Social exchange theory is a model of human behavior that has been developed to explain the processes by which people make relationships and maintain them. According to social exchange theory, people evaluate their relationships by analyzing the benefits they feel they might receive through them. They then make decisions about the relationships in their lives by comparing alternatives. Social exchange theory has been fruitfully applied to the workplace to explain employee interactions.


Social exchange theory posits that people make choices about their relationships based on rational decision-making. They evaluate their decisions by ordering their priorities. The priority sets of different employees will make a great difference in the kind of workplace relationships they have. If you have a group of employees who are prioritizing factors such as group achievement and teamwork, it is much more likely that your business will be successful and achieve positive results.


One way of reinforcing positive relationships in the workplace is by providing incentives that reward employees for skills such as teamwork. According to the understanding of social exchange theory, people will be more likely to seek out relationships if they feel there will be rewards for doing so. The investment that a person puts into his relationships will be directly proportional to what he feels they can get out of them for himself.


Social exchange theory also posits the importance of maintaining a friendly atmosphere in a workplace. If people feel that an environment will be hostile to them in any way, it gives them much less of an incentive to be engaging and seek out relationships. The motivation that people have for seeking out relationships is directly proportional to the extent to which they feel they will be positively received, so they can receive various benefits.


According to the understanding that is introduced by social exchange theory, people are fundamentally social animals. People orient themselves to the world through the relationships they have, and depend on social interaction. The extent to which employees will be satisfied in a workplace and wish to continue working at a company will be predicated to a large extent on the kinds of relationships they form. Fostering positive relationships is crucial to employee retention.