Group and Exchange Theories

Group and Exchange Theories

The group and exchange theories of leadership are derived from social psychology. These have their roots in the exchange theory. Leaders from different kinds of relationships with various groups of subordinates. Group theories describe how leaders need to maintain their position in group dynamics.

Social Exchange Theory:

Social exchange theory proposes that social behavior is the result of an exchange process. The purpose of this exchange is to maximize benefits and minimize costs. Social Exchange Theory is a social psychological and sociological perspective that explains social change and stability as a process of negotiated exchanges between parties. Social Exchange Theory posits that all human relationships are formed by the use of a subjective cost-benefit analysis and the comparison of alternatives.

Costs are the elements of relational life that have negative value to a person, like time, money, effort etc. and on the other hand rewards are the elements of a relationship that have positive value like sense of acceptance, support, and companionship etc. The Social Exchange perspective argues that people calculate the overall worth of a particular relationship by subtracting its costs from the rewards it provides. If worth is a positive number, it is positive relationship. On the contrary, negative number indicates a negative relationship. The worth of a relationship influences its outcome, or whether people will continue with a relationship or terminate it. Positive relationships are expected to endure, whereas negative relationships will probably terminate.

Benefits V/s Burden Costs in Leadership:

Social exchange theory can also be applied to leadership studies as reported by Hollandder and Julian (1969). They propose that the leader provides more benefits or regards than burden or costs to the followers who in exchange help him achieve the goals of the organization. There must be a positive exchange between the leader and followers in order for group goals to be accomplished. According to this group of theories, a leader provides more benefits/rewards than burdens/costs for followers.

How it Works for Leader-Follower Situations?

In a group, members make contributions at a cost to themselves and receive benefits at a cost to the group or other members. The leader can give rewards to his followers in the form of appreciation or monetary increments or promotion for accomplishment of the organizational goals or tasks. These rewards have positive impact on attitudes, satisfaction and performance of the followers.

In return of these awards, followers respect the leader and give him due regard for his status and esteem and believe in his heightened influence. The leader tends to follow initiating structure when followers do not perform very well and increases his emphasis on consideration when the followers do a good job.

In this balancing act, the perception of his followers of his being an effective leader increases and this equation is mutually beneficial for both the leader and the follower. Interaction continues because members find the social exchange mutually rewarding.

Leadership Lessons from Group and Exchange Theories:

  • In work organizations, the key partners involved in exchange relationships of investments and returns are superiors and subordinates. Superiors make investments in and receive returns from subordinates; subordinates make investment in and receive returns from superiors; and the investments and returns occur on a one-to-one basis in each superior-subordinate dyad.
  • It is an exchange process where followers also impact leaders. Leader behavior changes with subordinate behavior, leaders bending towards initiate structure or towards consideration.
  • Subordinates have to be trained to be good followers so that group overall emerges as successful. Followers have to support the leader and make leader be successful for their own success.
  • Subordinates who are committed and who expend a lot of effort for the group are rewarded with more of the leader’s potential resources than those who do not display these behaviors.
  • Perceived similarity between the leader and the subordinate leads to higher quality leader-subordinate relationship.
  • In the balancing act, leaders try to change the self-concept of the subordinate to improve the performance of the subordinate. Similarly subordinates also shape leader’s self-concept through their responses.
  • If every member of the group has to get more reward than his personal cost, the group must have synergy. The individual contributions result in bigger output due to group synergies.

Related Links

You May Also Like

  • Maslow's Hierarchy of Needs

    Maslow's Hierarchy of Needs

    Maslow's hierarchy of needs is a motivational theory that explains that people are motivated by five basic categories of human needs. These needs are physiological, safety, love and belonging, esteem, and self-actualization. There is a little scientific basis for this concept of a hierarchy of needs.

  • Hawthorne Studies - Leadership

    Hawthorne Studies - Leadership

    The Hawthorne studies were conducted on workers at the Hawthorne plant of the Western Electric Company by Elton Mayo and Fritz Roethlisberger in the 1920s. This study established the behavioral change that happened due to an awareness of being observed, resulting in active compliance with the supposed wishes of researchers, because of special attention received, or positive response to the stimulus being introduced.

  • Trait Theories - Application

    Trait Theories - Application

    Trait theories of leadership explain the leadership traits that have been studied to determine what makes certain people great leaders. The practical application of the theory is looking at how the leader‟s behavior affects their subjects.

  • Leader Member Exchange Theory

    Leader Member Exchange Theory

    The Leader-Member Exchange Theory (LMX), also called the Vertical Dyad Linkage Theory is a relationship-based approach that focuses on the two-way (dyadic) relationship to get the best from all team members. How leaders maintain their position in groups and develop an exchange with each of their subordinates. How leaders and members develop relationships that can contribute to growth or hinder development.

  • Tasks & Roles of Leadership

    Tasks & Roles of Leadership

    What are the functions which a leader does to establish as a leader? What are the activities undertaken by them to become great leaders, rather revolutionary leaders? The most important tasks done by a leader in all situations are defining the vision, mission, and goals, leading the team, administrative functions, motivating followers, decision making and conflict resolution, and continuous development.

  • Jung Personality Types

    Jung Personality Types

    Jung first introduced his personality theory and explained that all humans have a natural impulse to relate meaningfully to the world through productive work and people through significant relationships. He used four psychological functions - thinking and feeling (rational functions) and sensation and intuition (irrational functions). He also used introversion and extraversion and its impact on appropriate leader behaviors.

  • Generating Ideas using Brainstorming

    Generating Ideas using Brainstorming

    The brainstorming technique was developed by Alex F. Osborn in 1957 and brainstorming means where a team of members generates a large amount of alternative fruitful ideas on a specific problem without any criticism and then evaluates each idea in terms of their pros and cons. Brainstorming techniques fall into four broad categories: visioning, exploring, modifying, and experimenting.

  • Fiedler Model of Leadership

    Fiedler Model of Leadership

    The Fiedler Model of leadership is a contingency theory and states that a leader's effectiveness is based on the situation. There is no one best style of leadership and the effectiveness of a leader in an organization depends on matching the leader to the situation. Leaders should determine the natural leadership style and assess the situation to flex the style.

  • Process & Stages of Creativity

    Process & Stages of Creativity

    Creative ideas do not come just like that. There is a process to it. There are a number of techniques of creativity to support the generation of ideas but the widely practiced ones are brainstorming and lateral thinking. Most innovations are not so much the product of sudden insights as they are the result of a conscious process that often goes through multiple stages. The creative process can be divided into four stages of preparation, incubation, evaluation, and implementation.

  • Investment Theory of Creativity

    Investment Theory of Creativity

    Sternberg in the year 2006, proposed the investment and confluence theory focused on understanding creativity. According to the investment theory, creativity requires a confluence of six distinct but interrelated resources known as intellectual abilities, knowledge, styles of thinking, personality, motivation, and environment. It emphasizes that creativity is not about one thing, but about a system of things.

Explore Our Free Training Articles or
Sign Up to Start With Our eLearning Courses

Subscribe to Our Newsletter


© 2023 TechnoFunc, All Rights Reserved