeling.

In my book, I go through in general how they all fit, but then I go into specifics of all five and how you, as a leader can create habits that include those five behaviors consistently. If you do it with everyone, all of them, your whole group, it makes that quality better, with better results for your team.

Charlie Hoehn: Which are the five do you really see as maybe, either the most heavily weighted or the one that leaders tend to lack?

David Smith: Excellent question. The real answer of course is by the book. It’s a good read I hope.

I always start with inclusion, when I start talking. I could have put this in any order.

By the way, when you get into the science of literature, those five behaviors are named differently, but my own research has changed the names to be more descriptive of the actual behavior.

It’s best if I just gave you an example. Let’s say the big boss hands down a five million dollar sales goal. As background, I’ve been in sales for 40 years, that’s how I relate. I think this book is probably best for sales management, sales leadership, but it applies across the board. Certainly the personal experience is in sales.

Your leader has five team members, and he’s got a five million dollar goal. Your leader could say, “Okay, I can do the math, a five million divided by five, hey, that’s a million dollars each.” Well, if your leader just announced that at a meeting, there’s three possible reactions of each individual team member.

One reaction is “Hey, a million, easy man. I did two million last year. I’m cool, and I’m going to Vegas for the conference.”

Let’s go to the opposite. Brand new person, had struggles over the last six months. “A million? Man, I don’t even know if I could do $600,000. I’m not going to Vegas. Have fun at the conference.”

Or in between, which is “Well, I think I can make it, I’m not too sure,” that kind of thing.

“That was a leader being non-inclusive.”

Inclusive would have looked like this: Okay, I got a five million dollar goal. I think what I’m going to do is call each team member in one at a time and tell them, “I have a five million dollar goal as a group. What do you think you could do of that five million?” Then stop and listen.

I think that’s really enough as an example to say, can you think about how each team member now will feel differently about the five million dollar goal? Instead of just being handed a million of it, we now have the one that was really happy. “Hey, I think I could do two million.”

Then when we get into the rewarding behavior, the leader might say “If you do two million, I will give you an extra 10%.” Now we’ve really got something going on.

Then let’s take the person that says, “Man, I can only do $600,000.” Well, meet one on one and saying, “Here’s the five million, what do you think you can do? I would like to include you in my thought process because it affects your job. It affects how you feel about me, it affects how you feel about the company, it affects how you feel about drinking heavily.”

I’m serious about the drinking heavily because that’s one of the negative outcomes of low quality LMX. If you have low quality, people sometimes like, “I don’t care, I’ll just go have a drink,” whatever.

“I’m not making fun of this at all.”

Now the leader says, “I could have just given you a million, but how would you have felt about that?”

“Man, I would have felt like quitting.”

“Well, okay, that’s not good, because we just hired you and we think you’re really good. How about this? Why don’t we make yours $600,000, I’ll get Charlie over there to pick up the slack because I know he could do it, he’s been around a long time. That way, between the two of you, I’ll be okay. You think you could do 600,000?”

“Yeah, boy, do I feel a whole lot better than if you just told me I had to do a million.”

Now, this sounds like a simple example. Okay, but in forty years, I never had that conversation. Before, it was announced what the team goal was, what my manager, not leader, my manager felt my goal should be. Then we had a discussion.

He’d already created – he or she…Actually, it was always been a he in financial services, unfortunately. There’s not a lot of women leaders. There should be a whole lot more.

That’s one of the things that got me about leader-member exchange. If we could do a way back machine, then my career probably had been a whole lot happier and I had happy career, very successful. But geez, every once in a while, I had team leaders that were more inclusive, more respectful, understood those kinds of things. Never was I included in ahead of time.

Charlie Hoehn: That’s pretty staggering to think about, that there’s not a lot of listening or caring about the inputs of the really smart people around these leaders.

David Smith: I had to come up with this example because I wanted to prove a point. There are actually on other areas in my work, a lot of autonomy, I had one leader who was great. He said, “David, okay. I agree,” and he did say, “here’s your goal.” Then, foreshadow, use the improvement behavior to say, “Is there anything you need to improve, our organization to improve, to be better at, whatever, that will help you get to that goal?”

When we talk about the math of here’s your goal, that’s strictly MBA management style stuff. Not leadership. My book says everything is about leadership.

Everything you do, you should be thinking about, how does it affect my relationship between me as the team leader and my team members each specifically, individually?

If you don’t think that way, if you don’t make it a habit, you make the mistake of reverting to non-leadership behavior in certain circumstances, which does not necessarily have a positive outcome.

Understanding Leadership

Charlie Hoehn: Let’s shift gears to the team members now. Let’s start with understanding what your leader needs.

David Smith: So many leadership books are about how a leader is, what they do, how they act, how they look, do they have good hair, are they tall? Whatever it is, it’s about the leader. I guess if you say it’s a leadership book, it’s about the leader, but when you get down to what excited me, leadership isn’t a one on one sport.

It’s two people tangoing. It’s not just one person, you can have a charismatic leader in front of a large group, getting the group to act or whatever but that’s not the kind of leadership I’m talking about. There’s certainly a place for that. In my book, actually, when we were starting out this whole process of riding, when I was starting out the whole process of writing the book, of thinking, what about – I started with all the chapters on leadership and I said, “I’m missing something here. I have got to talk about the follower, the supervisee. The worker bee, the team member.”

Because they are part of the diad, we call it—the two, the leader and member.

We talk about the themes, the reason I had to call them themes is there’s been so little study on it which is actually what I’m studying now in my research role. What is the scientific basis of how a team member should act and behave?

One of the big ones is understanding why your team leader is asking you to do something. I’ve had so many meetings where we’re sales people, right? We can sell refrigerators to Eskimos and that kind of thing, whatever it is. We’re independent. So many of my roles have been like, just go out and do it and office out of your home and travel, your territory, and call who you want to call.

Then you get your team leader saying something like, “You’ve got to get your expense reports in. You’ve got to get your travel approved ahead of time. You’ve got to this, you’ve got to…” We, as a group would look at each other like, why?

That’s the important thing, is why. If it’s important to your team leader, don’t you think it should be important to you? If you’ve got what’s called a high quality leader-member exchange relationship with your leader?

“You should care why it’s important to them.”

An example, we said why do we need to get our expense reports in within 90 days? We’re putting it all on our own credit cards, it’s our money. Our group finally got a real answer, which is we are a public company. We report every 90 days, we have 5,000 people on expense reports. If all 5,000 were 95 days late, and then put them all in, it would really screw up our finances for the next quarter.

It shifts expenses from one quarter to the other.

That can affect all of our reporting to our shareholders. Because of that, my boss was told by his boss, who was told by her boss, to get the expense reports in within 90 days. That’s why it is important to me. Enough said?

Okay, I get it.

“I get it” is really the answer. I get it why it’s important to you, okay, I’ll do it.

Charlie Hoehn: So let me push back a little bit because a lot of leaders I would imagine might object and say, “I’ve already got so much on my plate as it is to have these conversations with my team members. It would take forever” or not everybody needs to know the little details, what would you say back to them?

David Smith: Oh I like the way you ordered the question. Not everyone needs to know all the details. Well, what about the one person who does need to know all the details? Because they are so analytical and so sensitive and so whatever, but they are still a heck of a team member otherwise you would have fired them a long time ago.

They need it.

You don’t necessarily know right off the bat which team members need what, but if you are a good leader you will start to understand who hangs out after a conference meeting and after a group meeting and asks the questions.

Many times it’s the introverted employee, which is a whole another area of study that is getting a lot of attention now.

So the way you worded it is not everyone needs to. Okay, good. Fine, don’t. Spend like four seconds with a person who doesn’t need it, but spend as much time as necessary to maintain that relationship you’ve got with that team member because they need it.

Identify and Avoid Negative Behaviors

Charlie Hoehn: One of the chapters that stood out to me in the team member section is on avoiding negative behaviors. Talk to me about this, how do you avoid negative behaviors?

David Smith: That’s the one I had a lot of fun with because I have so many memories—you could call it pet peeves—of a team leader. It may not even be a pet peeve, it may be just something really, really important to them. Avoiding a negative behavior is a little bit different than doing the positive behaviors. A positive behavior is getting your expense reports in time, and negative behaviors, not getting them in time. But there is many, many other things.

An example there in my career was at one point, I actually lived in Hawaii and I know a lot of financial advisers in Hawaii and my new job that I just changed to was did not include Hawaii as a territory. It was California. I asked my bosses, “Who is going to handle Hawaii? I see no one assigned there” and they said, “Well we’ve got to assign it to somebody because we’ve got to show coverage.”

He went to go ask his boss, and the boss came back, it went on for a couple of weeks and we’re having a celebration. A group celebration and my boss comes over to me and says, “David I just got you assigned to Hawaii”.

And I said, “All right! This is great!” Because I know everybody there and I like Hawaii, and believe me, sales people going to Hawaii is generally not a vacation. You are working, but still I like it there.

So then he says, “But my boss doesn’t want you to going there, so don’t go there” I said, “Why?” he said, “Listen…” and so I of course being the independent little cuss that I am went there used points so that I didn’t have to do expenses, because even if I use my own money I was supposed to report and things like that.

“My boss was furious.”

It did not help our leader-member exchange relationship quality. It went down.

He said, “Why did you do that?” and I said, “Hey it is my own money” He said, “Yeah but now if my boss finds out he will be mad at me.”

We don’t know if we ever found out, and this is going to be a triple negative maybe, but I did not avoid a negative behavior.

The independent decision to go to Hawaii was negative, and I should have told myself, “Well that is stupid. I am just going to make him mad.”  I actually probably didn’t even think of that, it’s just that I wanted to do it. There are many things, when all you’ve got to do was listen to your boss.

You’ve got to listen to your leader say things like “I don’t want it.”

Here is a good example.

Our sales strategy is moving from this shotgun approach to the riffle approach. I always love that. The shotgun approach is seeing lots of people and seeing what works. And the riffle approach is identify your 10 top people and spend most of your time with them. Now the positive behavior is to identify 10 people and just see them. So dutifully, you write down 10 people and you put down a report, and then your boss takes a look at your actual activity. We got these wonderful sales force reports that show where you have been.

If you have told the truth, he knows where you have been, and negative behavior is lying on sales force.

Then he says, “David, here’s your ten, you saw them 30% of your time. You saw a bunch of people 70% of the time. You did not do what you are supposed to do. Why not?” Our relationship quality just went down. I’ve got all my own reasons, but that is not the point. The point isn’t that if you can avoid the negative behavior and still be right, that’s a win.

So find a way to avoid the negative, accentuate the positive. Circling back to the behavior called inclusion, if me and my boss had sat down and he said, “Here is why we are doing the riffle approach, what do you think?” and we had this discussion ahead of time, we might have avoided the blow up at the end. The reasons were still the same, but now my boss is a little bit upset with me and isn’t going to listen to reason. I might have if ahead of time we had this discussion, since I did have a very good reason according to me.

Both Sides of the Coin

Charlie Hoehn: David is your book primarily for leaders or is it for both leaders and members to help them be better at their roles?

David Smith: It is for both, and it is for both for a couple of reasons. One is most people in their roles are both a leader and a member. So my boss has a boss, so he is a leader of me and a member of his leader’s group right?

Then informally, my job was generally at the bottom of the totem pole. In a hierarchical way, I was at the bottom of the totem pole, but I still had informal leadership roles with several people. For example, we are called the external wholesaler, and back in Nashville, we might have an internal wholesaler at the home office who sits on the phone all day and that kind of stuff, and their job is to support me.

Informally, I need to lead that team member.

My internal wholesaler, in a way, accomplishes my goals, so I need to be inclusive with my internal wholesaler. You know, “Jackie I need you to make 14 calls this week to this group of people. How is that going to affect your job?”

“Oh my god, you’re asking me how it’s going to affect my job? Well I’m going to tell you how that’s going to affect my job, we’re only 70% staffing right now because staffing are either sick, on vacation or at home with a sick kid and so I don’t think I can do these 14 calls.”

“Okay, I got it. I understand that.”

See now we are working on a relationship. So Jackie and I, we’re having this conversation and I need 14 calls, but now I am thinking, “Okay maybe I can’t get 14 calls. What should the goals be?” and so on.

Alternatively Jackie might say, “Yeah okay, I got it. You really needed this 14 calls. I understand why, I’ll figure it out” or I might say, “Let me call your boss and say what’s going on, it is the first time I heard that you are only at 70% staffing.”

So that’s why for those two reasons the book is for both almost consistently that you are in a position of being a team member and a team leader, either formally or informally.

“People who want to become team leaders can benefit from this book.”

By seeing what I am saying about leadership, I think team leaders can benefit by what I am saying about team members and get the idea. I think we started this thing on this, get this idea about one on one, you and your team member and so you’ve got to understand what they’re thinking, and they need to understand what you’re thinking.

So this is not a leadership book for leaders. It is a leadership book for teams, successful teams.

The book appeals to the person who needs to understand why, and that was really one of the main purposes of me wanting to write the book.

This isn’t a book about how to act only. It’s why I act that way. Then if you get the why, it’s like trying to lose weight. You can get a list of the five things you need to do to lose weight, but they don’t tell you why.

I need to lose weight. I went to my doctor and I said, “I need to lose weight” and he says, “I know you need to lose weight. You know at our clinic we’ve got a specialist in medically supervised weight loss.”

So I went and saw a wonderful lady, a nurse practitioner, and we have a wonderful discussion and she said, “Tell me what you eat, how often do you eat, how much do you eat, how much exercise?”

I went through this whole thing and she said, “Well you’re doing a great job for maintaining blood sugar, all of the carbohydrates you eat are complex carbohydrates except for the occasional piece of candy, but it is only occasional.”

She said, “However, you are not eating right to lose weight, because all carbohydrates turn into sugar, where there’s a complex carbohydrate which takes a long time to turn into sugar, nonetheless it turns into sugar. It’s the sugar in your blood stream that is keeping your body’s metabolism from eating up your fat.”

And I said, “Okay now I get it. I now understand the science behind losing weight in this aspect.” Of course we talked about exercising more and so on, and what I did is I cut my cold cereal in the morning, which is almost pure carbohydrate Raisin Bran or Cheerios, and I just had eggs and bacon, eggs and sausage, or eggs and cheese for breakfast for two weeks.

I lost six pounds doing nothing else different.

But I now have just lost six pounds that’s it, so I’ve got to work on other things too.

So my example here is once I understood the science behind it, I can change my behavior. I am saying in this book, if you understand the science behind it and you hadn’t changed your behavior before, now maybe you will, especially if you are the kind of person that needs to understand why.

Principles in Action

Charlie Hoehn: How have the principles in the book affected the people that you have worked with at seminars and so forth? Do any really remarkable case studies stand out to you?

David Smith: That is interesting. Let us talk about me first since I’m one of favorite subjects. I am not a good leader in terms of how I define it in the book, and I think the effect of me first doing all the academic research, dissertation, all that stuff and then to having write the book and really think about it, at first I hadn’t realize that it is about habits. That it is behavioral. So I was writing the book, I did more research and more reading.

The research was survey based and things like that and it proved to me and again, this might be common sense, you know? Actually most social science is common sense. It’s about us, and we know ourselves pretty well usually. But the common sense thing that came to me that I now scientifically saw was that in order for me to be a better leader, I now knew what I needed to do. I knew how to act, now I needed to implement that in my own life in various ways by creating habits. Be a habitual leader.

Where that changed with me as a great example, is one at the volunteer boards I am on. I am not officially a leader, but informally, all of our board members are leaders in one way or the other, and I try to make it a habit at those meetings to do the various behaviors that fit the situation. It changed how I worked on that board and it changed in this way: I got more of what I wanted from that group after I started implementing these habits than before.

In terms of other individuals, one seminar I gave was for a non-profit group. It was actually 70 minutes, it kind of screwed me up because I had an extra 10 minutes. So what do you do with that? And it’s like, “70 minutes? That’s a 60 minute workshop”.

It was on introverts, how to work with an introvert with those behaviors, and one of the biggest ones with an introvert is inclusion and respect. Put those two together, respect the fact that they are not going to speak up at a meeting, respect the fact that they are smart still just because they are not talking, and inclusion means that you’ve got to go listen to them.

So, this workshop was about here is what an introvert is. You may know this, you may not but here’s what it is. Let’s get through that. Here are some of their behaviors that are introverted and here’s how it can affect them in your team and then in their career and why it’s important to understand that and here are the behaviors to use some very quick ones to include an introvert in a way that makes them feel respected, which then should lead to the outcomes you want from that introverted team member.

I got a feedback from that, like immediately, from one person. One specifically said, “Well it didn’t necessarily help me as a team leader, but as a team member it made a huge difference. I started making suggestion about how to better include me. I feel so much better about my job.”

Its title was “Using leadership behaviors to keep your most important people” but it really flipped on it.

That’s why my book has to be about both leaders and team members.

Connect with David Smith

Charlie Hoehn: Let’s start to wrap up a couple more questions. The first question I have is how can our listeners connect with you, follow you or potentially get in touch with you?

David Smith: Let’s see, LMXPro.com, leader-member exchange, is my website devoted to leadership. My research is funded by a group called Five Star Leadership, which is funded by a group called Oahu Adventures Foundation.

I am the director of research, and LMX Pro is all about research we’ve done and the kinds of seminars we put on under our Five Star Leadership registered trademark brand.

Charlie Hoehn: Excellent and the final question I have for you is to give our listeners a challenge. What is the one thing they can do from your book this week that will have a positive impact?

David Smith: Get a piece of paper, keep in front of you all day long, and every time you meet with one of your team members one on one, give yourself a point.

At the end of the day, see how many points you have. If you’ve got a very low number, it means you are not developing the one on one relationships necessary for good leader-member exchange quality.