Maintaining Psychological Contract During Downturns - Essay Example

Maintaining Psychological Contract is Crucial during Downturns Maintaining Psychological Contract Psychological contract can be defined as a concept that deals with the system of undocumented beliefs embraced by the employee and the organization regarding the mutual relationship that exists between them. Unlike the formal documented contract between the employee and the organization, psychological contract in its proper sense is more "cognitive-perceptive". It means that it resonate both parties’ silent perception that commitment and promises have been made and considerations offered in return which tie them together in mutual obligations. (ODonohue et al 2007). How employee perceive obligation and to what magnitude it is fulfilled constitute the main ingredient of this psychological contract. It can be divided into subdivisions within the literature that further enumerate its framework. The two types includes transactional and relational contract. Relational psychological contract is mainly driven by socio-emotional exchanges between the employee and the organization. It involves long term undefined performance terms and promotes a mutual sense of understanding. It bonds the two parties with the commitment of promoting collective interest over personal gains. (ODonohue et al 2007). On the other hand transactional psychological contract is comprised of monetizable exchanges and are driven by short term personal interest. Both these type of contract terms blend together to provide with the important adhesive that binds the two parties with a concealed force. According to Burr and Thomas there is another form of contract which is emerging under the label of “ideology-infused” contract. It has a more transpersonal perspective not only transactional and relational but also for something for the society. So it demonstrates what is in it for me, us and the society. So far we were explaining psychological contract from one dimension only involving the employee and the organization. But since recent changes in the trend of hiring workers from different agencies has given rise to another form of psychological contract. This contract has two dimensions. In this setup, workers are employee of the agency hence all the essence of psychological contract perfectly applies among the two parties. The other contract is established between the employee and the client organization where he or she works. (Chambel et al 2009). This dual psychological contract is not discussed much in the literature and it is important to highlights its implication in today’s changing trend of contingent employment. Now technically there are two different obligations and fulfillment perceptions between the employee and two other parties but can employee perceive this dual nature of psychological contract? A research was conducted (Chambel et al 2009) to determine certain hypothesis including the one in question. The research was fruited with some interesting results. They established a connection between the two psychological contracts and concluded that both are interdependent. But from the employees perspective the expectations are different at each end. The psychological contract between the employee and the client is short termed and implies transactional type with monetary exchange. We know that job insecurity is one of the major expectation of the employee and if not fulfilled may result in a breach of the contract. But this might not be true in the case of dual psychological contract as not much is expected by the employee from the client side and any insecurity is balanced by the intact psychological contract between the worker and the hiring agencies. If latter contract is breached it will result in negative impact as the type of contract is relational with socio-economical exchanges. The individual has more perceptions and expectations toward the agency then towards the client. But any negative impact on the worker from the agency can have a direct impact on the client. Therefore, it was emphasized that both the parties; agency and the client coordinate with each other to make sure the psychological contract is not breached from either side. They should work in harmony to achieve an environment of highest productivity. Psychological contract is very important in maintaining a positive working environment. It is the quiet understandable that all the dimensions of employment relationship cannot be addressed in a formal contract thus it fills that void by providing a more concealed but valuable common ground. It highlights the responsibilities of both employee and the employer towards each other thus establishing a delicate line of control which need to be respected by both the parties. It creates a perception of expected rewards among the employees enhancing the feeling that they can influence their destiny in the organization since they are part of the contract. (Maguire 2002). The importance of psychological contract has been recognized by many scholars examining the impact of changes in employment on the individual and also by the members of the two parties involved in the psychological contract as an important tool for recruiting, maintaining and motivating workers. (O’Donohue et al n.d). So by looking at its broad acceptance it can be concluded that psychological contract is required to maintain Employer of Choice (EOC) status of a firm especially in today’s competitive labor market. (Fisk 2002). The concept of psychological contract stem from outside the field of Human Resource Management (HRM) but it has become an important tool in broadcasting and explaining (HRM). (Cullinane et al 2011). Although we already discussed why it is important to maintain a psychological contract, empirical study showed psychological contract breach and violation is relatively common. (Robinson 1994). Today’s world is greatly influenced by new trends of globalization, reconstruction and downsizing and hence psychological contract has a very vital role in stabilizing the situation. Under the influence of present changes, organizations are under pressure and are forced to make prompt decision which can alter or breach the underlying psychological contract with the employee. One of the major components of such contract, long term job security in return of hard work and loyalty, may not remain valid. This often leads to state of uncertainty and mistrust among the employee. Therefore, organizations are under constant need to alter the terms of employment agreement continuously to cope with the changing circumstances. (O’Donohue et al 2007). This can have a dual outcome; it causes the employee and employer to reconsider their obligation towards each other and secondly it increases the chances of false interpretation of psychological contract breach due to constant modifications in the agreement. These results in various negative outcomes such as reduce commitment and productivity. (Robinson 2004). It may also prompt the other employees to believe that organization do not care about their well being and interest. Hence, it causes the whole structure of an organization to collapse. There is a difference between a breach and violation of psychological contract. One important concept to understand is that breach of psychological contract may be a short term process and an individual may return to its normal and stable contract state. But violation is more ‘personalized’ as respect and code of conduct is not followed as promised. Now let us discuss on the various types psychological contract violations. As we said earlier that job insecurity is one type violation. The other types include failure to provide sufficient training as promised, deviation from the actual pay and promotion schedule not as promised. We already discussed that in some conditions such as downturns it become inevitable for the management to take some drastic steps which may involve violating the psychological contract. We also discussed how this violation can be fatal for the whole organization. Therefore now we will discuss the steps that can be taken to ease or decrease the outcome of redundancies. According to a research (Campbell et al 2000) most of the survivors after downsizing undergoes severe emotional outburst. Different emotions include shock, demoralization, fear and frustration. It is not surprising that they mostly exhibit negative emotion. They also identified some key factors influencing such a response. Most of the employees did not approve of the way these redundancies had been decided. They did believe that the selection criteria were fair and appropriate. Their frustration continued as they described that the way there were informed was a shock considering all the services they had given to the company. These responses are fair in the above scenario and steps must be taken to address these issues. As Doug Dierking mentioned in his article that employees are watching you so a lot is to be done to ensure that their dignity and respect is not degraded. Manager plays a key role here and much depends on his actions. As research showed that individuals enjoying close association with their manager were less likely to demonstrate negative behavior. (Campbell et al 2000) This concludes that it is very important that employee should be communicated on regular basis and they should be aware of the need for taking any radical actions. Line manager has an important influence on the reactions of survivors and it’s their responsibility to provide guidance and support on a personal coping level. As evidence shows that employees who received union support in entire reconstructing phase were less likely to react negative to change. (Payne et al 1999) Reference: CAMPBELL, F., WORRALL, L., & COOPER, C. (2000). The psychological effects of downsizing and privatisation. University of Wolverhampton. CULLINANE, NIALL, & DUNDON, TONY. (2011). The psychological contract: a critical review. N. Cullinane and T. Dundon, 2006, The Psychological Contract: a Critical Review, International Journal of Management Reviews, 8(2): 113-129. International Journal of Management Reviews. http://hdl.handle.net/10379/2076. CHAMBEL,MARIA JOSÉ, & FONTINHA,RITA. (2009). Contingencies of Contingent Employment: Psychological Contract, Job Insecurity and Employability of Contracted Workers. Revista De Psicología Del Trabajo Y De Las Organizaciones. Revista de Psicología del Trabajo y de las Organizaciones. http://scielo.isciii.es/scielo.php?script=sci_arttext&pid=S1576-59622009000300002 MAGUIRE, HEATHER. (2002). Psychological contracts: are they still relevant? 167-180. Emerald Group Publishing Limited. http://eprints.usq.edu.au/3750/. ODONOHUE, W, & WICKHAM, M. (n.d.). Managing the psychological contract in competitive labour-market conditions. 23-31. http://eprints.utas.edu.au/8093/. ODONOHUE, W, DONOHUE, R, & GRIMMER, MR. (2007). Research into the psychological contract: Two Australian perspectives. 301-318. http://eprints.utas.edu.au/6810/. FISK, CATHERINE. (2002). Reflections on the New Psychological Contract and the Ownership of Human Capital. Duke Law Scholarship Repository. Duke Law Scholarship Repository. http://scholarship.law.duke.edu/faculty_scholarship/867. ODONOHUE, W, & NELSON, L. (2007). Lets be professional about this: Ideology and the psychological contracts of registered nurses. 547-55. Blackwell Publishing. http://eprints.utas.edu.au/4515/. PAYNE, K., ET AL. (1999). Violation of the psychological contract and the development of unions and strikes: the defense of the individuals employment rights. Peace Research Abstracts. 36. ROBINSON, S. L. (1996). Trust and Breach of the Psychological Contract. Administrative Science Quarterly. 41, 574-599. Read More