Workshop on Research Advances in Organizational

Behavior and Human Resources Management

Paris Dauphine
DRM - Management & Organisation
May 2011

Employment relationship in Academic Sciences

Jean-Yves HAMIOT
Ph-D. Student in Management Sciences
IDRAC Center for Applied Research in Management
47, rue Sergent Michel Berthet - CP 607 69258 Lyon Cedex 9
Mail: jeanyves.hamiot@idraclyon.com

Abstract:

The term employment relationship is widespread in current literature dealing with

organizational economics, organizational sociology, organizational psychology... Frequently,

it is used as a common expression without defining it while at the same time treating it as a

scientific concept. First, a definition of the perimeter of the construct will be proposed. Then a

review of the main theories put forward by academic sciences dealing with the employment

relationship will be carried out. The objective is to find the paradigms that structure the

construct. Then the author will draw the conclusion that it is necessary to delve further into

the cognitive processes present in the employment relationship.

Keywords: employment relationships, paradigms

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1. The problems involved in the definition of the concept:

The term employment relationship is widespread in current literature dealing with

organizational economics, organizational sociology, and organizational psychology...

Frequently, it is used as a common expression without defining it while at the same time

treating it as a scientific concept.

The aim of this article is to review the available literature, as part of a thesis on the

employment relationship, in order to locate the paradigms that structure the corpus and to

identify with more precision the means to achieve a more thorough analysis.

In 1993, Taylor and Giannantonio published recommendations in order to guide future

research on the employment relationship. They advocated the constitution of a common body

of knowledge on the three employment status activities – formation, adaptation and

termination – from three perspectives – individual, organizational and interactionnist

(Taylor&Giannantonio, 1993).

So far, from what we know, only one book has attempted to draw up a synthesis of the

various approaches to the employment relationship. It does not give a consensual definition of

the construct and prefers to define it through questions: “What then is the true essence of the

employment relationship? Is it simply an economic exchange or relationship that begins with

economic origins but soon broadens in scope to an enduring social relationship? Is it a

legally enforceable contract between two parties, albeit one involving parties who participate

as “whole persons” rather than as group of knowledge and skills working for a group of pay

and benefits? Is it a relationship which by its very nature is fraught with inherent conflicts of

interest where employees need protection from powerful employers?” (Coyle-Chapiro et al.,

2004).

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In order to delineate a perimeter for the concept, the book restricts its main field of

investigation to the issue raised by the concept of exchange. This issue is mainly tackled

through the social exchange theory, with complementary contributions from several academic

disciplines. While acknowledging the benefit brought by this analysis, we feel that this choice

can be debated. Hence the fact that this article will also mention other theoretical approaches

which have not been taken into account in this book.

First of all, and in order to refine the definition of the construct, we have decided to draw

from a definition that Kelly gives regarding Industrial Relations (Kelly, Coyle-Chapiro,

J.A.M., et al., 2004). It also seems suited for delineating scientifically the concept of

employment relationship. This relationship is thus a construct that can be observed in three

fields of study: Organizational Behaviour, Human Resources Management and Industrial

Relations, comprising contributions from across the social sciences, including economics,

sociology, law, politics and psychology.

Furthermore, the review of the literature dealing with the employment relationship shows that

the concept can be studied at different levels of the relation: for example Employee-

Employer, Employer-Employee, Employee-the group of Employees, and from the two sides.

The parties concerned can be defined differently according to the aims of the analysis. The

employee can be studied as an individual, as a group, or through the representatives of his

category, [most of the time the trade unions]. The employer can be studied or left aside. When

he is studied, it is either as the employer or as an organisation [ from a strategic perspective],

or individualised as the immediate leader.

The combination of the various levels of analysis and of the parties concerned offers five

cases substantiated by five different theoretical perspectives.

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 Chart n°1: “The Employment Relationship in the scientific literature”

Fields (OB) organizational behavior, (HRM) human resource management,

(IR) industrial relations
Academic Economics, Sociology, Law, Politics and Psychology
Disciplines
Level of Employee- Employee- Employer-Employee From two
analysis Employer Employees relationship sides
relationship relationship
Parties Individual Individual Organizational Organization Employees
involved employee employee employer and and
and and and 
 the individual Employers
organizational the group of the collective employee
employer the other employee
employees representative
Main Social Socialization, Collective Contingency, Perception of
theoretical exchange, Norms bargaining, Leadership, Mutual
perspectives Transactional Organizational Employability, Obligations,
& relational justice Downsizing Congruence
contracts,
Needs

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2. The concept from the scientific disciplines standpoint

The main difficulty in attempting a definition of the construct comes from the fact that it is

the object of various ambitions. Thus in scientific literature, we can find the following

definitions:

- The ambition to apply academic disciplines to the study of a real fact.

- An all-embracing desire discernible in the way the employment relationship is

regarded as a whole.

- The desire to distinguish constructs that are similar and that even overlap at

times.

- A constructivist approach that lets the parties involved in the employment

relationship analyse their own personal experience.

Due to a lack of means, in this article we will restrict the analysis of the concept to the

approach by academic disciplines. We will then attempt to identify the main paradigms that

can be observed.

2.1 From an Economic Sciences standpoint:

It seems that, for quite a long time, the issue of employment has been the “preserve” of

economists. As a matter of fact, as Atchison points out, the employment relationship

underwent a turnaround at the beginning of the industrial revolution (Atchison, 1991). It is

also known that Marx played a decisive role in the formal definition of the concept of work by

turning it into an abstract entity. In his book, written in 1859, he gives a definition which

demonstrates clearly the desire at that period in time to get rid of the idiosyncratic dimension

5
of the relationship: “The determination of exchange-value by labour-time, moreover,

presupposes that the same amount of labour is materialised in a particular commodity,

say a ton of iron, irrespective of whether it is the work of A or of B, that is to say,

different individuals expend equal amounts of labour-time to produce use-values

which are qualitatively and quantitatively equal.”(Marx, 1977).

Thereafter, several authors have contributed substantially to the analysis of the employment

relationship from an economic sciences standpoint. Thus, the analysis performed by Marshall

and his successors of the neoclassical school tends to consider employment from the narrow

viewpoint of the labour market.

“This theory stresses that individuals and firms make, respectively, utility-maximizing

and profit-maximizing choices based on market-determined prices that they cannot

influence. In perfectly competitive environment, the choices they make lead to optimal

outcomes for individuals, firms and society as a whole.”(Block et al., Coyle-Chapiro,

J.A.M., et al., 2004).

From a different perspective, but with a similar argumentation, the analysis developed by

Becker tends to consider human investment on societal or organisational grounds and to

validate it economically (Becker, 1964). His concept of “human capital” puts man at the core

of economic and social progress (Chamak&Fromage, 2006).

In addition, an author such as Schumpeter, with his concept of “Creative destruction”, does

not deal directly with the employment relationship but justifies the operations of

“downsizing” whose goal would be to increase the performance of the organisation.

Then, with the transaction-cost theory, economists have now analyzed the inner workings of

the organization and as a result, company CEOs now have access to economic tools which

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allow them to choose between employment or outsourcing (Williamson et al., 1975). We will

develop this point later on in the section that deals with the legal approach.

2.2 The concept from a sociological standpoint:

The employment relationship has long been studied by sociologists too. The most prolific

Anglo-Saxon school is the one that evolved from the Social Exchange Theory. In their

summary chapter Coyle-Shapiro and Conway refer to two successive groups of author

(Coyle-Chapiro&Conway, Coyle-Chapiro, J.A.M., et al., 2004).

The older is that of the very first sociologists Malinowski and Mauss known for their analysis

of the “gift” as a “total social fact” (Mauss, 1950). In this connection, Pihel remarks: “ The

originality of the gift-exchange is to consider the situations in a perspective which is

culturally determined , embedded, total and tangled up by proposing an entry into the

relationship through the specificities of the environment and its traditions.” (Pihel, 2008).

This dimension tends to disappear in the more recent works of the social exchange theory in

favour of concepts such as cost-benefit as the following quotation shows: “Social behavior is

an exchange of goods, material goods but also non-material ones, such as the symbols of

approval or prestige. Persons that give much to others try to get much from them, and

persons that get much from others are under pressure to give much to them. This process of

influence tends to work out at equilibrium to a balance in the exchanges.” (Homans, 1958).

Another sociological approach to the employment relationship focuses on the socialization of

the members of the organization. This socialization is considered as the process of inheriting

norms, customs and ideologies. One of the oldest theories of socialization is that of Max

Weber in his analysis of the spirit of capitalism (Weber, 1905).

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2.3 The concept from a legal standpoint:

As Roehling points out in the article about the relations between law and the employment

relationship theory: “the richness of legal theories of contract is not adequately reflected in

the employment relationship literature” (Roehling, Coyle-Chapiro, J.A.M., et al., 2004). It is

regrettable that management sciences pay so little attention to this discipline that

established itself, to quite an extent, through dealing with disputes and in particular

those dependent on the execution of contracts.

The main benefit of this academic approach is first, to remind us that the contract has not

always been the dominant pattern in the employment relationship. Historically, it has been

preceded by the “master-servant relationship” whose working relations were determined by

the status. The employment relationship is certainly a cultural model, not a natural one, which

entails that it can still evolve.

Today, this discipline mainly opposes two theoretical conceptions of the contract in the

Anglo-Saxon world. The first one, so-called classical, considers the contract as a bilateral act

between two parties supposedly free and having the same ability. This conception is based on

a “market-individualist ideology” analysed by several authors (Campbell, 2004). Incidentally,

one may reasonably think that this form of contract so-called “at will”, which is still

widespread in the USA, was born under the influence of this school of thought.

The second one originates in the theory of Macneil about the relational contract and its

continuum of transactional-relational exchange behaviour. The assumption is that contractual

relations only based on transaction are very rare. Most of the contracts include a relational

dimension. Macneil shows that the social environment must be taken into account in most

contractual situations (Macneil, 1974).

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Finally, it seems important to mention the interplay between the economic conception of the

transaction-cost theory and a neoclassical conception of the Anglo-Saxon law. Coase makes

the assumption that exchanges must aim at eliminating the costs of the transaction, and

subsequently the costs of contract signing (Coase, 1987). It then boils down to having the

practice of law subordinated to an economic logic. The employment relationship therefore has

the same importance as its alternative, that is to say it is subject to the laws of the free market

economy. The objectification of the exchange is the axiom, even though this theory takes into

account the idiosyncratic character of certain employment situations (Williamson et al.,

1975).

2.4 The concept from a Political Sciences standpoint.

Addressing the political dimension of the employment relationship implies considering the

organisation as a sub-part of society. This approach goes contrary to the unified vision often

developed by the managerial trend of thought or by the paternalistic style of management.

Historically, they have regarded the organisation either as a team having the same goal, or as

a family. But, as Kelly remarks: “The employment relationship is partly cooperative – the

parties have a shared interest in the success of the employing business – but also entails an

unavoidable, structural conflict of interest between worker and employer, which cannot be

designed out of the system by better management.” (Kelly, Coyle-Chapiro, J.A.M., et al.,

2004). Political science considers that the economic goal is dependent on the political issues.

This is embodied in the concept of pluralism (Fox, 1966) in a democratic system or of class

conflict in the Marxist model.

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As Lewis points out, this political analysis of the employment relationship must take into

account the rise of individualism in society (Lewis et al., 2003). This unprecedented social

phenomenon in the Western world has partially put into question collectivism. The political

vision applied by organizations mainly to industrial relations is confronted with the necessity

of finding new landmarks.

2.5 The concept from Psychology standpoint:

Psychology has probably initiated the greatest number of recent constructs dealing with the

employment relationship. For that matter, the difficulty will be, later on, to decide which ones

need to be maintained according to a restrictive and operative definition of the concept of

employment relationship.

As a matter of fact, it is thus difficult to consider presenting a thorough summary of the

contributions of this discipline. However, one can highlight some key elements.

First, one must point out that the North American school, which is the initiator of most of the

research, has never totally accepted the principle of the irrational dimension of the living

being. The definition of the main constructs is strongly influenced by a behaviourist and

positivist conception, even when it comes to the theory of needs, for example (Maslow,

1943).

Apart from this behaviourist approach, the psychological dimensions which underlie the

concepts of management seem to us to rely mainly on a cognitive conception of psychological

phenomena. The latter is apparent in two theories underlying a number of constructs.

The first one is the bounded rationality. This approach considers that man is not irrational, but

he does not have the capacity to be totally rational. Thus Simon points out that:

10
“This man is assumed to have knowledge of the relevant aspects of his environment which, if

not absolutely complete, is at least impressively clear and voluminous. He is assumed also to

have a well-organized and stable system of preferences, and a skill in computation that

enables him to calculate, for the alternative courses of action that are available to him, which

of these will permit him to reach the highest attainable point on his preference scale.”

(Simon, 1955). Applied to the employment relationship, it implies that this relationship can

never be totally rational from the employer’s viewpoint as well as from the employee’s.

Therefore, we need to analyze the variables in the rationality of each actor in the context.

The second theory is the schema theory in which the human behavior is studied through the

cognitive processes (Piaget, 1976). This theory specifies that the human being approaches

reality through mental structures which are of great use to him for perception as well as for

memorization and in managing situations. Studying the employment relationship implies

understanding those cognitive structures.

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3. The Main Paradigms of the Employment Relationship.

Basing our approach on the analysis of the contributions of academic sciences to the

understanding of the employment relationship, we are going to try to identify the main

paradigms that support the theoretical models used. We have selected four main paradigms:

the exchange, the contract, power and cognition. Below, in more detail, we will present the

theories that can be linked to each of these paradigms, then we will see the extent to which the

paradigm has spread through the existing constructs of management theories, and finally, how

useful can the paradigm be for understanding the employment relationship.

3.1 The paradigm of exchange:

The employment relationship, by definition, logically implies that the exchange is the

dominant paradigm present in the background of much research work. However, one could

object that the dominant theoretical models of the social exchange theory and of the rational

choice theory tend to remove the social dimension of this exchange [that is to be found in the

Gift theory, for example] in favor of the relationship cost/profit.

This paradigm is present in numerous constructs such as the Perceived Organizational

Support, the Leader-Member Exchange, the Organizational Citizenship Behavior, the

Organizational Commitment, the Organizational Justice…

It is especially useful for comprehending the “economy” of the employment relationship, the

expected performance and the continuation of this relationship.

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3.2 The paradigm of the contract:

Because most of the research work concerning the employment relationship originates in

America, one can understand that the second most frequent paradigm is that of the contract.

[It is to be reminded that some jurists and sociologists have shown that the contract is not the

only form of exchange]. We have also decided to include in this paradigm the transaction-

cost theory. It is originally an economic theory, but whose core reasoning seems to us to be

the contract and not the cost. Indeed, the contract, be it commercial or for employment, thanks

to the degree of autonomy which it provides in its Anglo-Saxon sense, which enables one to

control the costs. Whether it is in opposition or in concordance with the transaction-cost

theory- this needs to be discussed – the relational contract theory tends to take into account

the societal context.

Although it is based on the exchange paradigm, the Psychological Contract is certainly the

construct that has best integrated the contract paradigm. It is particularly true with the

distinction between different contract forms, but also with complementary concepts such as

obligation, cancellation and violation. This paradigm is also present in Collective Bargaining.

It turns out that it is very helpful, for example to locate the mutual obligations in the

employment relationship as well as the indicators which will help to assess whether the

contract is respected or not.

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3.3 The Power Paradigm

This paradigm is naturally present in the relationship between the organization and the group

of employees and in the mechanisms of collective bargaining it generates [pluralism theory].

It is also present in the problems of socialization, when the individual has to make himself

accepted by the working team or when he has to conform to the norms of the organization.

The theoretical conceptions in this field go from a very passive vision of the individual within

socialization theories to visions taking into account more interactivity. Finally, this paradigm

is to be found in the relationship between the organization and the individual, when a strategy

has to be defined [i.e. downsizing theory], or when his needs have to be taken into account

[needs theories].

This paradigm is present, to a much lesser extent, in constructs like the Collective Bargaining,

the Organizational Socialization or the Employee-Organisation Relationship.

Among other things, it can be used for studying the relationship from the perspective of the

conflict [negative or positive], of collective bargaining and of the delegation.

3.4 The Paradigm of cognitive processes:

This paradigm considers the employment relationship from the perspective of the mechanisms

that bring about the meaning of the situation [schema theory] as well as the rational model for

the various parties involved [bounded rationality theory]. In an Anglo-Saxon perspective,

this debatable issue is then mostly dealt with from the standpoint of cognition.

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This paradigm is less present than the first two. It is to be found in the Psychological

Contract, the Employee-Organization Relationship, the Emotion in the workplace.

It can be used for explaining the behavior and the mechanisms of decision making in the

employment relationship. It is also used for comprehending the perceptual biases.

Chart n°2: “The main paradigms and theories of the employment

relationship”

Paradigm of the Exchange Paradigm of the Contract

Rational choice theory
“Most investments in human capital—such as
formal education, on-the job training, or
migration—raise observed earnings at older
ages.” (Becker, 1964)
Transaction-cost theory
“The Governance of Contractual Relations.
Alternative modes of governance (markets,
hybrids, firms, bureaus) differ in discrete structural
ways […] the action resides in the microanalytics”
(Williamson, 1979)

Social Exchange theory Relational contract theory

“Social behavior is an exchange of goods,
material goods but also non-material ones, such
as the symbols of approval or prestige.”
(Blau, 1964)
“Few economic exchanges occur entirely in the
discrete transactional pattern. “
“The benefits and burdens of the relation are to be
shared rather than divided and allocated (a law
partnership).” (Macneil, 1974)

Paradigm of the Power Paradigm of the Cognition

Socialization theories
“The Puritan wanted to work in calling; we are
forced to do so. For when asceticism was
carried out of monastic cells into everyday life,
and began to dominate worldly morality, it did its
part in building the tremendous cosmos of the
modern economic order.” (Weber, 1905)
Bonded rationality Theory
“The human being striving for rationality and
restricted within the limits of his knowledge has
developed some working procedures that partially
overcome these difficulties. These procedures
consist in assuming that he can isolate from the rest
of the world a closed system containing a limited
number of variables and a limited range of
consequences.”(Simon, 1997)

Pluralism theory Personal Construct Theory (schema)

“The organization is a miniature democratic
state composed of sectional groups with
divergent interests over which government tries
to maintain some kind of dynamic
equilibrium”(Fox, 1966)
“Man looks at his world through transparent patterns
or templates which he creates and then attempts to
fit over the realities or which the world is composed”
(Kelly, 1963)

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4. Conclusion and suggestions for further research

This paper does not give a full account of the issue. We can reasonably think that other

paradigms structure the construct of the employment relationship. It could be effectively

supplemented through an analysis of the various constructs present in the fields of study of

Human Resources Management, Organizational Behavior and Industrial Relations.

Yet, it helps to show that two paradigms are less studied while analyzing the employment

relationship. That is to say, the paradigms of Power and of Cognition could be explored in

more depth. In particular, it seems to us that the analysis of the employment relationship

based on the cognitive processes has not been sufficiently developed. In this period of

instability and globalization of organizations, the issue of the meaning of work and

employment could enrich the analyses of the exchange.

16
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