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HRM Assignment: Purpose & Value Of Social Exchange Theory


Task: Using a range of work-based examples, write a HRM assignment critically determining the potential purpose and value of Social Exchange Theory (SET) on employee relations.
• You should address both individual and group / team factors that might be considered by an organization in engaging an effective approach to employee relations.
• Simply providing a range of advantages and / or disadvantages is unlikely to evidence any depth of understanding on the subject. You must critical examine why and how a variety of approaches (probably not more than three or four) might be used.
• It is extremely important to provide specific work-based examples from a range of culturally diverse sources to facilitate this discussion. You will be expected to include a minimum of four (4) different examples (not four examples from the same company or same source).


Introduction to the context of HRM assignment
In today’s hyper competitive business world, employee performance is inevitable for organizations to survive. Despite having essential physical resources, it is not possible for companies to reach their targets without proper utilization of those resources. In this regard, employees or human resources are indispensable assets of the organizations. This makes it essential for the managers and leaders to maintain harmonious and healthy employee relations to keep them motivated and satisfied. Motivated workforce enables the organizations in enhancing their performance and gain competitive advantage in the global market (Ahmed, Ahmadand Jaaffar, 2017). These human resources are capable of coordinating all other resources for utilizing them to achieve the desired outcomes. Leaders are required to focus on this human aspect of the organization to ensure best results as the employees become motivated in performing their duties. The purpose of this research is to critically analyse the purpose and value of social exchange theory and its consequent impact on employee relations through work-based examples.

Concept of Social Exchange Theory (SET)
This theory considers social behaviour as the outcome of exchange process. Based on social exchange theory, the interaction between individuals can be referred to as the exchange of resources. Here, people get involved in different social interactions and exchange behaviours with the belief of receiving either financial or social benefits (Chang, et al., 2015). According to SET, individuals further evaluate the possible benefits and risks of social relationships before engaging in them. They have the capability of terminating such relationships where the risks are greater than the benefits received. Furthermore, this theory determines social behaviour as series of exchange between the individuals where they focus on maximizing their benefits and have an obligation of reciprocation after receiving something beneficial from another individual (Nunkoo, 2016). This clearly indicates that the theory involves exchange of intangible benefits like status, love, honour, respect, information, friendship, knowledge and others that are generally considered as symbolic benefits. SET also puts forward the notion about how interdependence is essential for maintaining a harmonious social exchange relationship. Here, the structure of rewards and costs present in a relationship determines the patterns of interaction between the individuals. The individuals’ decisions to participate in interaction process depends largely on a subjective cost-benefit analysis by comparison of the alternatives available (Chang, et al., 2015). This clearly indicates that interactions or social exchange process only continues when both individuals perceive their mutual benefits from the relationship. Thus, they weigh the pros and cons of such relationships before engaging in the same to maximize benefits and minimize costs.

Purpose and Value of SET
The purpose of social exchange theory helps in forming a foundation of organizational citizenship behaviour for understanding the exchange relationship between employees and the organization. This employee relationship existing with the organization depends on the rule of reciprocity as put forward in the SET (Liaquatand Mehmood, 2017). It helps in determining both intrinsic and extrinsic behaviour of the employees towards the organization. According to SET, it has been observed that employee’s behaviour and performance in the company depends on their perception of treatment and information present in the organization. For example, when employees of an organization, namely, Nestle feel that their wellbeing and concerns are being addressed, they display positive attitudes and role behaviours through their performance as exchange of intangible benefits achieved in the organization (Yin, 2018). In this regard, workplace culture plays a significant role in building a strong medium for delivering organizational principles and values to the employees, thereby influencing their perceptions and work performances (Liaquatand Mehmood, 2017). Thus, this helps in building an interdependency between both the employers and employees through open communication about organizational values in exchange of positive work outcomes.

Furthermore, social exchange theory provides a fresh perspective in better understanding employee relations in the organizations. It portrays how the employee-organization relationship depends largely on the unspecified obligations of the employees in reciprocation to the benefits they receive in the form of both monetary compensation and beneficiary treatment in the organization (Heand Brown, 2013). For example, in a multinational organization like Amazon, when managers fulfil the socioemotional needs of the employees put forward in Maslow’s need hierarchical model, they tend to become obligated in reciprocating the same through socioemotional attachment and positive performance in the workplace. SET further helps to understand that leaders developing long-lasting and meaningful relationships with their subordinates are able to generate positive work outcomes from them as a result of reciprocity (Heand Brown, 2013). It is often observed in consumer service based brands like Starbucks. This is because perceived organizational support as viewed by these employees encourage them to reciprocate such mutual and positive benefits to the organization by displaying positive organizational behaviour and efficient performance.

Besides, social exchange helps in understanding the employment relationship in companies like Zara, H&M and others, that is initiated from fair treatment of the employees. Employees of an organization expect being treated fairly with respect and justice that fulfils their psychological needs such as belongingness, control, meaningful existence and self-esteem (Agarwal, 2014). Fulfilment of such needs in the organization through proper leadership practices display a goodwill gesture, thereby making the employees obligated to reciprocate the same through good deeds, behaviour and performance in the organization. These companies ensure providing fair and just supervision treatment to their workers and employees, thereby enhancing employee engagement and satisfaction influencing employee relations (Slack, Corlettand Morris, 2015). This theory provides the value of understanding the principle of reciprocity existing in employee relations. Thus, both employee commitment and engagement towards work and organization enhances with their perception of the respect, benefits and value they get from the organization.

Mechanisms for Facilitating Social Exchange
Both individual and collective actions and mechanisms are essential for facilitating social exchange in an organizational context. In Hofstede’s cultural dimensions model, individualism indicates the degree to which people emphasize on their own goals as compared to those of their group or clan (Vasile, 2016). Based on social exchange theory, employees are expected to engage in relationships and tasks that represent their own values and principles and neglect the others depending on the perceived benefits that they would receive by involving in the same. Individuals become more committed towards their goals, tasks or projects in an organization when they reflect their own values, beliefs and identities. This increases the possibility of people having different personalities being involved in different jobs or reacting in different aspects of their work environment (Block, 2015). On the other hand, collective action in social exchange also consists of both benefits and problems. Actors involved in any social exchange context might come across competing pressures of satisfying their own needs rather than participating in the facilitation of collective goods (Merkin, 2015). There might occur cases where partners often fail to fulfil their obligations as there is no guarantee of such explicit negotiations. Besides, the dynamic actions between power and dependence further generate problems in collective actions of social exchange (Van Knippenberg, Van Prooijenand Sleebos, 2015). Collective mechanisms might be beneficial in facilitating social exchange for addressing the social good of all members. However, actors often face prisoner’s dilemma of fulfilling their own interests above their group, thereby causing uncertainties in addressing their social obligations.

Impact on Employee Relations
Social exchange theory helps in understanding people’ actions from different perspectives, thereby making employees feel more comfortable and become productive. In organizations, employee relationships determine not only person’s success but also their satisfaction and commitment towards a job. Both collective and individual mechanisms enable the company managers in fostering a workplace environment and culture promoting for relationship-building and friendliness amongst employers and employees (Staffordand Kuiper, 2021). This helps in making the employees feel more connected towards the organization on a personal level. This theory generates substantial benefits within the organization. Employees become more enthusiastic in building positive relationships with their leaders, which further enhances their productivity and loyalty at work. In this regard, managers should focus on providing recognition of hard work and effort to the employees for maintaining positive relationships with them (Raginsand Dutton, 2017). This helps in building a rapport with them by recognizing their individual work.Furthermore, social exchange also helps in building a company culture of positivity and friendliness for supporting employee relations and creating opportunities for them to know each other (Zhao, et al., 2020). Besides, it enables managers to focus on various conflict resolution strategies for addressing issues or concerns facing the employees, which further strengthens the relations with them. This encourages employees to approach their managers for resolving their problems in the organization. Social exchange also helps in operating with transparency that is essential for building positive employee relations. When employees feel they can trust and confide in their superiors, they become more willing to build long-lasting relationships with the managers.

Trade Unions and Social Exchange Theory
The fundamental aim of a trade union is to enable in regulating employee relations with the employer through different processes like collective bargaining and consultation. Here, the social exchange theory comes into play as it helps in the negotiation about pay, salary and other working conditions of employment in collective bargaining (Van Roozendaal, 2020). On the other hand, the theory also enables in understanding the consultation process involved between these trade unions and the employer consisting of discussion about different issues persisting at the workplace which can influence the terms and conditions of employment. This theory helps in understanding that proper communication between these employees and the employer is essential for the functioning of the business. When the interests of the trade unions are fulfilled and their opinions are given value in the organization, employees become motivated in achieving the desired objectives, arising from their intention to provide their effort in exchange.

Potential Challenges in Approach
Despite the efficient approach of social exchange theory in understanding employee relations in the organizations, it consists of several challenges that make it difficult to apply it in various situational contexts. The entire theory revolves around costs and benefits analysis, thereby neglecting various cultural and human aspects of relationships in an organization (Cropanzano, et al., 2017). This makes it difficult to better analyse the impact of organizational operations, culture or processes on the engagement and satisfaction of the employees. Furthermore, it puts more emphasis on an individualistic and reward-seeking approach, thereby neglecting the group dynamics present in employee relations of organizations. Besides, scholars have often observed this theory as a generalized mathematical model devoid of interpreting human interaction in the social exchange process. The assumptions of individuals terminating relationships based solely on the costs outweighing benefits might not be realistic in various situations. The assumption of ultimate goal of a relationship being intimacy as put forward in this theory might not always be true in every context (Rasoolimanesh, et al., 2015). It has further been criticized for ignoring the social aspects of an exchange relationship including ways of communicating and sharing interests. Lack of consideration about personal perceptions, assumption of hierarchical development of relationships and failure to explain humane actions are various other limitations of this approach.Extensive focus on economic benefits and reasoning in an exchange relationship in this theory has ignored other aspects that can influence employee relations in an organization (Nunkoo, 2016). Thus, these challenges might make it difficult for the managers to apply in an organizational context for enhancing employee relations.

The research study aimed at critically analysing the purpose and value of social exchange theory and its impact on employee relations. For this purpose, the study first explored the concept of this theory that states how social behaviour is considered as an outcome of the exchange process. In the next section, it analysed the purpose and value of the social exchange theory by focusing on various examples and its related impact on employee relations in the organizations. It helped in understanding how employees display positive performance and behaviour in the workplace when they perceive organizational support from their employers. The study also explored different challenges and limitations associated with undertaking this approach in the organization. Lastly, the study provided recommendations in enhancing employee relations in organizations.

Reference List
Agarwal, U.A., 2014. Linking justice, trust and innovative work behaviour to work engagement.Personnel Review, 43(1), pp. 41-73. Ahmed, S., Ahmad, F.B. and Jaaffar, A.R., 2017. Employee engagement on employee relations with supervisor and employee performance relationship in developing economy: critical analysis with PLSSEM. Saudi Journal of Business and Management Studies, 2(4), pp.389-398.

Block, P., 2015. Reciprocity, transitivity, and the mysterious three-cycle.Social Networks, 40, pp.163-173. Chang, H.H., Tsai, Y.C., Chen, S.H., Huang, G.H. and Tseng, Y.H., 2015. Building long-term partnerships by certificate implementation: A social exchange theory perspective.HRM assignmentJournal of Business & Industrial Marketing, 30(7), pp. 867-879. Cropanzano, R., Anthony, E.L., Daniels, S.R. and Hall, A.V., 2017. Social exchange theory: A critical review with theoretical remedies. Academy of management annals, 11(1), pp.479-516.

He, H. and Brown, A.D., 2013. Organizational identity and organizational identification: A review of the literature and suggestions for future research. Group & Organization Management, 38(1), pp.3-35. Liaquat, M. and Mehmood, K., 2017. Organization citizenship behavior: Notion of social exchange theory. Journal of Business and Social Review in Emerging Economies, 3(2), pp.209-216.

Merkin, R., 2015. The relationship between individualism/collectivism.Journal of Intercultural Communication, 39(4), pp.1-17.

Nunkoo, R., 2016. Toward a more comprehensive use of social exchange theory to study residents’ attitudes to tourism.Procedia Economics and Finance, 39, pp.588-596.

Nunkoo, R., 2016. Toward a more comprehensive use of social exchange theory to study residents’ attitudes to tourism.Procedia Economics and Finance, 39, pp.588-596.

Ragins, B.R. and Dutton, J.E., 2017. Positive relationships at work: An introduction and invitation. In Exploring positive relationships at work (pp. 2-24). Psychology Press.

Rasoolimanesh, S.M., Jaafar, M., Kock, N. and Ramayah, T., 2015.A revised framework of social exchange theory to investigate the factors influencing residents' perceptions.Tourism Management Perspectives, 16, pp.335-345. Slack, R.E., Corlett, S. and Morris, R., 2015.Exploring employee engagement with (corporate) social responsibility: A social exchange perspective on organisational participation.Journal of business ethics, 127(3), pp.537-548. Stafford, L. and Kuiper, K., 2021. Social exchange theories: Calculating the rewards and costs of personal relationships (pp. 379-390). Routledge.
Van Knippenberg, D., Van Prooijen, J.W. and Sleebos, E., 2015. Beyond social exchange: Collectivism’s moderating role in the relationship between perceived organizational support and organizational citizenship behaviour. European Journal of Work and Organizational Psychology, 24(1), pp.152-160.
Vasile, A.C., 2016. Hofstede’s cultural dimensions and management in corporations.Cross-Cultural Management Journal, 18(01), pp.35-46. Yin, N., 2018. The influencing outcomes of job engagement: an interpretation from the social exchange theory. International Journal of Productivity and Performance Management, 67(5), pp. 873-889.
Zhao, P., Xu, X., Peng, Y. and Matthews, R.A., 2020. Justice, support, commitment, and time are intertwined: A social exchange perspective. Journal of Vocational Behavior, 120, p.103432.
Van Roozendaal, G., 2020. Trade unions and global governance: the debate on a social clause. Routledge.


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