Alnajim, 2021

Impact and Application of Social Exchange Theory in Employee Retention
Written by: Afnan Y. Alnajim
Electronic copy available at: https://ssrn.com/abstract=3884032

CONTENTS
1. ABSTRACT ........................................................................................................................ 1
2. KEY CONCEPTS .............................................................................................................. 1
3. RESEARCH DESIGN / METHODOLOGY / APPROACH ......................................... 1
4. PRACTICAL IMPLICATIONS....................................................................................... 1
5. INTRODUCTION.............................................................................................................. 2
6. LITERATURE REVIEW ................................................................................................. 3
7. DATA COLLECTION AND RESULTS ....................................................................... 14
8. DATA ANALYSIS ........................................................................................................... 16
9. CONCLUSIONS .............................................................................................................. 18
10. REFERENCES ................................................................................................................ 20
11. APPENDICES.................................................................................................................. 22
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1. ABSTRACT
This paper examined the relationship between Social Exchange Theory and employee
retention to boost employee engagement. At the end of this paper, recommendations and
approaches will be explored to allow practical application of principles of Human Resources
Development and social exchange theory.
2. KEY CONCEPTS
- Social Exchange Theory

- Employee Retention
- Employee Attrition
- Career Development
- Humanistic communication strategy
- Leadership Development
3. RESEARCH DESIGN / METHODOLOGY / APPROACH

This research is co-relational in nature with cause and effect approach. The design of the
study is both descriptive in the theoretical part and quantitative in the applied one.
Theoretically, this paper adopted the analytical approach to define the main concepts, aside
from an empirical study to investigate correlations in practice.
4. PRACTICAL IMPLICATIONS
The findings and recommendations of this research can practically guide management to
devise effective HRM/HRD practices to improve employee retention using high impact
retention strategies, capitalize on social exchange theory, and leadership development.

5. INTRODUCTION
Employee Retention becomes one of the biggest HR challenges at the workplace. Statistics
showed that organizations should aim for 10% for an employee turnover rate, but most falls
into the range of 12% to 20% (Stowers, 2020). Additionally, retention of calibre employees is
a major concern across the board, due to the digitalization, automation, and high
competitiveness in the labor market.
According to SHRM's Employee Job Satisfaction and Engagement: The Doors of

Opportunity are Open Research Report, employees tend to leave the organization for many
reasons, including: Poor supervisor- employee relationship, lack of attractive
compensation/pay programs, lack of trust between management and employees, and lack of
career advancement opportunities.
Setting impactful retention strategies need to be aligned with individual needs, by

understanding why people leave and why people stay within an organization. Managing for
employee retention involves strategic actions to keep employees motivated and focused. A
comprehensive employee retention program can play a vital role in both attracting and
retaining key employees, as well as in reducing the loss of high performing employees and its
related costs. All of these contribute to an organization's productivity and overall business
performance.
Employee retention tackles both aspects of HR, including: Human Resources Management
and Human Resources Development. It falls under Human Resources Management because it
is centred in administering the retention driver factors, including: Compensation and pay,
staffing the right talents to be retained, managing employee performance, including: Job
satisfaction and higher morale. Considering Human Resources Development, employee
retention can be achieved through adopting an organizational culture that boosts employee
engagement and retention. Thus, employee retention is part of Human Resources
Development, because it investigates the individual and environmental factors, treating
organization as a whole system, where each part is interdependent and interconnected.
The study will address different HRD theories related to employee retention, including:
Social exchange theory, Transformational Leadership, and Humanistic Leadership Style.

6. LITERATURE REVIEW
1.1 HRM & HRD
Saudi vision 2030 is creating mass transformation in Saudi economy. Many industries are
willing to make a difference in their HR practices (Al-Kahtani & Khan, 2013). An effective
action taken through HR practices will lead to human resources development (HRD) (Al-
Kahtani & Khan, 2013). According to Hussain & Ahmad, HRM can be defined as: “An entire
system of values, policies and practices which focuses on maximizing the performance of
people in organizations, achieving balance between the personal interests of people and their
economic added value.” (Hussain & Ahmad, 2012).
Moving to the other concept which is HRD, is the strategies that HR department follow to
motivate and retain employees (Al-Kahtani & Khan, 2013). Apart from that, HRD contains
four factors, consists of: Training and development, organizational development, quality of
work life & welfare measures, performance appraisal and participative management. All
these factors are affecting the employee’s level of motivation, overall productivity, and level
of loyalty to the organization (Al-Kahtani & Khan, 2013). Therefore, human resources are
key source to promote organizational success (Hussain & Ahmad, 2012).
2.2 Social Exchange Theory

The social exchange theory is developed by Georage Homans in 1958 (Redmond, 2015).
According to Homans, social exchange theory emphasized on the social interactions between
people, involving cost and rewards. Digging deeply into the definitions of the components of
the social exchange theory, including: Cost and Reward (Redmond, 2015). According to
Crossman (2020), lasting relationship is based on approval, respect, and trust, and care
between both parties (Crossman, 2020).
Homans' key propositions structured the study of social behavior in terms of rewards and
punishments. Relationship with positive behavior is rewarded and continues. The five
propositions are, as follows: His first proposition, the success proposition, and states that
behavior that generates positive consequences is likely to be recurring.
The second proposition, the stimulus proposition, states that behavior that has been rewarded
on such occasions in the past will be performed in similar context. The value proposition, the
third proposition, specifies that the valuable result of an action to an actor is more likely that

action is to be performed. The fourth proposition, the deprivation-satiation proposition,
qualifies the stimulus proposition introducing the general ideal of diminishing marginal
utility: the more often a person has recently received a particular reward for an action, the
less valuable is an additional unit of that reward. Finally, the fifth proposition described the
reaction when individuals react emotionally to different reward situations. For instance,
people will become angry and aggressive when they do not receive what they anticipate.
Homans (1974) later argues they can become angry when they do not receive a fair rate of
return.
Elements of the Social Exchange Theory

Cost
Cost refers to the intangible cost of time and efforts that occurred in the social interactions.
The cost of time examined the time and energy to carry out a conversation, time and energy
to do alternative activity. The value and cost of the time depends on the demand placed on the
individual’s time. The social exchange theory suggested that, individual will spend more time
in rewarding relationship and conversations (Redmond, 2015). Besides that, rewarding
relationship resulted in profit.
Rewards
According to the Human Resources Management Practices (2021), the rewards reflect the
outcome of extraordinary performance in an organization. Other literatures defined reward as
anything we allocate value for (Redmond, 2015). The social exchange theory suggested that
rewards couldn’t be achieved without social interactions that can takes different forms, such
as: Being accepted, loved, respected, attractive, valued, trusted, and their opinions are taken
into consideration (Redmond, 2015).
In reference to the self-directed theory, motivation factors are examined based on the goals
that push an individual to move and be motivated. The intrinsic motivation is driven by self-
satisfaction and enjoyment. While, extrinsic motivation is driven by external rewards or
avoidance of punishment. Besides that, the intrinsic motivation drives loyal and productive
workforce. According to Crossman (2020), if the rewards outweigh the punishment, then the
interaction is likely to continue. The theory addressed punishments, such as: Public
humiliation, beating, or execution, to subtle gestures like a raised eyebrow or a frown.

Profit
Homans (1961) stated that the greater the rewards and the fewer the costs, the greater the
profit a person gains. We seek interactions, which are profitable, that provide us with greater
reward than cost. Thus, it is attached with the level of satisfaction and enjoyment is probably
related to how rewarding that relationship is compared to what it costs.
Levine, Kim, and Ferrara (2010) as cited by Mark Redmond (2015), people are satisfied with
their relationships when the rewards exceed the costs, and they continue in those
relationships, where investments in this relationship lead to projected future profit.
Assessment of Social Exchange Theory

This section addressed the strengths and limitations of Social Exchange Theory. In light of
the strengths, it follows courses of logical thinking, assumed behavioral approaches in
describing relationships (Crossman, 2020). For example, people in social interaction
calculate the best means to compete and be rewarded and recognized, likewise for
punishment avoidance situations.
However, it has its own limitations, such as: Failure to explain negative human attitude and
behaviors, ignoring the nature of fact of relationships such as terminations or forming again.
Additionally, it ignores different paradigms of punishments and rewards. Besides that, the
value of the rewards varied from one individual to another. According to Crossman (2020),
the theory undercuts the social structure and forces, which unintentionally shape our
perceptions of the world and our social interactions.
3.3 Employee Retention
What is Employee Retention?

According to business management study guide (2021), employee retention refers to the
organization’s practices to retain employees for long period. Hom and Griffeth (1995) stated
that the process of encouraging employees to stay for a long period or till the project
completion is termed as retention (Kamalaveni, Ramesh, & Vetrivel, 2019). Similarly,
Chartered Institution of Personnel & Development defined employee retention as, the tenure
of employee in an organization (CIPD, 2020). On the other hand, employee turnover refers to

the proportion of employees who left the organization either voluntary or involuntary (CIPD,
2020).
Why Employee Retention is Important?
Skilled Workforce
According to Insala (2019), the labor market is booming and new technologies arise in the
businesses, which added more pressure to the workers to learn technical skills (Insala , 2019).
Jonathan Holmes, Korn Ferry managing director for MENA region, said: “There are plenty of
people, but not enough with the skills their organizations will need to survive.” (Hassan,
2018) . Besides that, a study done in KSA and UAE labor markets, showed that: There will
be a total labor deficit of 660,000 by 2030 in the Kingdom (Hassan, 2018).
With respect to the talent shortage, effective employee retention strategies become a must.
These talent employees are the future leader of the organization and will significantly secure
the future of the organization.
Employee Tenure
Employee tenure is highly appreciated and contributed to the organization’s competitive
advantages. For instance, employees with more service years showed strong relationship with
business partners and stakeholders that drive smooth business operations. Studies highlighted
the trends in employee tenure, states that: Median tenure for all working groups has
decreased since 2012 (Hassan, 2018). This finding is aligned with the observed decrease in
retention. Because of this, tenure is becoming scarce and highly anticipated by organizations.
Increasing employee retention is important to preserving these individuals as value-added
assets to the organization.
Cost of Turnover
The Work Institute’s report reveals that employers in 2018 paid over $600 billion in turnover
costs and the cost per employee estimated at 33% of their annual salary (Insala , 2019).
Additionally, the recruiting and training cost play vital role in retaining the existing
employees. According to Hassan (2018), businesses in Saudi Arabia could see a wage surge
of more than 17 percent, adding a potential $33.6 billion to the national payrolls. Similarly,

training cost for new hire can negatively impact the business and postponed the achievement
of business results.
Who should be Responsible for Employee Retention?
Role of Team Leaders and Supervisors in Employee Retention

Team leader should align employee’s interest and KSAo’s with the assigned tasks and
function. Business Management Study Guide (2021), stated that responsibilities should be
assigned based on employee’s specialization and qualifications. Thus, improving employee
job satisfaction and ensures full utilization of employee potential.
Additionally, equal work distribution is essential in retaining top performers. According to

Management Study Guide (2021), an over burdened worker never finds the job interesting
and would always be eager for a change. Important to mention that, leaders should not misuse
their positions and authority, they should treat their subordinate with respect and dignity to
promote healthy and productive working environment. Besides that, appreciation and
recognition is important role of leaders in employee retention.
Role of HR in Employee Retention

HR should work hand in hand with leaders and senior management to retain talents in the
organization. HR professional should establish two-way communication channel with the
employees and emphasized on open-door policy to listen to employee concerns. Besides that,
HR professional should master problem-solving skills and provide solutions and
recommendations to employee issues. (Management Study Guide , 2021) In support of
continuous learning and development, HR Professional should motivate employees to learn
something extra part from their routine work.
How to Retain Employees?

Practices that contribute to retention arise in all areas of HR, and all roles within an
organization will need to work together to develop and implement effective retention
strategies. Thus, leaders support, commitment, and buy-in are essential in sustaining high
employee retention rate in the organization. There is multiple areas of HR served employee

retention, including: Employee selection, Career Development, Consultation, Employee
Well-being, Employee Relations.
Employee Selection
According to CIPD (2020), effective employee retention strategies start with the right
recruitment and selection practices. Thus, HR professional and leaders should clearly explain
the role and responsibilities of the vacant position, recruit the right people for the right jobs.
In reference to CIPD (2020), career development and progression opportunities should be
shared with employees to further develop their skills and widen their horizons. (CIPD, 2020)
A part from that, promotions may not be feasible due to higher-level directives.
Career Development
As obtained in the literature, the definition of career development can be defined as a process
for achieving specific employee’s and organization goals. According to Parajapati (2021),
career development is the organization’s responsibility to improve the quality of work life,
where leaders plan for employee career growth, give the employees opportunities to grow and
utilize their potentials (Pajarati, 2021).
According to Berkely (2021) career development is the ongoing acquisition of skills and
knowledge, including job mastery and professional development, coupled with career
planning activities. Job mastery skills are those that are necessary to successfully perform
current job. Professional development skills are the skills and knowledge that go beyond the
scope of the employee's job description, although they may implicitly improve job
performance (Berkeley , 2021).
Since career development is a dynamic process, employees may need encouragement and
support in reviewing and re-assessing their goals and activities. Leaders should provide
valuable feedback and learning activities or resources. Formal training and classes away from
the job are effective in providing new information, but adult learners also need to practice
new skills. Therefore, active learning is effective in career development interventions.

Employee Voice
According to CIPD (2020), employee voice is “The ability of employees to express their
views, opinions, concerns and suggestions, and for these to influence decisions at work.”
(CIPD , 2021) In reference to management literature as cited by CIPD (2021), there are two
main purposes of voice: Organization and Individual voice. Firstly, organization voice meant
to improve innovation by listening to employee ideas. Secondly, individual voice refers to
employee involvement in the decision-making process and openly express their concerns.
Therefore, consultation services and practices recognized employee voice.
Employee Wellbeing
According to CIPD (2020), paying attention to employee well being is essential to promote
work-life balance and retain employees (CIPD, 2020). To illustrate, leaders should
proactively manage business through crisis, by developing business continuity and
contingency plans. Additionally, leaders are responsible to maintain stress-free work
environment and help employees to manage their stress and emotions during difficult
situations. In reference to figure (2.2) in the appendices section, mental health is the common
challenge in the business and remains the most common focus of well-being initiatives,
including: Stress management workshops, Counselling services, and employee assistance
programmes among their wellbeing benefits. (CIPD , 2020)
From different angle, International Labor organization (2021) stated that: Workers well being
is a key factor in determining an organisation's long-term effectiveness. Many studies show a
positive relationship between employee retention, productivity levels, and the general health
and well being of the workforce. Thus, wellbeing activities promote organization's long-term
effectiveness.
Employee Relations
According to CIPD (2020), leaders should demonstrate fairness with their subordinates, as
unfair practices are the major cause of voluntary resignation (CIPD, 2020). For instance,
favouritism and unfairness distribution of rewards and recognition lead to employee
dissatisfaction, low morale, and high tendency for voluntary turnover.

4.4 Humanistic Communication Strategy
Empirical studies in human science defined Humanistic-Psychological Approach and the
Communicative Approach, stated that: Employee are seen as human individuals whose
personal dignity and integrity, and the complexity of whose ideas, thoughts, needs, and
sentiments, should be respected (Khatib, Sarem, & Hamidi, 2013). Thus, employee is treated
as a whole and HRD interventions are human-centred as opposed to outcome/ task
orientation.
Literature described the humanistic approach in educational, as the establishment of the

context that influences teacher-student relationship through social interaction and negotiating
of meaning among peers, cooperative language learning can facilitate and support most of
their affective factors: Reducing anxiety, increasing motivation, fostering the development of
positive attitudes toward language learning, promoting self-esteem, as well as supporting
different learning styles and encouraging perseverance in the difficult and confusing process
of learning another language (Khatib, Sarem, & Hamidi, 2013).
The implications of a humanistic approach, organization should foster growth and learning in
each person, by paving the organizational conditions and ways of operation that people can
reach their own goals. The administration seeks to ease the ability of teachers and students to
formulate and use their potential, via removing obstructions and making a climate of valuing,
prizing, and trusting. Everyone takes part in the organizational process, sharing initiative,
responsibility and authority. For instance, supervisor who could listen, accept, understand,
clarify, and communicate assist individuals and groups grow (Khatib, Sarem, & Hamidi,
2013).
5.5. Leadership Development Best Practices

According to Lumen Learning (2021), leadership development can take different approaches,
such as: Formal Training, Job Assignments, 360 degree feedback, self-directed learning.
These approaches are captured in the leadership model.
Methods of Leadership Development
Leader development takes place through multiple mechanisms, including: Lecture-based

training, developmental job assignments, 360-degree feedback, executive coaching, and self-
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directed learning. These approaches may occur separately but are more effective in
combination (Lumen Learning , 2021). According to CIPD (2020), given the variety of
leadership styles and learning styles, a collection of formal and informal learning methods are
useful to build and sharpen leadership skills. It includes coaching and mentoring, coaching
offers leaders an opportunity to learn and master the coaching skills, in order to manage
others effectively.
Formal Training
Organizations often offer formal training programs to their leaders. Traditional styles provide
leaders with required knowledge and skills in a particular area using coursework, practice,
“overlearning” with rehearsals, and feedback (Kozlowski, 1998). This traditional lecture-
based classroom training is useful; however, its limitations include the practicality and
transferability of the acquired leadership competencies. Similarly, CIPD factsheet highlighted
postgraduate degree, such as: MBA or higher qualification in business is vital to gain
comprehensive knowledge associated with management, such as employee development,
finance, and accounting.
Developmental Job Assignment
Following formal training, organizations can assign leaders to developmental jobs that target
the newly acquired skills. A job that is developmental is one in which leaders learn, undergo
personal change, and gain leadership skills resulting from the roles, responsibilities, and tasks
involved in that acting assignment. Developmental job assignments are one of the most
effective forms of leader development, as it allows for experiential learning (Lumen Learning
, 2021). Similarly, Management Development factsheet published by CIPD stated that,
shadowing and secondment job assignments allowed leaders to gain hands on experience
(CIPD , 2020).
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360-Degree Feedback
The 360-degree feedback assessment provides leaders with perceptions of their performance
from a full circle of viewpoints, including subordinates, peers, superiors, and the leader’s
own self- assessment. According to CIPD (2020), leadership development center is useful
method to identify, assess, and develop leaders. However, HR professionals need to be clear
about its credibility, purpose, and outcomes.
Coaching
Leadership coaching focuses on leadership effectiveness, it involves one-on-one relationship

aimed at conveying important lessons through assessment, challenge, and support. Although
the goal of coaching is sometimes to correct a fault, it is used more and more to help already
successful leaders move to the next level of increased responsibilities and new and complex
challenges (Lumen Learning , 2021). Likewise, CIPD factsheet spotlighted the impact of
coaching session in establishing confidence between a leader and designated coach (CIPD ,
2020).
Self-directed Learning
Using self-directed learning, individual leaders teach themselves new skills by selecting areas
of interest for development and taking an ownership to develop their leadership competencies
(Lumen Learning , 2021). According to CIPD (2020), self-paced virtual leadership training
courses are additional source for leadership development.
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Leadership Development Models
To sum up the above leadership development mechanisms, 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 element identifies three elements
that combine to make developmental experiences stronger: Assessment, challenge, and
support. Firstly, Assessment helps leaders to identify their current position, by knowing
where they stand in areas of strengths, current performance level, and developmental needs.
Secondly, challenging experiences that stretch leaders’ ability to work outside of their
comfort zone, develop new skills and abilities, and provide new opportunities to learn.
Thirdly, Support, which mainly comes from bosses, co-workers, friends, family, and coaches
to enable leaders to handle the struggle of developing.
The second part of the leader-development model illustrated that the development process
involves a variety of developmental experiences and the ability to learn from them. These
experiences are interrelated and interdependent (Lumen Learning , 2021). For example,
leaders with a high ability to learn from experience will seek out developmental experiences,
and through these experiences leaders increase their ability to learn.
The leader-development process is rooted in a particular leadership context, which includes

elements such as age, culture, economic conditions, population gender, organizational
purpose and mission, and business strategy.
General Electric Model of Leadership Development
Important to mention one of the well-known models of leadership development, that is used
by the General Electric Corporation. Leaders with high potential are identified early in their
careers. Their development is monitored and planned to include a variety of rotational
assignments to develop skills and experience, a rigorous performance-evaluation process, and
formal training programs at the corporate leadership center in Crotonville, New York.
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7. DATA COLLECTION AND RESULTS
This research is based on primary and secondary source data. An Employee Engagement
survey was distributed virtually. The survey consists of two main groups: Grouping questions
and specific questions related to the research topic, which consists of six main categories with
a total of 27 questions. The six main categories are, as follows: Career Development, Work
Engagement, Compensation, Management Relationship, Benefits, Work Environment. The
survey responses collected from different sectors, including: Agriculture, Education, and HR.
The sample size was 8 responses, including: Business owners, business partners, and
individual contributors.
To improve the reliability and validity of the data, additional data has been collected from 22
workers through focus group. Questions given were like survey questions. Their responses
were included in the total to have an idea of their suggestions, to assess the need and
application of social exchange theory in business setting. Table below identified the survey
results. Survey questions details will be shown at appendices section.
In light of the secondary data, CIPD Reports, survey, and, fact sheets were utilized to support
the findings of the primary data.
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Figure (1.1): Survey Questions: Below table illustrated the survey responses per question
Grouping Questions A B C D E Total

Q#1 14 16 30
Q#2 28 2 30
Q#3 17 3 30
Q#4 28 1 1 30
Q#5 1 1 28 30
Q#6 20 5 3 2 30
Q#7 28 2 30
Q#8 20 2 4 1 2 30
Specific Topic Questions
Q#1 1 6 22 1 30
Q#2 13 15 1 1 30
Q#3 1 29 30
Q#4 1 28 1 30
Q#5 1 17 5 7 30
Q#6 1 28 1 30
Q#7 1 6 11 12 30
Q#8 1 7 8 30
Q#9 9 13 8 30
Q#10 1 6 11 12 30
Q#11 8 16 3 2 30
Q#12 8 18 2 2 30
Q#13 8 18 2 2 30
Q#14 1 27 1 1 30
Q#15 1 28 1 30
Q#16 1 12 17 30
Q#17 1 1 28 30
Q#18 1 29 30
Q#19 1 29 30
Q#20 1 29 30
Q#21 1 29 30
Q#22 1 27 2 30
Q#23 2 26 2 30
Q#24 2 26 2 30
Q#25 1 28 1 30
Q#26 1 28 1 30
Q#27 1 28 1 30
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8. DATA ANALYSIS
This section is intended to analyze the assumptions and beliefs of the survey’s participants
regarding the extent to which they feel passionate about their jobs, committed to the
organization, and the willingness to put discretionary effort into their work, through
employee engagement survey and focus group. The survey focused on the following subjects:
Career Development, Work Engagement, Compensation, Management Relationship,
Benefits, and Work Environment.
The sample is 30 responses, majority of takers were 53% females, while the minority of
takers were 46.6% males. Also, 93% were aged between 25 to 35 years, 6.67% were aged
between 36 to 45 years. Moving to their annual income, 56.67 % were below SR 50,000, this
clarify that they were individual contributor as employee and 10% had an annual income
between 50,000 to 100,000, this portion clarify that they were at top and middle management
as business owner and business partner. A majority 66.67% had below 5 years of experience.
There is positive relationship between career development and work engagement elements.
To illustrate, majority of employees are not satisfied with the opportunities for career growth,
in return they are not determined to give their best effort at work. This is because employers
focused on job-related training that boosts employee productivity at the current job to achieve
the business targets, ignoring the employee long-term career growth. This supports
Berkeley’s definition of career development, stated that: Professional development skills are
the skills and knowledge that go beyond the scope of the employee's job description, although
they may implicitly improve job performance (Berkeley , 2021). Additionally, career
development is the organization’s responsibility to improve the quality of work life, where
leaders plan for employee career growth, give the employees opportunities to grow and
utilize their potentials (Pajarati, 2021).
Furthermore, since a majority of 93% who are aged between25 to 35 yeas respondents were
individual contributors, from the seventh question regarding the fulfilment of one’s career
goals, a majority of 40% are not inspired to meet their goals at work. According to litritures,
employees who failed to meet their goals at work are either not fit with the current position,
too busy with other tasks which caused them to be mantly and physically exhusted.
16

This emphasized the role of leaders in maintaining stress-free work environment, helps
employees to manage their stress and emotions during difficult situations. Additionally, it
supports the CIPD Survey findings that mental health is the common challenge in the
business (CIPD , 2020).
There is positive correlation between the applications of full potential, talent, and expertise
and the employee-supervisor relationship. To illustrate, 23% of the employees felt that they
don’t have the opportunity to apply their full potential and 96.67% of the employees don’t
have good relationship with their supervisor. This confirmed the Humanistic-Psychological
Approach and the Communicative Approach, stated that: Employee should be seen as human
individuals whose personal dignity and integrity, and the complexity of whose ideas,
thoughts, needs, and sentiments, are respected (Khatib, Sarem, & Hamidi, 2013). This leads
to another observation regarding the employee’s ability in making decisions related to career
growth. 93% employees are not safe to voice out their opinions, concerns, and career plans
with their supervisors, due to lack of two-way communication channel. This supports the
individual voice concept, which is the employee involvement in decision-making process
open communication between supervisor and employee (CIPD , 2021).
Furthermore, 96.67% of the employees felt that their job is not recognized and appreciated at
work and has poor relationship with their supervisor. Thus, there is positive correlation
between recognition and employee-supervisor relationship. As stated in the literatures, lack
of recognition is due to lack of visibility to senior management, credit is given to someone
else, employee got passed over for promotion and praise. This is inline with the social
exchange theory, suggested that: Rewards couldn’t be achieved without social interactions
that can takes different forms, such as: Being accepted, loved, respected, attractive, valued,
trusted, and their opinions are taken into consideration (Redmond, 2015).
Since 56.67 % of employees were not communicating with the senior leaders, this
emphasized the root causes of lack of recognition, where employees are not exposed to
management to be recognized for their hard work and accomplishments.
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9. CONCLUSIONS
In conclusion, statistics and literatures emphasized the need for social exchange theory
application in the business. Besides that, humanistic culture paved the way for social
exchange theory application. Leaders tend to adopt the classical management approach,
where viewed employees as they only have physical and economic needs. It does not take
into account social needs or job satisfaction. This approach was highlighted in several
categories in the given employee engagement survey, including: Work Engagement, Career
Development, and Management Relationship. The significant drop in these categories is
alarming to organizations as it gives an indicator that employees are not satisfied and have
tendency to leave the organization at any given time.
Leadership development is an additional venue to adopt social exchange theory, where

leaders are provided with formal and informal leadership development methods to benefit
themselves and others around them. Additionally, “stretch” or developmental assignment
challenges leaders’ new skills and pushes them out of their comfort zone to operate in a more
complex environment, one that involves new elements, business issues, and dilemmas, and
employee performance issues to resolve. Besides that, 360-feedback assessment is vital to
gain holistic view of leader’s strengths, weaknesses, and areas of improvement. For this
mechanism to be effective, the leader must accept feedback and be open and willing to make
changes. To complement the process, coaching session should be facilitated to interpret 360-
degree feedback report and help effect change using open discussion. Coaching aims to move
leaders toward measurable developmental goals that contribute to individual and
organizational growth and effectiveness. Importantly, leaders should be willing to learn and
receptive to personal change. Considering the self-directed learning helps leaders to gain a
broader perspective on leadership responsibilities and what it takes to succeed as a leader.
Considering the application of social exchange theory to retain employees and fostering
interactive and humanistic working culture can be done in different ways, such as: On-going
on to one sessions, coaching and counselling sessions, support relationship development,
recognition programs. Starting with the one to one meetings, these meetings enable
employees to express their opinions, concerns, and feelings openly with their leaders.
Eventually, build positive and trusted relationship, where they feel heard, supported, and
respected. Additionally, coaching and counselling sessions is key enabler to people
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development. Through coaching session, employee is given the opportunity to discuss and
develop the career development plans with designated coach, which showed the genuine care
and investment in employee development and supports the social exchange theory where
employee will spend more time in rewarding relationship and conversations (Redmond,
2015). Thus, employee will be loyal to the organization when their professional development
is considered and valued by the employer. Another venue to establish positive relationship
and strong connection with employees is the workplace gatherings, informal talks, and social
activities. Eventually, friendly relationship promotes healthy and humanistic work culture
that attracts and retains employees. Such social activities enabled leaders and employees to
get to know each other at personal level away from work. In support of the second
proposition, the stimulus proposition, states that behavior that has been rewarded on such
occasions in the past will be performed in similar context. Rewards and recognition program
is vital to translate social exchange theory into practice and improve employee retention.
Additionally, the power of humanistic communication strategy plays a major role in creating
positive and rewarding relationship, thus retaining employees. Through humanistic
communication, leaders will be able to effectively handle difficult conversations, combine
humility, compassion, and collaboration into everyday interactions with employees.
Additionally, HR professionals should act as strategic business partners to guide and advise
management to the best practices in HRM & HRD to unleash employee’s talents and retain
top performers, such as: Promote internal mobility opportunities through sharing vacancies
with employees to allow for rotational assignment and cross-functional training opportunities
that match their interest, knowledge, skills, and abilities as well as address the business needs.
KPI dashboard is created to measure the impact of social exchange theory in employee
retention rate, please refer to figure (3.3) & (4.4) in the appendices page for more details.
Additionally, an animated video is attached in the references page to visualize the impact and
application of social exchange theory in employee retention. Furthermore, a future study will
examine the use of predictive analytics in measuring the impact of social exchange theory
application in employee retention.
19

10. REFERENCES
1. Al-Asmari & Khan*. (2014, 2). E-learning in Saudi Arabia: Past, present and future. Near
and middle eastern journal of research in education , 2-11.
2. Al-Kahtani & Khan. (2013). Human Resource Development Practices in telcom sector in
saudi arabia: As Empirical presentation. World Applied Sciences Journal (28(11)), 1567-
1578.
3. Forstenlechnera et al. (2011). Emiratisation: determining the factors that influence the
recruitment. The International Journal of Human Resource Management, , 1-16.
4. Alnaqbi, W. (2011). The relationship between human resource practices and employee
retention in public organisations : an exploratory study. Research Online. , 1-231.
5. Alothman, A. (2017). Affirmative Action policy and Labour Market. Research Gate , 1-
279.
6. AlSabeeh et al. (2015). Labor market dynamics in the GCC states. Oxford university. UK:
OxGAPS Forum.
7. Berkeley . (2021, April 8). Employee Development and Training: Concepts & Definitions.
Retrieved April 8, 2021 from Berkeley Website:
https://hr.berkeley.edu/hr-network/central-guide-managing-hr/managing-hr/managing-
successfully/development/concepts - https://hr.berkeley.edu/hr-network/central-guide-
managing-hr/managing-hr/managing-successfully/development/concepts
8. CIPD . (2021, March 29). Employee voice. Retrieved April 8, 2021 from CIPD Website :
https://www.cipd.co.uk/knowledge/fundamentals/relations/communication/voice-factsheet
9. CIPD . (2020). HEALTH AND WELL-BEING AT WORK. Chartered Institue of

Personnel and Development , Health & Wellbeing . London: CIPD .
CIPD. (2020, July 21). Employee turnover and retention. Retrieved April 4 , 2021 from CIPD
Website : https://www.cipd.co.uk/knowledge/strategy/resourcing/turnover-retention-factsheet
- https://www.cipd.co.uk/knowledge/strategy/resourcing/turnover-retention-
factsheet%237169
10. CIPD. (2020, July 21). Employee turnover and retention. Retrieved April 8, 2021 from
CIPD file://localhost/Website:
https/::www.cipd.co.uk:knowledge:strategy:resourcing:turnover-retention-factsheet
11. CIPD . (2020, August 20). Management Development. Retrieved April 20, 2021 from
CIPD Web Site : https://www.cipd.co.uk/knowledge/strategy/development/management-
factsheet
12. Crossman, A. (2020, January 14). Understanding Social Exchange Theory. Retrieved 4 4,
2021 from ThoughtCo.: https://www.thoughtco.com/social-exchange-theory-3026634 -
https://www.thoughtco.com/social-exchange-theory-3026634
20

13. Hassan, R. (2018, July 3). Saudi Arabia’s skilled talent shortages mean salaries could
soar. Arab News .
14. Hussain & Ahmad. (2012). Mostly Discussed Research areas in Human Resource
Management (HRM) –. International Journal of Economics , 2 (No.3), 10-17.
15. Insala . (2019, June 10). Why Employee Retention is Important. Retrieved April 8, 2021
from Insala Website :https://www.insala.com/blog/why-employee-retention-is-important -
https://www.insala.com/blog/why-employee-retention-is-important
16. Iveta. (2012). Human Resources Key Performance Indicators. Journal of Competitiveness
Kamalaveni, M., Ramesh, S., & Vetrivel, T. (2019). A REVIEW OF LITERATURE ON
EMPLOYEE RETENTION. International Journal of Innovative Research in Management
Studies (IJIRMS) , -10.
17. Khatib, M., Sarem, S. N., & Hamidi, H. (2013). Humanistic Education: Concerns,
Implications and Applications. Journal of Language Teaching and Research , 4, 45-51.
18. Lumen Learning . (2021, April 20). Developing Leadership Skills . Retrieved April 20 ,
2021 from Lumen Boundless Management: https://courses.lumenlearning.com/boundless-
management/chapter/developing-leadership-skills/
19. Management Study Guide . (2021, April 8). Role of HR in Employee Retention.
Retrieved April 8, 2021 from Management Study Guide Website :
https://www.managementstudyguide.com/role-of-hr-in-employee-retention.htm -
20. Pajarati, S. (2021, April 8). What is Career Development? Retrieved April 8, 2021 from
business management ideas website: https://www.businessmanagementideas.com/human-
resource-management-2/career-development/what-is-career-development/20203
21. Redmond, M. V. (2015). Social Exchange Theory. In M. V. Redmond, Social Exchange

Theory (Vol. 5). Iowa : English Technical Reports and White Papers.
22. Shammot, M. M. (2014). The role of human resources management practices represented
by employee's recruitment and training and motivation for realization of competitive
advantage. African Journal of Business Management , 8(1), 35-45.
23. Stowers, J. (2020, July 23). Employee Retention: What Does Your Turnover Rate Tell
You? From Business.com:https://www.business.com/articles/employee-turnover-rate/
21

11. APPENDICES
Figure (1.1): Survey Questions
Impact and Application of Social Exchange Theory in Employee

SPECIFIC TOPIC
Retention
Self employed / Workforce from different sectors (Agriculture,

POPULATION
Education, HR, Health Care)
30 workers / self-employed from different sectors (Agriculture,

SUBJECTS
Education, HR, Health Care)

GROUPING QUESTIONS : Category#1 : Employee Information

1. NAME (Optional)
2. GENDER (SEX): o Male o Female
3. AGE o 25-35 o 36-45 o Above 45
4. ANNUAL INCOME o Below 50,000 o 50,000 - 100,000

(SAR): o 100,000 - 300,000 o Above 300,000
5. Role o Individual Contributor o Owner oPartner

o Top Management oMiddle Management
6. POSITION: o Staff
o Below 5yrs o 5-10yrs o 10-15yrs

7. WORK EXPERIENCE: o Above 15yrs
8. EMPLOYMENT STATUS: o Employer o Employee o Self-Employed
9. SECTOR
o Education o Agriculture
o HR
22

Specific Topic Research Questions
Category #2: Career Development

1. I am satisfied with the Strongly Agree Strongly Disagree
opportunities for Agree Disagree
professional growth
2. I am pleased with the Strongly Agree Strongly Disagree
career advancement Agree Disagree
opportunities available to
me
3. My organization is Strongly Agree Strongly Disagree
dedicated for my Agree Disagree
professional development
job-related training that my Agree Disagree
organization offers
5. I am satisfied that I have Strongly Agree Strongly Disagree
the opportunity to apply my Agree Disagree
talent and expertise
investment my organization Agree Disagree
makes in training and
education
Category #3: Work Engagement

7. I am inspired to meet my Strongly Agree Strongly Disagree
goals at work Agree Disagree
8. I feel completely Strongly Agree Strongly Disagree
involved in my work Agree Disagree
9. I am often so involved in Strongly Agree Strongly Disagree
my work that the day goes Agree Disagree
by very quickly
10. I am determined to give Strongly Agree Strongly Disagree
my best effort at work each Agree Disagree
day
11. In my organization, Strongly Agree Strongly Disagree
employees adapt quickly to Agree Disagree
difficult situation
12. Employees in my Strongly Agree Strongly Disagree
organization take the Agree Disagree
initiative to help other
employees when the need
arises
13. I am willing to take on Strongly Agree Strongly Disagree
new tasks as needed Agree Disagree
23

Category #4: Compensation
14. I am satisfied with my Strongly Agree Strongly Disagree
overall compensation Agree Disagree
package
15. I am compensated fairly Strongly Agree Strongly Disagree
relative to my local market Agree Disagree
Category #5: Management Relationship

16. Communication Strongly Agree Strongly Disagree
between senior leaders and Agree Disagree
employees is good in my
organization
17. I am able to make Strongly Agree Strongly Disagree
decisions affecting my work Agree Disagree
18. My job is fully Strongly Agree Strongly Disagree
appreciated and recognized Agree Disagree
at work
19. I have good relationship Strongly Agree Strongly Disagree
with my supervisor Agree Disagree
20. I have good relationship Strongly Agree Strongly Disagree
with my co-workers Agree Disagree
21. Senior management and Strongly Agree Strongly Disagree
employees trust each other Agree Disagree
22. Employees treat each Strongly Agree Strongly Disagree
other with respect Agree Disagree
Category #6: Benefits

23. I am satisfied with my Strongly Agree Strongly Disagree
total benefits Agree Disagree
24. I am satisfied with Strongly Agree Strongly Disagree
health care related benefits Agree Disagree
paid leave offered by my Agree Disagree
organization
Category #7: Work Environment

26. I understand how my Strongly Agree Strongly Disagree
work impacts the Agree Disagree
organization’s business
goals
27. I feel secured in my job Strongly Agree Strongly Disagree
Agree Disagree

24

Figure (2.2): Wellbeing survey;The position of health and well-being in organizations
(% of respondents) (CIPD , 2020)

25

Figure (3.3) illustrated the application of social exchange theory in business context.
The theory suggested three main elements, including: Reward, Cost, and Profit
(Benefits) that can be translated into three main HRD & HRM practices, including:
Employee Engagement, Coaching, Career Development.
100
Employee Engagement Score
90
80 Coaching session held with my

employee
70
Coaching session held with my
60 supervisor
50 # of RecogniEon Event (Held)(Y/

N)
40
Townhall MeeEng (Held)

30
20
Social Gathering / AcEviEes
10
# of employees who had career

0
development opportuniEes (ADP,
RotaEonal Assignment )

26

Figure (4.4) Below figure illustrated the Social Exchange KPI as an outcome of
the above mentioned study, findings, and breakdown showed in figure (3.3)

Social Exchange KPI (2020)

Social Exchange Theory Score (Actual)
Social Exchange Theory Score (Target)

85
71.8

27

Alnajim, 2021

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Impact and Application of Social Exchange Theory in Employee Retention

Written by: Afnan Y. Alnajim

Electronic copy available at: https://ssrn.com/abstract=3884032

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- Social Exchange Theory

3. RESEARCH DESIGN / METHODOLOGY / APPROACH

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According to SHRM's Employee Job Satisfaction and Engagement: The Doors of

Setting impactful retention strategies need to be aligned with individual needs, by

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2.2 Social Exchange Theory

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Elements of the Social Exchange Theory

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Assessment of Social Exchange Theory

3.3 Employee Retention

What is Employee Retention?

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Why Employee Retention is Important?

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Who should be Responsible for Employee Retention?

Role of Team Leaders and Supervisors in Employee Retention

Additionally, equal work distribution is essential in retaining top performers. According to

Role of HR in Employee Retention

How to Retain Employees?

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Literature described the humanistic approach in educational, as the establishment of the

5.5. Leadership Development Best Practices

Methods of Leadership Development

Leader development takes place through multiple mechanisms, including: Lecture-based

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Developmental Job Assignment

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Leadership coaching focuses on leadership effectiveness, it involves one-on-one relationship

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The leader-development process is rooted in a particular leadership context, which includes

General Electric Model of Leadership Development

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Grouping Questions A B C D E Total

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Leadership development is an additional venue to adopt social exchange theory, where

Electronic copy available at: https://ssrn.com/abstract=3884032

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9. CIPD . (2020). HEALTH AND WELL-BEING AT WORK. Chartered Institue of

Electronic copy available at: https://ssrn.com/abstract=3884032

21. Redmond, M. V. (2015). Social Exchange Theory. In M. V. Redmond, Social Exchange

Electronic copy available at: https://ssrn.com/abstract=3884032

Impact and Application of Social Exchange Theory in Employee

Self employed / Workforce from different sectors (Agriculture,

30 workers / self-employed from different sectors (Agriculture,

GROUPING QUESTIONS : Category#1 : Employee Information

4. ANNUAL INCOME o Below 50,000 o 50,000 - 100,000

5. Role o Individual Contributor o Owner oPartner

o Below 5yrs o 5-10yrs o 10-15yrs

8. EMPLOYMENT STATUS: o Employer o Employee o Self-Employed

Electronic copy available at: https://ssrn.com/abstract=3884032

Category #2: Career Development

Category #3: Work Engagement

Electronic copy available at: https://ssrn.com/abstract=3884032