Psychological Contract Theory - Essay Example

Psychological contract theory Author’s name Institutional affiliation Psychological contract theory Introduction Since the reconceptualization of the psychological theory by Denise Rousseau in the year 2004, psychological contract theory has established itself as one of the significant concepts in the field of management and organization more especially, in managing organizational change (Business dictionary, 2015). By so saying, it means that, it is of great importance for management agents to comprehend fully the concept of psychological theory since it involves both implicit and explicit relationship perceptions between the workers and their employers. Additionally, in order for change to occur in any organization, there must be a close working relationship between the employers and the workers (George,2009,32) Moreover, Psychological contract offers employees flexibility because organization change revolves also on the ability to adjust the size of the workforce depending on product change and demand. Therefore, Psychological contract works closely with other organization change theory to emphasize the employee-employer commitment, Importance of psychological theory in managing organizations Psychological contract theory is one of the fundamental schools of thought that is used in comprehending the relationship that exist between the employees and the employers as well as the subsequent effects such as work performance and attitudes. In other words, Psychological contract can be termed as the explicit and implicit promises that employees and employers make to each other. For instance, an employer may guarantee his employee job training and security, and their worker will in return promise loyalty and hard work (Shruthi & Hemanth, 2012). Moreover, Psychological contract is believed to be psychological because of the emotional relationship perceptions involved in terms of promises from both parties. Furthermore, one of the distinctive features of psychological contract from other forms of contracts is that, psychological contracts can in most cases be implicit. By so saying it means that, the relationship perception and promises can be unspoken and unwritten but can be inferred from behavioral actions (Petersitzke, 2009,3). For instance, a worker may believe a promise of an education allowance from their employer because their employer has in the past paid for their fellow worker MBA courses. The underlying concepts in organization change as far as psychological contract is concerned are the fact that employment relationship is defined by an exchange. In other words, in exchange of the workers contribution, the employer provides certain returns. Additionally, the exchange level is determined by both parties’ expectations. By so saying, it means that, the psychological contacts serves as a processing filter of information regarding employment relationship hence in the process, guiding the behavior and attitudes of employees (Barling & Cooper, 2008). Therefore, change agents need to understand psychological theory in order to conceptualize the much needed motivation of workers towards change. In other words, career motivation is one of the fundamental element that defines and shapes workers psychological contract. Additionally, with regards to the organization’s actions and policies, management agents should therefore understand that psychological contracts depend heavily on both non-economic and economic returns that are provided by the company. Furthermore, Organization change agents have to study and evaluate psychological contracts within the social context using the social exchange theory of management where government actions, public policies, cultural values and social norms play a crucial role (Kate, 2012). There is a significant connection between psychological contract and social contact since psychological contracts are currently in the process of change as far as transition economies are concerned (George, 2009). By so saying, it means that, a shift to an open market comprises of not only economic matters but also the societal norms, values and expectations. Additionally, this concept is important to change management agents because, both economic and societal attributes will have to be incorporated into the new organizational system and the workers will therefore need to change their mindset so as to cope with the new innovations and demands of production (Heather, 2015). Therefore, to salvage this situation, the management change agents will therefore need to establish a new social contract to act as a mediator in the shift of workers expectations. Another important concept of the psychological contract theory to the change management agents is contract breach. By way of definition, a contract breach is said to have occurred when one party fails to honor the terms and conditions of the psychological contract. Additionally, the general reaction to contract violation is not only attributed to the unfulfilled expectations but also to the beliefs regarding the respect to an individual’s code of values, conduct as well as other behavioral patterns (Robert &Nada,2007). In simple terms, breach enables the change agents to comprehend fully the implications of psychological contracts on the attitudes, feelings, and employee’s behavior. Moreover, the flexibility of contract breach can be also be used by change agents to understand the effects of other psychological contract concepts such as contracts violations and antecedents of breach which plays a crucial role in employment relationship (George,2009,27). By so doing, the psychological contract theory helps the change agents to examine whether breach results into negative implications always or whether the breach consequences depends on external factors as well. In the process, the organizations change management agents are able to establish ways of avoiding contract breach and violations and ways of dealing with its implications. .Real life example of how psychological contract theory can be used in organization change It is universally acknowledge that organizational changes will in most cases cause distortions on the existing psychological contract irrespective of whether they imply direct changes to the employment contract or indirectly through working conditions (Kate, 2012). In this case, the change agents must therefore establish effective strategies when it comes to recognizing, anticipating, managing employee resistance as well as accommodation of workers expectations (Heather, 2015). For instance, CISCO IT decided to implement organizational change as well as their advanced services necessary for operational success. As a result of the modern pressure to optimize Information Technology resources and services while curbing the cost of production, CISCO employed a lifecycle methodology necessary in making their IT operations more responsive and efficient. Cisco established a way of slowly blending the new service operation with its employees so as to avoid psychological contract shock. CISCO’s organizational change management went through six distinctive phases. The first phase was the prepare phase which involved anticipation of the wider vision, needed technology and requirements necessary to sustain a competitive advantage. In this phase, CISCO was able to determine financial rationale and a business case that will ensure that employees are motivated to support the new innovation’s adoption (Cisco,2010). The second phase is the plan phase which entailed the assessment of the current organization’s workers and work. In the process, it ensured that its employees are ready to support and adopt the new innovation. The third phase Cisco employed was the design phase which ensures that risks involved in terms of workers resistance and resignations are minimized (Cisco, 2010). The fourth stage involved was the implementation phase which purposed to integrate, configure and install the operational innovation into the system without compromising employee’s availability. The fifth stage was the Operate phase where it ensured that the new innovation enhanced the workers performance much to the employees delight. The final stage was the Optimize phase in which CISCO ensured that workers remain motivated so as to continue being better innovators, planners, designers and diligence workers (Cisco, 2010). Therefore, it is clear that, in order to avoid resistance to change, managers and change agents need to comprehend that, organization change is a process that needs to be geared in relationship to the employee and employer relationship. Psychological contract theory and organization change theory It is universally known that the psychological contract has a number of implications on the employee attitudes, satisfactions, and behavior in respect to the exchange relationship that exists between employee and the employer. By so saying, it means that, the idea revolving around this relationship is believed to be derived from organizational change theory known as the social exchange theory (Ian et al, .2008). In other words, the psychological contract attributes in the workers mind in terms of the rewards the organizations owes them and their promise to the organization, results in an inequity perception in the social exchange relationship. Additionally, to maintain balance in the exchange relationship, any perceived employee obligation increase must therefore be curtailed by increased rewards (Heather, 2015). In simple terms, if employee obligations overweight are the organizations rewards then there exists a negative shift in the contract situation. Social exchange theory can be used hand in hand with psychological contract theory to emphasize the commitment of both parties (Ian et al., 2008). Additionally, the employee commitment basically shows the relative strength of workers identification with a particular organization. Moreover, it shows the willingness of both parties to exert effort toward the organization’s goals and objectives. Psychological contract theory has enhanced social exchange theory because it defines other concepts relating to individual exchange relationship such as contract breach and violations (Ian et al., 2008). By so doing, it has established a way of emphasizing honoring of exchange relationship conditions. Conclusion The rhetoric regarding the importance of psychological contract theory needs to be understood in the vital role it plays in managing work contract conflicts. By so saying, it means that, comprehending Psychological contract helps organization’s to embrace change without disrupting the workers morale(George,2009,12) Moreover, the perceived conditions and terms under which employees work are more extensive, complex and subtle than the formal employment contract. Furthermore, breaching this complex and more extensive conditions can result into more significant effects to both the organization and the individual. References Barling, J. & Cooper, C. (2008).Handbook of organizational behavior, sage. Viewed on 29th July from: http://eprints.lse.ac.uk/26866/1/Psychological_contracts_%28LSERO%29.pdf Business dictionary, (2015). Psychological contract. Viewed on 29th July from: http://www.businessdictionary.com/definition/psychological-contract.html Cisco, (2010).How Cisco It Implemented organizational change and advanced services for operational success. Viewed on 29th July from: http://www.cisco.com/c/dam/en/us/services/collateral/services/data-center- services/NDCS_Restructuring_AdvSvcs_Case_study.pdf GEORGE, C. (2009). The psychological contract: managing and developing professional groups. Maidenhead, Berkshire, McGraw Hill Open University Press. Heather Maguire, (2015). The changing psychological contract: challenges and implications for HRM, organizations and employees. Viewed on 29th July from: https://eprints.usq.edu.au/3749/1/Maguire_Book_chapter.pdf Ian Palmer, Richard dunford, Gib akin, (2008). Managing Organizational Change: A multiple perspective approach (2nd edition). Sydney, SW, Australia: McGraw Hill Australia Kate J.Mclnns, (2012).Psychological contracts in the workplace: a mixed methods design project. Viewed on 29th July from: http://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1553&context=etd PETERSITZKE, M. L. (2009). Supervisor psychological contract management developing an integrated perspective on managing employee perceptions of obligations. Wiesbaden, Gabler. http://dx.doi.org/10.1007/978-3-8349-8194-3. Robert kase, Nada Zupan, (2007). Management in firms and organizations: psychological contracts and employee outcomes in transition to market economy: a comparison of two Slovenian companies. Vol 5 issue 4 2007. Viewed on 29th July from: http://businessperspectives.org/journals_free/ppm/2007/PPM_EN_2007_04_Kase.pdf V.K.Shruthi & Hemanth K P, (2012). .Influence of psychological contract on employee-employer relationship. Vol1 issue 7 (2012). Viewed on 29th July from: http://www.academia.edu/5694622/Influence_of_Psychological_Contract_on_Employee- Employer Relationship Read More