Use of Psychological Contract in Solving the Management Challenge in Chris Motor Services Limited - Case Study Example

Chris Motor Services Limited Name: Institution: Background Information Chris Motor Services Limited is a company that was set up in 1967. Chris, an obsessive mogul set up this motor services company in a town known as Southampton in Hampshire. To set up the Company, he loaned money from friends and topped up the deficit using his savings. Chris, about 6 years before this, worked as a service engineer in RAC motor company (in the same town). Chris sold spare parts and repaired light motor vehicles, such that, in a year he is reaping large benefits in form of profits. Chris, due to his honesty, commitment, and exceptional high quality servicing (durable and genuine spare parts), has in the recent past moved most customers to his new business. As at the start in 1967, Chris has worked with 12 employees under him but by last year (2011) he has employed 80 plus individuals. He currently has two branches of his firm (in Fareham and Portsmouth). In December 2011, Chris made a decision to rest and chose Paul (A senior most employee with reference to his age, experience and working hours with the firm) to lead the group. Steve (Chris’ son, a graduate of automobile engineering in 2009) is working as a special executive under Paul’s mentorship as requested by his father. As a just appointed Executive Director (2011), Steve helps Paul in dealing with the company matters. With time (about ½ a year), Steve as an Executive Director and Paul as a Managing Director, the company’s employees have been split into two generation groups, a new and young group supporting Steve, the Executive Director, and another, an old generation group composed of very senior employees in support of Paul the Managing Director. With these two groups, a lot of collisions brought about by misunderstandings and disagreements have become a frequent new face of the organisation. Several serious matters have encompassed the organisation making the survival and sustenance of the motor service company difficult and critical. This division majorly is due to a collision of interests between the two managements. Paul has an interest to strengthen the company while Steve on the other hand has an interest of expanding the organisation and venturing into other related businesses which encompasses sale of used cars (2nd hand) and taking up licence or dealership/ businesses of a car building/ Production Company and many more. Paul insists that the company should concentrate more in establishing itself more in terms of its strengths and not risk going into other businesses that would make the company spend with the uncertainty of a return. Also, he says that a divided attention (area of concentration) may make the company less competent due to interruption by other businesses. However, Steve on the other hand opines that taking advantage of the opportunities at hand taking into consideration the suitable risk managing processes is good enough and would leverage the company into a higher rank/ level of operation. He claims that Paul wants to confine him within the company. In addition, Paul, as an experienced employee holds allegiance, durable relationships, know-how and reliance as a way of keeping the employees and avoiding turn over whereas Steve, a young entrepreneur, insists that pooling of young talents is essential and situations would dictate whether an employee should be fired or maintained and visitor/ new employees hired to enable cost management and employ new and innovative ideas that ensure development/ growth of the organisation/ or company. As a result of this, few employees of the organisation have left due to fears of being fired without notice. Further, the loyal employees to the organisation have lost interest/ motivation to work in the company due to the unravelled issues/ misunderstanding between the two managers. Chris, through his confidants, has learnt about the unfolding events. He believes that employees are an imperative/ very important positive feature of the organisation and has an interest to make right the wrongs. Amongst the suggestions he is given, is to divide the company into two different entities, one run by Steve and the other by Paul. Chris then contacts a management consultant to offer advice in line with the below mentioned tasks and analyses. Logical and Analytical Applications of Theoretical Concepts to the Case Use of Psychological Contract in Solving the Management Challenge in Chris Motor Services Limited This involves an individual’s belief about the conditions and terms of the exchange agreement between an employer and an employee (Curwen, 2011).Psychological contract as the name suggests (psychological/ emotional/ psychometric) involves a set of prospect/ potentiality/ expectation held by both owner (employer) and member of staff (employee). Employers anticipate employees to work fairly in a day, respect and accept the authorities and report to work daily if not regularly (Advanced solutions, 2012). It involves taking into consideration the observations/ perceptions of the employer and the employee. It takes into consideration their reciprocated obligations towards one another. The obligations are many a time unofficial and are indefinite/ undefined. They are created from deeds or from past happenings, as well, during the employment process or in performance appraisals. Some of these roles may appear as promises and others as expectations. In essence, the employee should view these features as part of their societal relationship with the owners or employers (CIPD, 2012). The main difference between Psychological contracts and official contracts is that, the latter partially represents the reality on ground in line with the employment relationship. Many a time the terms and conditions under the formal contracts have little, if any, to do with the contributions of the employee. The employee only has an obligation of accepting the terms. On the other hand, Psychological Contracts, the perceptions of both the employees and the employer are vital to its formation. It has more influence, as compared to formal contracts, in affecting the day to day behaviours/ relationships of the employees. Because it is psychology that directs an employee on what he/ she is supposed to do and what return to expect back, it is found to be more effective in handling relations. Psychological contracts cannot be strictly enforced though under the interpretations of common law in courts, it can be used to achieve reciprocated trust and self-confidence (CIPD, 2012). In a more diverse perspective, psychological contracts are formed during the recruitment process. During the discussion between the interviewee and the employer, certain issues may be mentioned as offers that the employee can offer the company. A standard contract may be imposed on the employee by the employer, excluding the duties which will be outlined in the job contract. These offers, at a later date, may be commemorated as promises. Promises under any psychological set up lead to expectations. Whenever these expectations are not met, the employer may get offended or disappointed. Some organised employers are keen enough to record these offers during this process to reduce the danger of giving rise to false expectations that may lead to disappointments. As much as these promises may appear very unofficial and unspecified or undefined, they in future define how an employee should operate. The operation should be in such a way that the meet the expectations of the employer. By employing an interviewee, a deal/ contract has been signed/ sealed between the two parties. The employer mentions, during recruitment, what he or she can offer the employee and the employee in return has a chance to give promises and mention what conditions he or she can meet. This therefore draws a boundary of operation between the two parties, thus their mutual obligations. Common law outlines that that an employee should be trustworthy and loyal to the employer. These parameters are undefined to this effect and do not state what would be used to measure their effectiveness. Psychological law and its terms states that it is is very critical to note whether promises and potentialities/ expectations have been met or kept. It also alludes to the fact that the agreements made during the interviewing process should be fair to both parties. During the first few years of employment, it becomes easy to establish the difference between the actual performances of an employee relative to the promises made during the employment/ recruitment process. The Psychological Contract can be split into two; Transactional and Relational Contracts. The latter takes into consideration the interpersonal relations between an employee and the employer in line with (Advanced Solutions, 2012) their shared values, respect and support from both parties, while the lays emphasis to the compensation/ pay that an employer would offer an employee and the punishments there in, in case the contract is breached. Making reference to Chris Motor Services Limited, Paul, the Managing Director and Steve the Executive Director seem to have a problem. Paul prefers establishing a healthy relationship between him and the employees and winning their allegiance to effectively produce while Steve has developed a tendency of firing workers based on their poor performance as he puts it. Seemingly, there is a gap between the expectations that the management of Chris Motor Services Limited (to be specific Steve) has for its employees and what the employees know as part of their obligations to their employers (Steve and Paul). The interests that Paul and Steve have can both be met when both parties take into consideration the terms of Psychological Contracts between them and the employers (Between Steve and Paul and one between The Management and Employees). For instance, Paul believes in trust, durable relationships, maintaining employees, and experience while Steve has a feeling that those young and innovative employees should be sort after and firing done where situation (company’s interests not met) dictates. This is evident of Steve and Paul’s lack of proper coordination and understanding. Further to this, loyal employees are leaving the company for others because they fear losing their jobs. Decline in motivation amongst the employees is also evident. Paradigms/ theories of Psychological contract can be applied to the above mentioned case in that, during the employment/ recruitment process, both Steve and Paul can form part of the interviewing committee and draw a clear line of what they both want the employees to do(expectations) and what they get as compensation. The employees in return outline what they are able to meet (promises). Once they both agree to hire the interviewee, a deal is signed and this defines their obligations towards each other. Within this line of operation, it would be unnecessary to fire employees anyhow. If the psychological contract terms are kept, with time, due to interaction and communication between Steve, Paul and the Employees, trust is developed between the parties. Both parties have to be fair in their dealings. A positive employee relation is developed as explicit and implicit promises are kept. Paul would have won the trust of employees and Steve would have known when to fire an employee. In return the employees feel secure because they trust the employers (Steve and Paul). As such they will not leave for another company. Paul, Steve and their employees would therefore work within defined lines of operations. Distrust and unnecessary disagreements is thus a foregone challenge. The expectations of the individual employees and those of the organisation are therefore well incorporated in the agreement (psychological contracts) (Cyril van de Ven, n.d).The organisation, Chris Motors Services Limited, therefore recruits and retains enough qualified personnel. Motivational Gaps and their Solutions Motivational gaps are the ends that are left unconsidered between an employee and an employer. Chris Motor Services has a specific type of gap known as the generation gap. We see a two groups/ opposing forces working within the organisation. There is group of young employees ready to work with Steve while on the other hand a group of old and experienced workers of the company are in support of Paul’s way of ruler ship. The concepts of motivational gaps have it that there exist three different types of generations within work stations (Mind Tools, 2012). Baby Boomers belong to a generation of people born between 1946 and 1964 and are beginning to retire. In this context Chris, is an individual that could be placed in this generation. Generation X, (Mind Tools, 2012) is a generation born between 1965 and 1976, where Paul belongs and Generation Y, born between 1977 and 1998 includes Steve. The main challenge comes when Steve and Paul join the management levels in the firm. Making reference to Paul and Steve’s generations (Generation X and Y), there seems to be a large gap between how Steve manages his team and how Paul manages his generation members resulting into the two generational groups. In order to solve this, it is important to learn what interests each of the above mentioned generations and trying much to reach a compromise that satisfies the two groups in order to manage them effectively. As much as the two generations have almost the same qualities, they have different ways of working as compared to the baby boomers. To bridge this gap, it is important to understand what each of the generations think and what they hold as dear or important to them. Making reference to Chris Motor Services Limited, Paul is an entrepreneur that is natured by Chris the founder of the company. In line with organisational behaviour, there is a very high chance that Paul’s way of management is closely similar, if not exact, with Chris’ way of management. This categorises Paul as a leader that leads a kind of leadership similar to what is done by the Baby Boomers. Steve, belonging to a younger Generation Y, is being natured by Paul. Steve finds it difficult to survive under the ruler ship of Paul because his mode of management is totally different from Paul’s. This leads to the split of the company’s employees into two, Baby Boomers working with Paul because they find it comfortable and Generation Y, working under Steve because he understands them. Generation Y believe so much in work/ life balance while boomers presume that the only way to prove loyalty to a firm is through working long hours. Generation Y may have experienced the unappreciative nature of most firms that employed their parents in an earlier life and therefore do not find it interesting. Compensation to them may not have been commensurate to the working hours that their parents might have worked (Mind Tools, 2012). Generation Y prefers longer vacations, flexible working hours, prefer working in teams and attach a lot of importance to pays. Boomers give less attachment to salaries and try to work longer hours to finish their daily duties. They believe that pays should be commensurate to ones working hours. As evidenced by Steve’s leadership, the generation Y encompasses a team that is creative, forward thinking and independent. This explains why he wanted to venture into other related businesses. He expects immediate results and that is why he feels that any employee who shows even the smallest epitome of less seriousness should be fired. Paul prefers the old method of ruler ship. They follow the traditional method of having bosses (corporate ladder). As the generation Y prefers using current technologies under less supervision to carry out their duties, the baby boomers prefer working under less strenuous environments, and prefer a group approach to management. Paul holds the employees dear because of his generation while Steve only looks at the short term benefits of the relationship. To reach a compromise, both Steve and Paul should understand one another’s way of leadership and operate within compromises. Equality and involvement should be ensured in the company by tossing around authority around through the team leaders so that neither of them feels left out. In addition they should do away with the chain of command to lay more emphasis on this point. The workers as well should be paid for any extra working hours to motivate them. Making the corporate culture more flexible would ease the survival of employees in the firm and reduce turnover rates. Paul and Steve as well should make joint decisions and embrace more of a consultative way of leading in order to bring the two groups together for the benefit of the whole corporation. Communication Mechanisms that Can help in Managing Chris Motor Services Limited In order to unite the two opposing forces, an example of a communication mechanism that can be used is having team meetings (Angelica, 2007). Team meetings can help bring the two groups together. With a joint meeting, it can be easy to merge the objectives of the two groups, develop a common idea and where necessary common solutions to problems realised. This would make the two groups think in the same line thus working together to realise a common goal. Secondly, organising projects that involve team works can unify the two groups. A team from the two groups can be constituted to form a single team that handles a common project. With different individual having different areas of specialisation coming together in the team, a culture of consultation is encouraged within the organisation. This builds a positive employee relation thus encouraging unity. The employees learn to appreciate each other’s capability and move from the stance of being segregated in line with age groupings. Thirdly, Paul and Steve can create a suggestion box (Safety Concepts, 2008) for employees. The employees can leave their ideas there. The ideas can then be taken into consideration by the management. Once the ideas are read, decisions pertaining to management can be made making sure that they look at what the employees deem as essential. This enables making of fair decisions that are mutually beneficial to the two groups. Adopting a vertical and horizontal communication/ two way communication process would help restore the trust between the management and staff. By involving the staff in key decision making processes, they feel appreciated and are motivated to work for the company. When information flows from the employees to the managers and from the managers to the employees, most decisions that are made are a compromise of the two groups thus a positive employee relation. Steve and Paul should allow the two groups intermingle, put aside their personal interests and identify common goals that help the company grow. To resolve the misunderstanding between Paul and Steve, an agreement between the two parties should be initiated. Definition of roles between the Managing Director and the Executive Director should be drawn to avoid contradictions and collision of interests between the two managing teams. Conclusion In line with the above mentioned sentiments, it is evident that for a corporate/ business enterprise to effectively operate and grow, it is essential that mutual obligations between the employees and the employers are met. Trust, durable relationships, open modes of communication and understandings are essential to sustaining a business. Drawing lines of operation between employees and employers at an earlier stage, for instance during recruitment processes, help avoid the risks of possible disappointments later into the business transactions. Two way communication mechanisms have numerous advantages whenever running of a business and establishment of positive employee relations are concerned. Therefore, respect of contracts and understanding are paramount to successful running of an enterprise. 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