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

  • Four Factor Leadership Theory

    Four Factor Leadership Theory

    The four theory of leadership was formulated after studying hundreds of leaders and the model includes four basic dimensions of effective leadership - support; interaction; facilitation; goal emphasis, and work facilitation. This model was tested as a predictor of an organization's effectiveness.

  • Normative Leadership Theory

    Normative Leadership Theory

    Normative leadership theories are built on moral principles and tell leaders how they ought to act. Victor Vroom formulated the normative model of leadership that specifically address leader behavior explicitly built on moral principles or norms. Normative leadership theories tell leaders how they should act to raise the moral performance inside the working group and manage their different responsibilities.

  • The Systemic Approach to Leadership

    The Systemic Approach to Leadership

    The systemic approach to leadership looks at the organization as a whole and focuses on the understanding of the organization as a system. Moving to systems thinking demand managers to view organizations as organic systems. Leaders are also part of this complex system which is constantly undergoing change and evolving. The leaders need to manage the relations and networks within these systems by acting with systemic awareness.

  • Trait theories

    Trait theories

    Trait theories of leadership identify the specific personality traits that distinguish leaders from non-leaders. The trait model of leadership is based on the traits or characteristics of leaders that make them successful in their leading role. These theories use heritable attributes to predict leadership effectiveness.

  • Theories of Team Development

    Theories of Team Development

    The development of teams is an ongoing process because the composition of the team may keep on changing. The new members may join and the old members may leave the team. The team members pass through several stages for the development of the team and there has been a lot of research to identify these stages. In this article, we discuss the common theories of team development.

  • Ohio State Studies

    Ohio State Studies

    Early studies on leadership were done at Ohio State University using the Leader Behavior Description Questionnaire to identify the leader's observable behaviors. Ohio State study on leadership found two behavioral characteristics of leadership - people-oriented (consideration) and task-oriented (initiating structure) leadership style.

  • Types of Power in Leadership

    Types of Power in Leadership

    Power is the ability to exercise influence or control over others. Leadership involves authority and it is very important for leaders to understand what type of power they're using. The 5 Types of Power in Leadership are Coercive power, expert power, legitimate power, referent power, and reward power. Authority is the right to command and extract obedience from others. It comes from the organization and it allows the leader to use power.

  • Social Learning Theories

    Social Learning Theories

    Social learning theory is a theory of learning process that states that most human behavior is learned observationally through modeling. Behavior change can occur in response to leader modeling and learning occurs through the observation of rewards and punishments. The focus of this approach has been teaching leadership across formal and informal settings.

  • Continuum of leadership

    Continuum of leadership

    Continuum of leadership is a leadership theory based on the relationship between the level of freedom given to the team and the level of authority used by the manager. The chosen leadership style will depend on multiple factors, including the leader's personality.

  • Transactional Analysis

    Transactional Analysis

    Transactional Analysis also is known as the theory of human personality was proposed by Eric Berne in the 1950s. This theory of transactional leadership defines three different ego states in a person who engages in transactions with another person's ego states. These three ego states refer to major parts of an individual's personality and reflect an entire system of thought, feeling, and behavior.

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

Subscribe to Our Newsletter


© 2023 TechnoFunc, All Rights Reserved