Social Exchange Theory: What It Is And How It Applies In The Workplace

Lori Li
8 min read
Jul 20, 2020

social exchange

You may remember learning about social exchange theory in Psych 101. 

Here’s a brief refresher: Social exchange theory says that human relationships and social behavior are rooted in an exchange process. 

In any relationship, people weigh the risks and rewards. When relationships become too risky for folks, they decide to ax them altogether.

Let’s say you have a casual friend that you enjoy hanging out with. This person’s always been struggling to pay their bills and is often unemployed — but doesn’t seem to mind. 

When you go out, you may not mind picking up the tab every so often. But once you notice there’s a clear pattern developing — this person will never, ever, ever open their wallet when it comes time to settle up — you may decide it’s not worth maintaining the friendship if you always have to pay for everything.

Social exchange theory is also applicable to the workplace. In fact, it’s one of the most influential conceptual paradigms in organizational behavior

This makes perfect sense because we spend so much of our lives at our jobs. Work is a give and take. Everyone has hit the wall at one point or another and questioned whether sticking around at a company was worth it.

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When employees hit that wall and decide to stick around, they’ve obviously determined that — despite everything that’s bad about their job — the benefits still outweigh the risks. On the flip side, employees who decide they’d rather not have a job have decided there aren’t really that many benefits to staying put.

There are all kinds of scenarios where social exchange theory looms large in the workplace. Let’s take a look at eight situations of the social exchange process.

1. Employees work extremely hard but aren’t receiving recognition for their efforts

Even the most hardworking person in the world will be at the end of their rope sooner or later if nobody ever tells them they’re doing a good job. What’s the point in busting your tail if nobody notices? 

According to our research, less than 33% of today’s workers feel valued at their jobs. At any given time, no matter how hard they’re working, as much as two-thirds of your entire staff may feel as though they’re working really hard but not really getting much benefit out of it.

This is why employee recognition programs are so critical. They don’t have to suck up a lot of time or resources to make a big difference. By recognizing your employees’ hard work on a regular basis, you add more benefits to the social exchange theory equation. 

Plus, they also tend to be happier:

employee recognition

2. Employees deliver their best performance but aren’t paid well for their efforts

The rent doesn’t pay itself. Even if your employees are very prominently recognized for their hard work, compliments and awards can’t be deposited in the bank. 

Yes, recognition is part of the puzzle. But money is usually a much bigger piece. 

According to our report, nearly 25% of employees would take a job somewhere else if it came with a 10% bump in pay. That’s why, as a result of the social exchange process, so many employees give their best performance when they’re promised a raise compared to having no monetary incentive at all.

Since it costs a lot more money to hire new employees than keep existing ones, you’d be wise to recognize your employees’ efforts with cold, hard cash. 

Money is by far not the single best reason for employees to stick with a company. But it sure does help you gain their trust when you deliver the promised salary increase.


3. Employees realize they’re in a terrible atmosphere

Ever had a job that you dreaded showing up to each day? Maybe there was a toxic environment. Maybe some of your coworkers were outright mean to you. 

Whatever the case may be, it’s safe to say that, unless you were making a killing, you probably daydreamed about getting a new job every day.

Believe it or not, coworkers are the number one thing employees love about their jobs, according to our report. Believe it or not, a whopping 62% of employees admit that the culture in their organizations is not a strong one:

company culture

When employees reach the breaking point, there’s no turning back. This is why, according to eHow, organizations should do everything within their power to create and nurture a friendly, inclusive environment. 

That includes a stronger focus on helping teams bond, get along, and socialize so they can develop trust in each other and learn to ask for help or share feedback without hesitating. The stronger the relationships between your employees and their coworkers, the better the atmosphere in the office will be.

4. Employees realize they are picking up way too much slack for their coworkers

Even if your workers get along with their colleagues fabulously, there comes a point during the social exchange process where slackers start really getting on the nerves of those who consistently produce. 

Nobody wants to work incredibly hard on a daily basis only to watch their coworkers do nothing — without getting punished for their lack of action.

Rather than letting lazy employees pollute the atmosphere in your office, survey your employees on a regular basis so that they’re able to let you know what’s wrong before it becomes an enormous problem. 

You can also hold regular one-on-one meetings to get this insight. Be prepared to tackle on-point topics and act upon the feedback you get in a timely manner. 

For instance, one-on-one meetings are a perfect opportunity for managers to get a better look inside their teams and spot any challenges or risk zones they need to fix. 

Yet, there are way too many employees who negatively rate their one-on-one meetings or would want them to be improved:


5. Managers have rock-star employees who are the best at what they do, but employees are actually have a hard time following rules

From management’s perspective, hardworking employees who consistently overdeliver and can be relied on to get the job done are obviously desirable. But even the best employees in the world can’t get away with everything.

Managers can’t hold their employees to different sets of standards. There may come a point in time when some of your most highly skilled workers push the envelope a bit too far. 
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In the interest of maintaining a happy staff — one where everyone is treated equally — you may be forced to sever ties with talented individuals.

To prevent a situation from ever reaching that point, make sure all of your employees know exactly what’s expected of them. If your rock-star employee is always coming in 90 minutes late and leaving an hour early, let that person know right away that the behavior is completely unacceptable.


6. Though they like a product, customers can decide that dealing with a company is too much of a hassle

Customers are not immune to social exchange theory either. 

Imagine a customer is in love with a certain brand. They love everything the brand puts out. The products are well-made and affordable. 

Now imagine a shopper who’s having a customer service issue. They call the company only to be greeted with subpar service that’s quite frankly a bit rude, too.

Rather than continuing to deal with the company, the customer might decide that it’s no longer worth it and take their business elsewhere.

As you can see, social exchange theory plays an enormous role in the workplace and employee engagement. The good news is that managers who understand the theory and actively manage relationships in tune with it are likely to have happier staff and more satisfied customers.


7. Employees are giving their best but managers don’t deliver upon the promised benefits

For years, keeping employees engaged has been something all companies strived for. Now, employee engagement involves cultivating employee-employer trust above all else. 

In particular, you need to deliver upon all of those seemingly tiny things you promised when you first hired someone. This includes offering professional development opportunities, schedule flexibility, monetary benefits that grow along with performance, fun team activities, stipends, and so much more.

When these expectations aren’t met, employees tend to be less engaged at work. As many as 71% of employees feel like they don’t get the recognition they deserve. In a workplace like this, the first thing that needs to be fixed is companies delivering upon all promised perks to ensure that their team will be able to trust them once again. 

To find out more insights into what your employees truly want and if they think their needs are met, use a tool like TINYpulse to send regular employee engagement surveys and get their feedback in real time.

employee appreciation

8. Workers voice their opinions and concerns, but these aren’t taken into consideration

A huge part of the social exchange theory in the workplace focuses on the importance of employees voicing their thoughts. 

Similar to delivering upon the benefits you promised, managers are also viewed highly when they actively listen to their employees. 

But above all, individuals want their feedback and ideas to be taken into consideration so they can see a positive change in the workflow and work environment.

It turns out that the majority of employees don’t think performance reviews and even engagement surveys are useful mainly because managers fail to take action based on these. 

But our research has found that — when conducted according to best practices — pulse surveys alone can help you explain where as much as 70% of employee happiness lies. 

This means you’ll have to ask the right questions and use the feedback to fix issues in a timely manner.

Ready to maintain a healthy social exchange balance at your workplace?

All of the above social exchange principles have hands-on fixes that only require a bit more time and honesty from the employer. 

Don’t promise something you’re not able to deliver upon and never fool employees into thinking that working more than needed or exceeding their past performance will provide them with some kind of benefit.

Maintaining a healthy social exchange balance in any shape or form depends directly on the trust relationship we’re able to build between our organization and every single individual who is part of it. 

All decisions made during these interactions should remain rational and focus on keeping the interests of both parties in a perfect stability. This ensures both the company’s productivity and growth and every employee’s happiness and engagement.

And that adds up to a stronger, healthier business and more satisfied customers.

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