The burgeoning literature on leader-member exchange (LMX) differentiation indicates that differentiating LMX relationships within groups has both benefits and costs when it comes to group effectiveness. Although some clarity is emerging surrounding the null total effect of LMX differentiation on group performance, we still know little about how leaders themselves shape the differentiation process. In this article, we extend theory to suggest that some leaders may differentiate more effectively than others. Drawing from functional leadership theory, we first identify a potential approach available to leaders likely to enhance their functional effectiveness-strategically investing in and developing stronger social exchange relationships with subordinates who can best help them fulfill the task functions (via task performance-based differentiation) and group maintenance functions (via contextual performance-based differentiation) specified within functional leadership theory. Embedding this potential approach within the ability-motivation-opportunity framework, we then develop a theory for which leaders are best positioned to recognize and pursue strategic relationship development this way. Specifically, we posit that leaders with stronger cognitive abilities (g) are more likely to recognize the value of such an approach, and those high in core self-evaluation are more likely to believe in their capabilities to successfully process, execute on, and persist with the approach. The results from two studies-a multisource study of leaders and team members in newly formed teams as well as a preregistered online vignette study using a sample of current and former supervisors-largely supported our predictions. (PsycInfo Database Record (c) 2024 APA, all rights reserved).