Social Exchange Theory, Employee Retention

• This paper explores how Social Exchange Theory relates to employee retention and employee engagement.
• It aims to recommend practical applications of Human Resources Development principles and social exchange theory

Key Concepts

• Social Exchange Theory
• Employee Retention
• Employee Attrition
• Career Development
• Humanistic communication strategy
• Leadership Development

Study Design

• The study uses a co-relational approach, examining cause and effect.
• The design combines a descriptive theoretical analysis with a quantitative applied analysis.
• It uses an analytical approach to define key concepts and an empirical study to investigate practical correlations.

Practical Implications

• The research aims to guide management in creating effective HRM/HRD practices.
• Goal to improve employee retention through high-impact strategies.
• Focus on social exchange theory and leadership development.

Introduction to Employee Retention

• Statistics indicate that companies should aim at 10% employee turnover, though it usually falls between 12%-20% (Stowers, 2020).
• Keeping quality employees is a major concern because of digitalization, automation, and competitiveness.
• The findings of SHRM's Employee Job Satisfaction and Engagement: The Doors of Opportunity report indicated several reasons why employees leave organizations.
• Poor supervisor-employee relationships, lack of attractive compensation/pay, lack of trust, and limited career advancement opportunities are some reasons.
• Understanding why staff leave or stay is necessary to align impactful retention strategies with individual needs.
• Managing retention includes motivating staff using strategic actions to keep employees motivated and focused.
• Employee retention programs attract and retain employees and reduce the costs of losing high performers.
• All factors contribute to a company's productivity and overall business performance.
• Employee retention is part of Human Resources Management and Human Resources Development, addressing compensation, staffing, and job satisfaction.
• Through adopting an organizational culture that boosts employee engagement and retention, employee retention may be attained
• Employee retention is part of HR Development, looking at individual and workplace aspects while treating the firm as a whole system.
• This study will address how social exchange theory, Transformational Leadership, and Humanistic Leadership Style relate to employee retention

Literature Review: HRM & HRD

• Saudi Vision 2030 transforms the Saudi economy
• Many industries are trying to make a difference with HR practices (Al-Kahtani & Khan, 2013).
• Effective HR practices leads to human resources development (HRD) (Al-Kahtani & Khan, 2013).
• HRM defined as a balanced focus on maximizing performance and balancing interests with economic value.
• (Hussain & Ahmad, 2012).
• HRD involves motivating and retaining workers (Al-Kahtani & Khan, 2013).
• HRD consists of training, organizational development, work-life quality, welfare, appraisal, and participatory management.
• All factors affect motivation, productivity, and loyalty (Al-Kahtani & Khan, 2013).
• Therefore, human resources are the key to promoting organizational success (Hussain & Ahmad, 2012).

Social Exchange Theory

• Social exchange theory was developed by Georage Homans in 1958 (Redmond, 2015).
• Social exchange theory emphasized social interactions, costs, and rewards (Homans).
• Key components include Cost and Reward (Redmond, 2015).
• Lasting relationships rely on approval, respect, trust, and care between parties (Crossman, 2020).
• Homans' propositions structure social behavior in terms of rewards and punishments.
• Positive behavior is rewarded and continues.
• Behavior with positive consequences tends to recur (success proposition).
• Behavior rewarded in the past will be repeated in similar situations (stimulus proposition).
• The more valuable the result of an action, the more likely action will be performed (value proposition)
• Diminishing marginal utility qualifies the stimulus proposition (deprivation-satiation proposition).
• People may react emotionally to different reward situations
• People may become angry if they do not get what they expect.
• Homans (1974) argued that people get angry if they do not receive a fair return.

Elements of Social Exchange Theory: Cost

• Cost is the intangible cost of time and effort in social interactions
• Cost of time examines the time and energy to converse and alternative activities.
• The value and cost of time depend on demand
• Time is spent more in rewarding relationships and conversations (suggested by social exchange theory) (Redmond, 2015).
• Rewarding relationships result in profit.

Rewards

• Rewards reflect extraordinary performance outcomes (Human Resources Management Practices, 2021).
• Rewards include anything society values (Redmond, 2015).
• Social interactions lead to being accepted, loved, respected, trusted, and having opinions considered (Redmond, 2015).
• Self-directed theory examines motivation based on individual goals.
• Intrinsic motivation comes from self-satisfaction, while extrinsic motivation comes from external rewards or avoiding punishment.
• Intrinsic motivation drives a productive and loyal workforce
• Interactions continue when rewards outweigh punishments (Crossman, 2020).
• Punishments range from public humiliation to subtle gestures

Profit

• According to Homans (1961), profit depends on balancing costs and awards.
• Interactions should be profitable, providing more reward than cost
• Satisfaction and enjoyment are linked to rewarding level of relationship compared to associated costs.
• People stay in relationships where rewards outweigh the costs and lead to projected future benefit (Levine, Kim, and Ferrara (2010), cited by Mark Redmond (2015))

Assessment of Social Exchange Theory

• The assessment addresses the strengths and weaknesses
• The theory follows logical thought, as people calculate how to compete, and be rewarded likewise, for avoiding punishments (Crossman, 2020).
• The theory fails to explain negative human attitude and behavior, and ignores relationship terminations.
• Other limitations of social exchange theory include ignoring paradigms of punishments/rewards, and that the value of rewards varies.
• The theory affects perceptions and social structure (Crossman, 2020).

Employee Retention

• Employee retention includes practices to prolong an employee's tenure with the organization (business management study guide (2021)).
• Retaining staff for a long period or until project completion constitutes retention (Hom and Griffeth, 1995).
• Employee retention is the length of time an employee stays with an organization (Chartered Institution of Personnel & Development, CIPD, 2020).
• Employee turnover is the proportion who leave voluntarily or involuntarily (CIPD, 2020).

Skilled Workforce

• The labor market is booming, pressuring workers to acquire technical skills (Insala, 2019).
• Jonathan Holmes notes talent shortage with needed skills (Hassan, 2018).
• The KSA and UAE labor markets will have a 660,000 labor deficit by 2030 (Hassan, 2018).
• Effective employee retention strategies secure the future of organizations given talent shortages and future leadership.

Employee Tenure

• It contributes to competitive advantages for an organization
• Employees with long tenures have strong relationships with stakeholders and business partners to facilitate business operations.
• Median tenure has decreased since 2012 (Hassan, 2018).
• Therefore, organizations value tenure to increase retention of value-added skills.

Cost of Turnover

• Employers paid more than $600 billion in turnover costs in 2018 and the cost per employee was 33% of their annual salary (Insala , 2019).
• According to Hassan (2018), Saudi Arabian businesses may experience a surge of 17% in wages adding $33.6 billion to national payrolls.
• Training costs for new hire can negatively impact performance.

Employee Retention Responsibilities

• Alignment of employees' interests with tasks should be done by team leaders
• Management should assign work based on the interests and skills of employee (Business Management Study Guide (2021).
• Equal work distribution is essential to retain top performers.
• Overburdened workers are always eager for a change.
• Leaders should not misuse their positions but treat everyone with respect and generate a healthy working environment.
• Leader appreciation and recognition is important for employee retention.
• HR professionals should establish two-way communication and an open-door policy and work with organizational leaders
• HR should provide master problem-solving skill and provide solutions and recommendation (Management Study Guide , 2021)
• HR should motivates employees to learn something extra part from their routine work.

Retaining Employees

• To promote the retention rate each role needs to work together.
• Essential areas include employee selection, career development, consultation, employee well-being, and employee relations.
• Selecting the right hires from recruitment (CIPD, 2020) depends on clearly HR professionals explain the role and responsibilities of the vacant position.
• Provide opportunities relating to their skills and horizons (CIPD, 2020).

Career Development

• A process for achieving specific employee and organization goals
• According to Parajapati (2021), organizations are responsible for employee work life.
• Leaders provide opportunities for employees' growths and utilize their potentials.
• It is the acquisition of jobs, and job mastery skills combined with professional development, coupled with career planning activities (Berkely 2021).
• Leaders provide learning activities and resources.
• Formal training is helpful for information

Employee Voice

• It is “the ability of employees to express their views, opinions, concerns and suggestions, and for these to influence decisions at work.” (CIPD , 2021)
• Voice promotes innovation by listening to staff opinions (Organization and Individual voice, CIPD (2021)).
• Individual voice refers to the involvement in the decision-making process, it is recognizing consultation services.

Employee Wellbeing

• It promotes retention and work-life balance (CIPD, 2020).
• Leaders proactively manage crises, and develop business continuity plans.
• Mental health is a challenge.
• It includes workshops to manage stress and counselling to offer employee assistance programmes.
• Workers and employees overall performance go hand in hand and a business should ensure both are cared for.

Employee Relations

• Leaders should demonstrate fairness (CIPD, 2020).
• Some instances are where favouritism and unfairness leads to employee dissatisfaction.

Humanistic Communication

• Humanistic-Psychological Approach and the Communicative Approach show that employee dignity, ideas and thoughts should be respected (Khatib, Sarem, & Hamidi, 2013).
• HRD interventions should also be human-centered as opposed to outcome or task focused.
• The humanistic educational approach influences teacher-student relationships through social interaction, cooperative language learning which facilitates language learning.
• Implications include organizations must provide learning conditions for people to reach their own goals and students must be able to formulate and use their potential.
• Everyone takes part in the organizational process.
• Supervisors listen, accept, understand, clarify, and help employees and supervisors grow (Khatib, Sarem, & Hamidi, 2013).

Leadership Development

• Includes Formal Training, Job Assignments, 360 degree feedback, self-directed learning (Lumen Learning (2021).
• These approaches are captured in the leadership model.
• Leader development takes place through lectures, job assignments, 360-degree feedback, executive coaching, and self-directed learning.
• These approaches may occur separately but are more effective in combination (Lumen Learning , 2021).
• Leaders may benefit by formal and informal learning (CIPD (2020)).
• Also mentoring and coaching which helps leaders learn coaching skills.

Formal Training

• Organizations offer formal training programs to their leaders.
• Styles include required knowledge, skills and practice (Kozlowski, 1998).
• Transferability and practicality is also important.
• Degrees with higher qualification helps gain comprehensive knowledge associated with employee development, finance, and accounting.

Developmental Job Assignment

• Assign leaders to developmental work that targets the newly acquired skills.
• Effective form of leader development allowing for experiential learning(Lumen Learning , 2021).
• Organizations permit leaders to gain hands on experience (CIPD , 2020).

360-Degree Feedback

• An assessment provides feedback on performance from subordinates, peers, superiors, and self- assessment.
• Method to identify, assess, and develop leaders (CIPD (2020).
• HR has to be on credibility, outcomes and purpose

Coaching

• Involves one-on-one relationship to convey lessons through assessment, challenge, and support.
• Coaching is to help leaders move to the next level (Lumen Learning , 2021).

Self-directed Learning

• Individual leaders are to teach themselves new skills and develop their leadership competencies
• Offers the opportunity to pace themselves (Lumen Learning , 2021).

Leadership Development Models

• McCauley, Van Veslor, and Ruderman (2010) as cited by Lumen Learning (2021) illustrated a two-part model for leadership development (Lumen Learning , 2021).
• The first involves Assessment, challenge, and support of strengths, current performance level, and developmental needs.
• Challenging experiences help to stretch leaders’ ability to work, offer opportunity for growth, and learn.
• Support can be given from friends and supervisors.
• Variety of developmental experiences and learning involved.

General Electric Model

• Well-known leadership development that is used by the General Electric Corporation.
• Uses early identifying of high leaders.
• Assignments help develop skills and experience and has rigorous evaluations.
• Offers training programs.

Data and Outcomes

• The study distributed an Employee Engagement survey and is based on primary and secondary data.
• A survey consists of two primary groups with questions that have relationships with the study topics.
  • Career Development
  • Work Engagement
  • Compensation
  • Management Relationship
  • Benefits
  • Work Environment
• Different are responses were recorded from the different sectors like Agriculture, Education, and HR.
• A total of 8 responses were recorded including business owners, business partners, and individual contributors.
• Data was collected from 22 workers in the studies through group discussion.
• CIPD reports were used to support the data.

Data Analysis

• This section analyzes the assumptions and beliefs among surveys in which they feel their work or the organization is committed.
• Survey was focused on:
  • Career Development
  • Work Engagement
  • Compensation
  • Management Relationship
  • Benefits
  • Work Environment
• Survey showed 53% of women with the other takers making 46.6% of the responders.
• 93% were shown to have ages ranging between 25-35 years old with another 6.67% were aged between 36-45.
• Majority from the recorded data was 56.67 SR which means it was mostly individual contributions and 10% with an annual income between 50,000 to 100,00 confirmed that they were owners and partners in the business.
• Career development and element engagement has a positive relationships.
• Career development, organizations are responsible for improving the quality of work by planning and giving growths to work related (Pajarati, 2021).
• It's also important to meet ones career goals.
• Roles and management is to maintain a workplace that has low stress so other personal emotions can be checked at difficult times.

Conclusion

• The statistics have shown that social exchanged is needed in a business. Besides that, humanistic culture has shown the way in a social application theory.
• Some workers may tend to look as if they only have physical and economic needs and are there not social needs or job satisfaction.
• The survey highlighted the categories for employers and business like:
  • Work Engagement
  • Career Development
  • And management Relationship.
• Leadership is another way and an additional advantage where employers are offered with some leaders methods that can benefit themselves and their company.
• It's key to have leadership that can be open and willing to get the necessary feedback.
• Leaders are to be on measurable development goals and contribute to individual growth.
• Leaders should support by having one one sessions, coaching and counseling sessions, support relationship goals, recognition programs and more.
• Communication can further have employees express opinions, concerns, and feeling in order to have an open line of discussions with there supervisors or leaders.