December 5th 2022

Social exchange theory posits that an individual’s social behavior is the result of an exchange process where they seek to maximize benefits and minimize costs.

Understanding social exchange theory

Social exchange theory was first proposed by sociologist George Homans in his 1958 essay Social Behavior as Exchange.

Based on basic economic principles and the behavioral psychology theories of B. F. Skinner, Homans believed that two people in a social interaction either rewarded or punished the actions of the other.

Homans later proposed that social behavior was an exchange of material and non-material goods such as time, money, prestige, power, or approval.

Based on this idea, individuals considered their relationships with others based on the potential rewards and costs.

When the rewards of a relationship outweigh the costs, the relationship is likely to continue.

When the costs outweigh the rewards, the individual who believes they are disadvantaged may choose to terminate the relationship.

In the next section, we’ll discuss rewards and costs and their fundamental role in social exchange theory.

Costs and benefits in social exchange theory

Since each person wants more from a relationship than they give, whether they continue to participate in the relationship is based on how much they think it is worth.

This is determined by:

Costs

Perceived negative aspects of the relationship such as time, effort, and money.

If you find yourself constantly covering for a colleague who is always late to work, you may see their tardiness as a cost.

Rewards (benefits)

These include companionship, support, enjoyment, respect, opportunity, and friendship.

If the employee who is always late to work has an extensive professional network you’d like to access, you may determine that the rewards outweigh the costs – at least for now.

Social exchange theory in the workplace

Social exchange theory and how it relates to the workplace has been studied extensively over the decades.

That it is one of the most influential paradigms in organizational behavior should come as no surprise.

We spend so much of our lives at work and routinely perform cost-benefit analyses to decide whether to move on or stay in our current role.

Here are a few situations in which social exchange theory is important:

Employee recognition

Employees who work hard but receive little recognition for their efforts may determine that the costs outweigh the rewards.

This only stresses the importance of employee recognition programs which do not need to be grandiose or expensive to make the individual feel more valued.

Company culture

Employees who have to deal with a toxic company culture may dread the thought of arriving at work each day.

At some point, no amount of remuneration compensates for the costs associated with undesirable culture.

Customers

Companies should not overlook a customer’s role in social exchange theory.

Consider a customer who has been loyal to a brand for many years but, over time, observes that the quality of the product or customer service is on the decline.

Based on this decline, they may eventually decide to buy from a competitor instead.

Social Penetration Theory Vs. Social Exchange Theory

Social penetration theory was developed by fellow psychologists Dalmas Taylor and Irwin Altman in their 1973 article Social Penetration: The Development of Interpersonal Relationships. Social penetration theory (SPT) posits that as a relationship develops, shallow and non-intimate communication evolves and becomes deeper and more intimate.

The social exchange theory has a more simplified view of relationships as an exchange process where the parties seek to maximize benefits and minimize costs.

Whereas the Social Penetration Theory posits that a relationship evolved beyond an economic exchange through four stages:

Orientation
Exploratory affective
Affective
Stable exchange

Those theories combined might help to give a more systematic and holistic view of human relationships, which combines emotions and a more economical/materialistic approach.

Key takeaways

Social exchange theory posits that an individual’s social behavior is the result of an exchange process where they seek to maximize benefits and minimize costs.
Since each person wants more from a relationship than they give, they constantly weigh up the costs and benefits to determine whether it is worth continuing.
Social exchange theory and how it relates to the workplace has been studied extensively over the decades. It is perhaps most obvious in employee recognition, with individuals unlikely to stick with the company if their hard work is not rewarded or recognized.

Read Next: Social Penetration Theory.

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