We aimed to examine the impact of Leader-Member Exchange (LMX) on organizational performance within the context of Kenyan small and medium enterprises (SMEs). We employed a comprehensive, integrated fuzzy reasoning approach to address critical research gaps in culturally diverse, resource-limited settings. Data from 1,350 respondents and expert assessments through fuzzy weighted sum techniques provided an indepth insights into how LMX quality correlates with organizational success. Demographically, a proportion of (827)61% was ascertained for males while a value of (523)39% was determined representing females. The youngest and oldest age distributions were observed to be from 26 to 58. Structural Equation Modeling (SEM) result confirm positive associations between LMX and improvements in employee well-being, job satisfaction, and organizational resilience, illustrating LMX’s role in fostering a cohesive and resilient work environment that supports team effectiveness and sustainable growth. These findings establish LMX as a vital strategic asset for bolstering employee engagement and driving competitive organizational performance. Our study advances the theoretical understanding of LMX by integrating fuzzy logic with affective engagement analysis thereby offering a practical framework for SME leaders in emerging markets to enhance employee engagement and organizational efficiency.