 Welcome back to the Knowledge Clips to the book Evidence-Based Human Research Management. What do we know about people in workplaces? And in this clip, I will continue talking about chapter two, and I will introduce two more theories, namely social capital theory and social exchange theory. If you add these to the theories on human capital that we discussed in the previous clip, you pretty well have the ingredients you need to make an HR business case. So after this clip, you understand literally the basics of social capital theory and social exchange theory. Let's start with social capital theory. So the big names in this field are Adler and Kwon, and they define social capital as the potential that is generated by the network, important word, of social relations in an organization, and that can be used to enable actions. So it is like the illustrations to the left of the slide show. It's about all these people in organizations and their interconnections. These interconnections are important for individuals in organizations, so if you want to perform your job and you need information, you need somebody else, but you need to know this other person and this other person should be willing to share their knowledge about what you need. And you can add that to the team level. So smoothly operating teams are a blessing for organizations. Their work will happen almost automatically without the need of much supervision. Also, imagine that an organization is embodied in a network of relationships with other organizations, and for example, with universities and governments as well. So this network also happens on the level of the organization, and if an organization as well-positioned has a central place in a network, then they can just be the ones that have access to the newest knowledge or be an important partner, for example, in a tender for an important job. So in essence, the essence of social capital theory is about the relationships between people in organizations. This picture is famous. It's the Dublin headquarters of Google, and Google is known worldwide for their offices. They are fancy, and they want, of course, to be an attractive employer, so this is one of the things they use to show who they are. It can also be understood from a social capital perspective, because if you are an organization that is focused on innovations and learning from each other, of course, you need a workplace that is designed in such a way that people accidentally walk into each other, share coffee, share talk, and then exchange their knowledge. And also, there should be some kind of an atmosphere that you can sit there and just sit back and relax and talk about things, because it's the belief that in such a beehive structure, good things may happen. So this can be translated back to the social capital theory by Adler and Kwon. So according to Adler and Kwon, there are three dimensions of social capital. There are structural social capital, relational social capital, and cognitive social capital. Structural social capital is literally the design of the organization, the design of workplaces. Does the organization allow that people can walk to each other, can actually meet each other? If an organization is very strictly hierarchically organized and people are just in their offices and they are supposed to be there from 9 to 5 without going out, so to speak, then of course the opportunity to meet each other is really, really low, and then the structural social capital of that organization will accordingly also be low. Relational social capital has more to do with the quality of relationships between individuals or between, again, organizations. Imagine that two organizations have a contract in which they were doing things, so the structural side of the relationship is there, but then they don't like each other. There's nothing that the one can do that the other really trusts. In such a relationship, the exchange of knowledge from one partner to the other comes really, really difficult. So relational social capital has to do with the liking of each other. If there are close relationships, it's more likely that people actually like working together, and that is more likely that that will happen. Finally, the cognitive social capital, this is the shared belief that working together and collaboration is a good thing. So for example, an organization that promotes teamwork as the part of working in the organization, they bring to the employees a message that is actually a good thing to team up. In science, for example, there is a debate that we should move away from the old competitive, the professor is the one and only important person who should publish top to something called team science, because in science also there is a stronger and stronger belief that it's not one person who does excellent research, there's always a team behind them, and the team should feel valued and should feel that they are invited to contribute to, in this case, research. So all three elements can be managed from a human research management perspective. So it's the design of offices and the structure of the organization. It is investing in that people like each other, maybe social outings, and it's investing in the way of working how we should work in the organization. These are all elements that are parts of human research management where organizations can invest in. So is this important, again, evidence-based? Yes, we have a nice meeting at Edison, Barry Westlinton and Adam in 2010, and they researched the importance of social capital on the level of individuals, teams, organizations and societies even. So you can already summarize the findings. Social capital matters for each and every of these levels, and the effect sizes are quite impressive as well. For the individual, just to give a small example, it matters whether or not you know people, if you're looking for a job, people with a higher social capital, so access to important people in their networks and also to have some quality relationships, they are more likely that they have our purpose to a job. Yes, networking still matters. And the same is true for organizations. You already gave the example how important it is to have your external network as an organization because there will be opportunities that you may be missed out if you are not part of a certain quality network of other organizations. So an interesting side step might be how to research social capital, and this is a figure that you will come across if you look into social capital theory-based research. So it is about relationships between people. So all the dots in these figures, you can conceive them as individuals or as teams, for example. And the lines indicate that these people work together. So there is a relationship or a contract or they like each other. The idea is that somebody's position in the network will determine how strong their social capital is, but also the quality of the lines. And these are often indicated with thicker or thinner lines. So if somebody is central in a network and there are a lot of thick lines going out to the other parts of the network, then that person is in a very advantage position. So for that person, the social capital is really strong and an important resource for their performance. So in the context of people management, it is important to realize that all these relationships, they lie in the behavior of people. So it's not automatically if you make sure that there is structural social capital, that people will automatically like each other. And the same is true for consortia, for organizations who collaborate. All of these collaborations need investments and there need to be some investment in that. There's also a good quality relationship and this takes time and trust and it's not as easy. So the implications for human resource management obviously is that encouraging teamwork in the broader sense of the word is beneficial for organizations. It is about individuals liking to work together. It is about departments being able to find each other. It is about organizations reaching out to their external networks as well. So human resource management can really contribute to creating conditions in which there is a shared understanding that teamwork is important, that they can work together, and so on. Why is this important? Reach back to this resource-based view theory. Remember the social organizational capital and the human capital is also the knowledge about these networks. These are the elements, the resources that are difficult to copy. So they are non-transparent as well as difficult to just move to another place. So they're also non-transferable. So teamwork, social capital, an important element of human resource management in the business case. The next theory, as promised, is adding something to the idea of human capital. And I'm going to talk about motivation. Social exchange theory is the perspective that we can use to understand why people are motivated to put in just this little extra in their efforts to contribute to the organization. So far we've talked about resources as more the people working together, social organizational capital as well as human capital being the knowledge, skills and abilities that nest in individuals. Here in the last part of this chapter, I'll make a jump to motivation. And motivation, you can imagine if people are willing to put a little extra effort, then organizations will perform better. A little extra investment in a relationship, a little extra investment in your work, better performance. Right. How does motivation work? There are loads of theories I am going to touch upon. The most cited theory which is social exchange theory. What is social exchange theory? It is a theory that explains why people put extra effort at work. And the core of this theory is an exchange relationship. So in essence, any work relationship is where employees work in an organization is an exchange between employees who put their precious time to the organization and they work there. And they do so because there's something that they receive in return. Of course, they have salary or because they are maybe learning opportunities or maybe they are very nice colleagues. In essence, an employment relationship is an exchange mechanism between an organization, an employer and an employee. So what happens in this relationship? That is central of this theory. Different from the other theories, there is not a single author that can be attributed as the core author to this theory. Actually, if you look into social exchange theory, there are three main contributors to the building of the theory. And they are Hommans, Gultner and Blau. So what did they do? The fundamentals of the theory. It all started with Hommans. And Hommans claimed that any relationship between two individuals is based on an exchange relationship. A relationship will continue as long as both partners find pleasure in this relationship so that there is something in it for them. He made a distinction between economic exchange relationships and social exchange relationships. In economic exchange relationships, the relationship is really short. There is, for example, you go to you need something, you need something repaired, then you call a plumber. And for a short moment, the two of you, you with your broken plumbing system and the plumber, you have a brief relationship, which is purely economic because the moment your plumbing system is fixed, the relationship ends. It was based on a contract, there is a pay. And neither of you expects something extra from this relationship. You don't want this person to stay over for dinner or anything. It's just, it ends after the service is completed. Social exchange relationships, on the other hand, are more open-ended and they are like friendships. They continue as long as both partners in the friendship find it valuable. There is an element of economic thinking in there, according to Hommans, because if the relationship doesn't make you happy anymore, then it stops. The second one. The second contributor to the social exchange theory is Goldner. So he wondered why some relationships continue, even if it's obvious that there's a disbalance between what is done. And he introduced the norm of reciprocity. And reciprocity means that if I invest in this relationship, I expect that I will have some kind of return with this valuable for me. However, I don't need it immediately. I expect this return to come at some point. And I expect that the thing that is going to be my return is of equal value, at least in my mind, to what I invested in it. So if I put a lot of effort in something in the relationship, and at some point I do hope that it is equally paid back, because according to Goldner and also Hommans earlier, they said this relationship should be in balance. It also explains why individuals become frustrated if the return is not there or it is much smaller than you expected it to be. You make a big fuss about a birthday and you hope that some of your best friends may come, because last time when this person had their birthday, you brought a big gift. And then if this person doesn't show up, then there is a disbalance and there is a feeling that there is unfair, the norm of reciprocity is damaged and the relationship will be harmed, so people will be angry, frustrated and seek for revenge. Okay, we dealt with Hommans, we dealt with Goldner and they were all talking about relationships between individuals, one person to another. Then came Peter Blau and he added the notice that people also can have relationships with non-persons and non-persons being organisations. And that becomes really interesting for human resource management because employees have an exchange relationship with an employer, but this is not one person, this is an organisation, this is an anonymous entity, but yet the norm of reciprocity, the expectation that there will be a fair return also exists in this relationship between an employee and this anonymous employer. So organisations, although they are not humans, they are assigned human-like characteristics by employees and they also expect that if they put in a lot of effort to the organisation that the organisation will likewise return a good salary or at least some compliments from your supervisor. So according to social exchange theory, this exchange relationship should be in balance. So if the employer is good to employees and especially if the employer is more or better to employees than the employee expected beforehand, this is a trigger to restore the imbalance in a relationship and the employees will feel compelled to be a very good employee and work a little bit harder. So positive attitude, extra effort, these are the rewards that the organisation receives in return for being a good employer to make sure that all the employment conditions are really, really nice, for example. The supervisor is really nice. However, when the organisation gives less as compared to what the employee expected then the extra effort will reduce as well. So employees will make up in their behaviour for the disbalance that they perceive in the relationship with their employer. So this means translated, if an employer is good to their employees, employees will feel motivated according to social exchange theory. If an employer gives less, so just basically a basic pay and nothing more the employee will also feel less motivated to put extra effort in the job. So unleashing all the social and human capital can be realised by also investing in the social exchange relationship between employers and employees. What are the benefits of having a good social exchange relationship with your employees as an employer? First of all, employees will feel happy. So it has been related to things like job satisfaction, commitments of feeling like you're part of the family in the business and you want to really contribute. And it pays all off in what is really important, extra effort. Extra effort is the extra role behaviour. So things that are not demanded based on the employment contract staying a little bit later to help out a colleague or putting some extra effort to make sure that the client is really satisfied. So all the extra things that really make the difference for the organisation but are not really demanded by employees, these are extra role behaviours. And by taking good care of your employees, you will stimulate that they will feel an urge, the reciprocity to show this extra effort. Another word that you might come across in the literature is organisation citizenship behaviour. So this is literally a concept that captures all the non-contractual behaviours like taking initiative, helping each other, staying longer to finish the job without having to do all these nice things or all the efforts of employees that matter for organisations and that bring about positive performance as a whole. Are nested in social exchange logics. Well, to the research then, does it pay off to invest in employees to give them extra money as compared to the competitors or maybe to have very good supervisors? And yes, the answer is yes. So if there is a higher than expected reward by the organisation and reward should be understood in the broadest sense of the word so flexible working conditions, personal attention, all these things, not only the money but all the non-tangible things as well. This will lead to additional job performance, a willingness to do something extra so organisation citizenship behaviour and commitment. Chewie et al. 1997, nice paper. And similar likewise, it's also demonstrated in longitudinal and meta-analysis that it is an important mechanism that explains commitment, satisfaction and in the end better organisational performance course 2001. So what's the implication for human resource management? Here we can be the standard clause. Make sure that your employees feel satisfied about the organisation. Make sure that they feel part of the team. Make sure people feel included, have an eye for individual needs and we've come to talk about that in Chapter 5. So basically make sure that employees feel that they are seen as people and not just as commodities that are there to perform for the organisation and then the employees will return that with nice behaviours. So this brings me to the end of Chapter 2. We have discussed human capital, social capital and social exchange theory and we can place these three big theories within the context of Baranish Resource Base View because if an organisation succeeds to hire or develop the best able human capital as compared to their competitors, in addition to having a group of employees that has excellent working relationships not only in terms of structure but also in terms of good quality relationships and knowing that working together is important and finally an organisation that takes good care of their employees they will have a workforce that has a unique capability and they will have an excellent starting point to achieve competitive advantage and score high on all the organisation performance indicators that we introduced in the clip on Resource Base View. That's it for now. We discussed social capital theory, social exchange theory how human and social capital bring about unique capabilities how social exchange theory adds motivation as a resource and which HR practices can improve human and social capital and social exchange.