Contingency theories are used to analyze situational influences on leadership effectiveness. Fiedler Contingency Model and the Leader- Member Exchange Theory are both used to analyze situational influences on leadership. The Fiedler Model focuses on basic leadership style. A person can measure his or her leadership style through a questionnaire called the LCP (least preferred coworker questionnaire). From this questionnaire a person is described as being task or relationship oriented. From the results of this test, the manager should match the leader with the situation that best fits his/her leadership style. There are three dimensions that Fiedler describes. The first is leader-member relations which is the degree of confidence, trust, and respect that members have in a leader. Secondly is task structure which is the degree to which job assignments are structured or unstructured. Lastly, position power describes the degree of influence a leader has over power variables. An example of power variables could be, promotions, hiring, firing, discipline, salary, etc. A person can then be evaluated on these three dimensions. An optimal leader would have a high degree of all three dimensions. This is important to an organization because based on a leader's style, a person can be placed where he/she can perform effectively. However, according to Fiedler, leadership is fixed. Therefore, a leader can only improve in two ways: a leader can change to fit the situation or a situation can be changed to appropriately fit the leader. Extensive research has shown that Fiedler's model provides positive conclusions, and evidence supports substantial parts of the model. However, there are flaws. Fiedler's model is complex, making it hard for managers or practitioners to access and evaluate leaders on the three dimensions (Robbins and Judge 163-165).
The Leader Member Exchange Theory (LMX) argues that leaders establish a relationship with a small group of members because of time pressures. A small group that forms a special relationship with the leader is known as the "in-group." These people are trustworthy, get attention from the leader, and often receive special privileges. Other followers of the leader are known as the "out-group." These followers receive less recognition and attention from the leader, and receive fewer rewards controlled by the leader. A leader's followers that fall into the "in-group" category have similar characteristics, traits, qualities, and work ethics as the leader. While those in the "out-group" hold different attitudes and characteristics (Robbins and Judge 165-166).