Out-group members may tend to be viewed more as interchangeable commodities by the leader. They have more distant relationships with their boss and usually are assigned less challenging and less rewarding work. The relationship tends to be seen as distant and based on economic exchanges (you work, I pay you for it). These followers are more likely to have issues with their boss, and may even file grievances. They certainly are less motivated to perform and report lower levels of job satisfaction.
Landing in the Right GroupAs followers, we'd all like to be in the in-group, of course. And as leaders it would be great if our relationships with our followers were all high-quality, like those with our in-group members. So why would anyone want the out-group to exist?
According to Leader-Member Exchange (LMX) theory, people essentially self-sort into in- and out-group members early on. Those first couple of interactions with your new boss are very important. Depending on how you respond to the first assignments and interactions as a follower, you are quickly steering yourself into either one group or another. You are defining your relationship going forward and essentially telling your boss which group you want to be in.
Here's how it works. As a leader makes requests to a member (or follower), that member responds in a certain way. He may either embrace the request and fulfill it to the best of his ability, or take a lazy or shortcut approach. From this initial exchange a leader starts to make an impression of the member: This guy is on the ball and delivers, this other guy doesn't.
Usually the leader starts out slowly with small requests, and escalates their importance. By observing how well members respond, they are then segregated (consciously or unconsciously) into in-group and out-group members by the leader. Once those roles are formed, they are very hard to change. Every so often a leader may give an out-group member a chance to redeem herself and get back in, but this is not common.
PerformanceIn-group members are not only more satisfied in their work, but they have higher performance as well. They perceive that they are treated well for their efforts, so they are more motivated to perform. Out-group members feel like the cards are stacked against them. They are not motivated to work hard, because they feel that they will always be on the outside. These guys work may just hard enough to not get fired, rationalizing that if their only motivation is a paycheck (as opposed to attention and status of the in-group), then they will scale back their efforts to match that pay.
In much leadership theory, it is important to ask "Ok, so what does this mean to me?" The lessons here are these:
Implications for FollowersIf you are a follower (employee, etc): make sure that when you start a new job you make that extra effort in the first months. Be aware that your boss will be looking to see whether you are trustworthy, hardworking, and capable. This is your chance to get in the in-group, that inner circle that is close to the boss. If you have been at a job for a while, ask yourself which group you are in. If you are in the out-group, make efforts to approach the boss for more challenging and demanding work, and deliver when you get it. You may be able to fight your way in to the in-group after all. But remember that if you are not happy in your work, or you feel that you are not treated fairly, look at your own actions as well in the context of LMX and see if you had anything to do with your situation.
Implications for LeadersIf you are a leader, be aware that you have an in-group and an out-group of followers. You may have noticed placing people in one or another, or maybe it just happened unconsciously. There is nothing wrong with having these two groups, as long as you frequently open your doors to the out-group and give them a chance to perform to earn entry into the in-group. One example would be every three months choose a member of the out-group and give them a challenging assignment. If they step up to it and excel, consider bringing them into the fold. You want everyone to be in the in-group as you will then be surrounded with capable, happy, and motivated people. Your leadership will be more effective as you work through this team.
One good resource on this is The First 90 Days by Michael Watkins: