Knowledge in Business Organizations (Social Exchange Theory & Knowledge Coaching)

Social exchange theory, data, information, knowledge, knowledge management, knowledge sharing, and knowledge coaching in business organizations
Business data on a laptop. Organizations use information systems to facilitate healthy relations among workers, to develop and access knowledge, and to support knowledge coaching. (Photo by Jonathan Francisca; Public Domain)

Organizations acquire, generate, and use data, information, and knowledge. In information systems theory, the organization is viewed as an information system involving these processes. Data, information, and knowledge are used to address the goals of the organization, such as in analyzing the external business environment. More particularly, in social exchange theory, the organization makes decisions based on its data, information, and knowledge.

Maximum benefit from information systems is achieved through effective knowledge management, such as in using the framework of Social Exchange Theory. Information systems are now increasingly significant in organizations, such that managers seek better ways to maximize the benefits of these systems. Knowledge management creates an organizational situation where data and information are converted to valuable knowledge to boost business performance.

Data, Information, and Knowledge

An organization generates and gathers data, such as transaction records or employees’ notes about job-related events or experiences. These records are not necessarily organized and, thus, contain little or limited value to the organization. The organization’s information systems process such data into information. Information is organized or processed outcome from data, and is more valuable than data.

The value of information increases through knowledge management, which helps develop information into knowledge and apply knowledge. In a business organization, knowledge includes expertise, insights and intuition gained from the experiences of workers. Managers and leaders focus on achieving knowledge in order to maximize organizational performance. This focus requires ensuring that knowledge is continually maintained and developed in the organization.

The Social Exchange Theory

The social exchange theory argues that social relations and interactions are processes involving an exchange between actors. This is an exchange of things of value, which may be tangible or intangible. For example, two groups may exchange material goods or assets, as well as business information within an organization’s context.

In an exchange, costs and benefits are assessed, according to the social exchange theory. In a business relationship between teams in an organization, costs may include work hours or effort, as well as possible opportunity cost or opportunity loss among team members. On the other hand, benefits may include the teams’ shared data, information, and knowledge, which can be used to improve the teams’ performance in creating customer loyalty.

The social exchange theory states that relationships continue and grow when the benefits outweigh the costs for the parties involved. In a company, work relationships need to benefit all parties, such as individual employees and teams. The theory also points to the importance of managers’ fostering of mutual benefits to maintain effective and productive work relationships. Considering knowledge as something of value, fostering these relationships should include facilitating the beneficial exchange of knowledge among the parties in the relationship, such as through the use of appropriate information systems as tools for knowledge sharing and knowledge management.

Knowledge Coaching in the Social Exchange Theory

Knowledge coaching is a way to keep and grow knowledge in an organization, while facilitating healthy work relations involving knowledge exchange. Knowledge is lost when employees leave by way of retirement, resignation, or layoffs. Employees are the ones who possess knowledge, such as expert knowledge. Managers need to find ways to ensure that knowledge is passed on in the organization and not lost over time. This is where knowledge coaching comes in.

A knowledge coach shares knowledge to other members of the organization so that this knowledge remains and grows within the organization. The coach is typically a senior or more experienced employee compared to the one being coached. The objective is to support the learning organization and appropriately disseminate knowledge to as many workers as possible.

In the Social Exchange Theory, business organizations benefit from social exchange between knowledge coaches and the knowledge trainee. The knowledge coach provides valuable knowledge to the trainee, and receives recognition and social support from the trainee in return. Also, the trainee provides a canvas where the coach improves his coaching experience and skills. In exchange, the trainee receives higher-level knowledge from the coach. This knowledge is suitable for improving work performance in the organization.

In the Social Exchange Theory, knowledge coaching identifies knowledge suitable for sharing in the organization. Leaders or facilitators of knowledge coaching should properly select knowledge for sharing from among the organization’s large amounts of data, information, and knowledge. Knowledge coaches aim at maximizing the possible benefits that the organization could achieve from using knowledge at the individual level and the organizational level, while fostering healthy work relations.

A company can use knowledge coaching alongside information systems to achieve the desired mutually beneficial exchange defined in the social exchange theory. For example, a company can implement information system functions specifically designed to support knowledge coaching. In addition to face-to-face communication, knowledge coaches could use information systems to relay expert knowledge to trainees. Trainees could access knowledge through the system. This setup helps optimize the effectiveness and efficiency of knowledge coaching to benefit the trainee, the coach, and the company.

Case Example: Ford Motor Company

Ford Motor Company serves as an example of knowledge management in the Social Exchange Theory. The automobile manufacturer has information systems in place to maximize information access and utilization for the effective use of machinery and equipment. However, this information is less valuable than knowledge that could boost business performance.

The company uses technical information based on its long business history and vast amounts of data collected over time. For the business to remain competitive and viable, managers derive knowledge from information, like technical information about products. For example, using business information systems, knowledge about trends and changes in the design of the company’s products is developed alongside the experiences of organizational leaders or innovators in the company.

With the help of information systems, Ford Motor Company derives knowledge from research and daily operations to boost its design, quality, and business performance. However, the company could achieve better outcomes from more comprehensive knowledge coaching in quality and innovation in order to avoid issues, such as possible product safety problems. Also, knowledge coaching can help disseminate knowledge that supports innovation and higher quality of Ford’s automotive products.


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