Reward developed on the basis of economic exchanges are

Reward Practicess and Social Exchange
Relationships between employers and employees are predominantly based on social
and economic exchanges (Kehoe and Wright 2013). Economic exchanges specify
contractual arrangements, such as pay, bonuses and opportunity for promotions.
These contractual obligations are clearly de?ned and enforceable through legal
sanctions (Gould-Williams 2007). Relationships developed on the basis of
economic exchanges are typi?ed by discrete, ?nancially oriented interactions
with no explicit expectation that performance will go beyond the terms of the
contract (Shore et al. 2006). Social exchanges, on the other hand, involve the
development of interdependent relationships in which unspeci?ed bi directional
transactions occur. In other words, “something” desirable is given by the
“donor,” and at some future point in time, “something” desirable is returned by
the “recipient” (Gould-Williams 2007). Such interdependence is based on
“normative rules” of reciprocity (Gouldner 1960), which are the “de?ning
characteristic” of social exchange relationships (Cropanzano and Mitchell 2005,
876). Because of the temporal gap between what is given and what is returned, successful
social exchange relationships are characterized by high degrees of loyalty and
trust between donor and recipient (Gould-Williams 2007).

Social exchange theory has been used
extensively as a framework by both HRM (Kehoe and Wright 2013) and, to a lesser
extent, public administration scholars (Gould-Williams 2007; Gould-Williams and
Davies 2005) to explain the relationship between Reward Practices and employee
performance.         Reward Practices are
typically conceived as a group of carefully designed combinations of HR activities
meant to improve performance (Boselie, Dietz, and Boon 2005). The
implementation of Reward Practices are premised on the assumption that
organizations want to promote workforce commitment by investing in employees
(the resource-based or “soft” approach to HRM; see Gould-Williams 2007). Th is
is distinct from the control-based approach, in which employees are closely
monitored and directed (the “hard” approach to HRM).

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When organizations invest in Reward
Practices, employees are assumed to view this as an expression of the
organization’s trust and commitment to them, an appreciation of their work, and
a desire to engage in a long-term relationship (Shore and Shore 1995; Sun,
Aryee, and Law 2007). For instance, allowing employees to plan their work may
signal that the organization trusts them. Personalized training and development
programs can signal that organizations value employees, as they are prepared to
invest in their careers and future prospects. Opportunities for promotion and
job security may similarly signal the organization’s appreciation and
recognition of employees’ long-term worth. Therefore, in combination, Reward
Practices should promote the view that organizations are desirous of forming a
long-term social rather than a short-term economic exchange relationship with
employees (Kehoe and Wright 2013).

Signals sent by organizations through
Reward Practices are not always perceived by employees as intended. “All HRM
practices communicate messages constantly and in unintended ways, thus
messages can be understood idiosyncratically” (Bowen and Ostro?  2004, 206; emphasis added). Two employees may
have di?erent perceptions of the same set of Reward Practices. Therefore, we
will focus on employees’ “experiential-based perceptions” of Reward Practices
rather than managers’ assessments of “intended” HR policy (Liao et al. 2009,
374). Also employees’ perceptions of HR practices are more likely to be aligned
with their work-related attitudes and behaviors. Moreover, we focus on the
overall e?ect of a group or system of interrelated HR practices rather than any
single practice, as the e?ectiveness of individual practices is often dependent
on complementary HR practices. For example, investments in employee training
and skill development may only be effective when employees are provided with
opportunities to use their newly acquired skills through, among other things,
autonomous work design. This approach is consistent with the general HRM
literature and the social exchange view in that it is the combined effect of HR
practices that in?uences employees’ perceptions of the organization’s
investment in them and, thus, the state of the social exchange relationship
(see Jiang et al. 2012; Sun, Aryee, and Law 2007).

The Direct Effect of Reward Practices
on Employee performance According to social exchange theory, when employees
perceive Reward Practices as indicative of the organization’s investment in
them, they are likely to respond with positive attitudes (a?ective commitment)
and behaviors (PUBLIC SERVICE MOTIVATIONs). A?ective commitment refers to an
employee’s emotional attachment to the organization, and it represents one of
Allen and Meyer’s (1990) three dimensions of Employee Job Performance.
Employees who are a?ectively committed or emotionally attached to the
organization will stay with their organization because they want to, not
because they have to (continuance) or feel they ought to (normative). In doing
so, Kehoe and Wright contend, a?ectively committed employees will have “a sense
of pride at being part of the organization” (2013, 371). Thus, when employees
perceive Reward Practices as signaling a supportive work environment, they will
feel motivated to work toward organizational goals and thus develop an a?ective
bond with the organization. In other words, if the organization is committed to
them, they will commit to it (Shore et al. 2006). Similarly, from a process
theory perspective, when the work environment promotes collaboration between
employees through teamwork, training, and e?ective communication, the social
interactions will provide opportunities for employee bonding and increased
identi?cation and commitment to the organization (Perry 2000).

On the basis of social exchange theory, Kehoe
and Wright (2013) suggest it is unlikely that employees’ a?ective commitment
and performance alone will be su?cient to “balance the scales” given the high
investments made by the organization in Reward Practices. Accordingly,
employees may feel compelled to make “further contributions to level the ?eld”
(Kehoe and Wright 2013, 372) by displaying positive work-related behaviors, such
“individual behaviors that are discretionary, not directly or explicitly
recognized by the formal reward system and that in the aggregate promote the e?ective
functioning of the organization”