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Management theory


Each one of us are proud of our own rationality, we even consider our own ability to reason as one of our achievements, seperating ourself from the rest. Human behavior is universally based on deliberate and controlled thinking that is from biases and strives to maximize personal benefits.

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One of the simplest definitions of social exchange is involving two person, each of whom provides benefits to the other and contigent upon benefits from the other (Emerson, 1981). In reality our behavior in situations involving give or take is guided by momentary state of emotions such as empathy, affection or anger as well as by behavioral interactions influencing personality traits and genders. Social exchange relationships evolve when employees take care of emplaoyees, which thereby engenders beneficial consequences. In other words, the social excahange relationship is a intervening variable: advantageous and fair transactions between strong relationship and their relationships produce effective work behavior and positive attitude.

2. Social Exchange Theory

Social behavior is exchange of goods, material goods but also of non-material ones, such as symbols or approval or prestige (Homans, 1958). Social behavior of people depends upon social excahange where everyone are motivated to receive valued reward in exchange for something thats of value to them. In social excahanges people expect rewards that are greater than the cost as everyone seeks profit. We all are disturbed when there is no fairness in an exchange or where others are rewarded more for the same costs incurred.

2.1 Elements of Social Echange Theory

2.1.1 Reward and Value of Reward:

Social behavior of one person depends upon the reward/benefit he gets in return, the value of reward varies from person to person. For example, in an organisation for some people, noticing their efforts/achievements and appreciating their work would be of more value to them, for others it could be incentive or increase in pay(money), this changes the persons behavior at workplace.

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2.1.2 Social Rewards:

Rewards that are met through interactions with one another, such as kind gestures, respect, judgments, opinions, being loved. Rewards in social interactions include pleasure, satisfaction”,


gratification, and fulfillment of needs (Thibaut & Kelley, 1959). One unique property of social rewards is that we can’t really barter over most of the (Blau, 1964). For example, in an organisations, helping one another in achieving certain tasks could increase the bond or love or respect towards each other, or if the employer of the organisation gives the employee loads of work to be done and does not appreciate his efforts it could lead to bad judgment about the employer among employees.

2.1.3 Cost:

Something of value one gives up to receive or achieve the reward or task in return. Mostly “money” is the obvious “cost” that people exchange for products or services. At workplace, it is our own efforts, time, energy and skills.

For example, in a manufacturing company, money is the obvious cost thats spent to buy the raw matrials from suppliers to make the required product, and for the employees, their efforts, time, energy and skills to produce the product.

2.1.4 Profit:

Profit = Reward – Cost (Homans, 1961). This implies greater the reward and fewer the cost, the greater the profit. Our communication and relationship decisions are affected by the profit we receive, we seek interactions which are highly profitable, spending low cost.

2.1.5 Equity and Distributive Justice:

We seek to find ourselves dealing with fair trade or equitable trade while gaining a desirable profit, we get concerned with reward being proportionate to our degree of cost: the more cost we incurred, the more reward we expect. Two additional factors influence our management of equity ina relationship: The first factor in an ongoing relationships, our social exchanges don’t necessarily require immediate payback from our partners (Mitchell, Cropanzana & Quisenberry, 2012). The second factor that affects equity is our assesment of the costs and rewards relative to the partners’ abilities to provide them or the relative “availability of resources” (Mitchell, Cropanzana & Quisenberry, 2012). For example, in an organisation when two employees are working in a team project, the reward is the same regardless the effort put in to complete the project , one would have put in more effort compared to the other and it doesnt seem fair to him that the other who put in lesser effort gets the same reward as him.

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2.2 Guiding Principles of Social Exchange Theory

The economic model of human behavior has three applications that are of particular interest to communication theorists (Mark V Redmond, 2015). The first is that we humans while making decisions we use our psychological thoughts on where we invest our costs and how we get our


rewards, but mostly the one that benefits us. The second is that how we humans interact with other people and gain the reward we seek.. The third is that we humans evaluate our social exchange/interactions with others by evaluating our relationships, rewards we received and costs spent. These three applications play an important part of your decisions in any social exchange/interaction you would like to make.

Following are the principles related to social exchange theory:

Principle 1: Social behavior can be explained in terms of costs, rewards, and exchanges. (Redmond V, 2015)

Principle 2: People seek to maximize rewards and minimize costs in pursuit of the greatest profit. (Redmond V, 2015)

Principle 3: Social interaction involves twp parties, exchanging a reward needed by the other. (Redmond V, 2015)

Principle 4: Social exchange theory can be used to explain the development and the management of interpersonal relationshiops. (Redmond V, 2015)

Principle 5: Social exchange affects the relationship among members of groups and organisation. (Redmond V, 2015)

2.3 Other Related Theories

2.3.1 Equity Theory (Theory of Inequity)

Where one’s action affects the other or the organisation in a negative way, and the other makes effort to achieve equity or to reduce inequity. For example, in an organisation, in a team project work, one doesnt put in enough effort to complete the project but the other puts in more effort to complete the project, later this changes the behavior of the employee by changing him put in lesser effort for the next work to be done.

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2.3.2 Interdependence Theory

Two or more individuals are dependant upon one another for achieving fovourable outcomes. Interdependency theory examines how structures and relationships interact to produce coalitions which help partners maximize their outcomes (Redmond V, 2015). For example, project work is given to a team of 3 members, one member seem to be particularly resourceful, each providing resources needed by the other, but the third member doesn’t have any such resources to provide and therefore is isolated by the other two.


2.3.3 Resource Theory

An exchange involving a reduction in the amount of resources someone has, but contrary to this, there are resources(love, pat, smile) which do not reduce givers resources. Social Exchange Theory suggests that there are as many as six different resources (love, status, information, money, goods, and services), but most of these have not been fully appreciated by organizational scientists (Cropanzano, Mitchell, 2005). The resources could be split into two symbolic resources, concreteness to symbolism and universalism to particularism (Foa, 1971). Particularism represents value of a particular individual or relationship between another person regarless the value of objects or money, but on the other hand universalism represents anything else that has value regardless relationship between another person, such as money. One’s need deicides which resources are required and how they are required.


Therefore from this theory we could say that one’s action depends upon the reward or satisfaction received and plays an important role in organization but also in our day to day life activities without our knowledge, as each of the us look towards what are the benefits or rewards we receive upon doing a particular task.

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