Whose Responsibility Is to Make Sure the Contract Is Being Adhered to - Case Study Example

Introduction: “Behind every action or document in an organisation there are people” (Mullins, 1998 cited in McKenna and Beech, 2008, pg 44) The following is an investigation of the psychological contract between employees and employers, with focus on whether it is the managers’ responsibility to make sure the contract is being adhered to by both employees and the organisation. The concept of ‘psychological contract’ was developed in early organisational research, and although it has played a significant role in studying organisational behaviour, more recent studies have identified numerous problems in its consistency (Guest and Conway, 2002; also see McKenna and Beech, 2008). The primary concern of organisations is to ensure effective performance through employees, normally done through the Human Resource Management (HRM) function of the organisation, where it becomes the responsibility of HRM to introduce effective policies and methods to achieve goals, and also carry out employee performance appraisals for further improvement (McKenna and Beech, 2008). Psychological Contract Definition and Literature: Unlike a physical contract of employment which can be seen and signed by both employees and employers, the psychological contract is a more subtle, even invisible set of expectations of rights and privileges, and obligations that employees and organisations have from each other, which are not part of a written agreement, but still impose a significant amount of influence on people’s behaviour (McKenna and Beech, 2008; Lester and Kickul, 2001; Guest, 1998). Rousseau (2001) as cited in McKenna and Beech (2008), takes a more one sided approach in his definition of the psychological contract when he says that it “concerns the expectations, right and obligations employees believe to exist between them and the organisation” (Pg 42). Research suggests that organisations can only achieve their objectives through co-ordinated efforts of their members, and that it is management’s responsibility to achieve this through other people, where people, unlike physical assets, are not owned by organisations, and bring with them a complexity of perceptions, feelings and attitudes towards the organisation, management styles, their own responsibilities (work roles), and working conditions (Guest, 1998, and Patterson et al, 1998 cited in McKenna and Beech, 2008). The authors argue that these factors are normally embedded in the individual’s psych, and form part of the psychological contract. Research also suggests that the human factor of organisations, where human behaviour is influenced by different social, cultural, and individual factors, must be taken into account whilst managing people, as these factors play important roles in how the individuals form their perceptions, which means they are vital in understanding how people form their psychological contracts (McKenna and Beech, 2008). This can also be applied from an organisation’s point of view, where, if the organisation is taken as an individual entity with its own personality and core organisational culture, these factors would play important roles in how the organisation perceives the real world, and how it forms its psychological contract. Some of the aspects of individual psychological expectations may include: safe working conditions; job security; equal opportunities; more autonomy for staff; opportunities for personal development and career progression; respect towards staff; considerate attitude towards people’s personal problems etc. Since psychological expectations are mutual, the organisation, on the other hand, may have the following or more expectations from employees: acceptance of the organisation’s ideologies; work towards organisation’s objectives; uphold the image of the organisation; be loyal; not take managers’ goodwill for granted; observe acceptable standards of appearance (uniforms); not betray positions of trust etc (see Mckenna and Beech, 2008). In either case, it is evident that both organisations and employees are required to understand each other’s needs in order to work as a unit towards achieving organisational goals. Problems Facing the Psychological Contract: In many cases, the implicit expectations of organisations differ from those of the employees often resulting in conflicts, poor performance and high employee turnover. French et al (1985), as cited in McKenna and Beech (2008), suggest a few organisational expectations that may be different from those of employees: achieving organisational goals that may not be in line with employee goals; involvement, commitment and initiative from employees; performing tasks effectively and efficiently, which may sometimes not interest the employees; adhering to policies, rules and procedures; accepting authority and assuming responsibilities; responding to leadership and influence; maintaining the organisation as a social system through reasonable loyalty etc. Further research by the same authors leads to the argument that a perfect collaboration between organisational and employee expectations may never be achievable, but the organisation has to operate through a continual process of balancing these differences in interests. More recent studies (Lester and Kickul, 2001; McKenna and Beech, 2008) suggest that the nature of the psychological contract is changing constantly due to modern challenges of fierce competition, economic problems, globalisation and the subsequent expansion of organisations into overseas markets, and changing technology etc. This changing or evolving nature has in many ways changed the traditional approach to the psychological contract, which was mainly concerned with aspects like ‘job for life’, career progression etc in line with job security. Modern businesses are having to change rapidly due to rapid changes in their environments. This may mean that jobs and positions may be short-lived, and organisational structures may have to be changed regularly due to emergent strategies (also see Guest, 1998; Nadin and Cassell, 2007). This evidently creates a form of inconsistency in the role of the psychological contract, where traditionally, the HRM function focused on training and development, and performance appraisals for employees based on a long-term commitment, modern methods focus more on short-term rewards based purely on performance as the notion of long-term job security is no longer a certainty in most cases (McKenna and Beech, 2008). This reduces the requirement for such qualities as loyalty and commitment from employees, as there is not much of a promise of a long-term relationship from the organisation. There has been more criticism in recent research on the concept of the psychological contract (Cullinane and Dundon, 2006 cited in McKenna and Beech, 2008) where it has been seen as a biased form of managing, where managers put the interests of the organisation above those of the employees due to their relatively more powerful positions to re-define policies and to determine what good performance is. In this case, the methods of working and standards of operation, which proved successful previously, may not be deemed acceptable anymore by management due to increased standards, higher targets and overall changes in organisational strategy. In such cases, there is conflict between the employees and the organisation, as the employees may feel that they are working to standards whilst the management doesn’t. This may result in employee dissatisfaction as they may not be rewarded for their performance due to differences in expectations. As discussed in previous sections, this may also be a consequence of the ever changing nature of organisations which eventually change the nature of the psychological contract. Other problems identified with the psychological contract are notions that it encourages a mechanical form of relationship between managers and employees, where managers are more concerned with elements like resource restrictions and finances when it comes to allocating rewards to employees, making it a monetary and ‘calculable’ exchange; employees on the other do expect these exchanges, but in addition also expect a more emotional relationship with management in that they may expect verbal appreciation, caring attitude and approachability from management. Absence of these emotional factors may lead to the employees perceiving the organisation as uncaring or management too distant for effective co-ordination (Garrow, 2003, and Winter and Jackson, 2006 cited in McKenna and Beech, 2008). Suggestions and Conclusions: From the above discussion it is evident that even though the psychological contract has its draw backs, it is still an important tool for the effective performance of an organisation. The limitations are mainly dependent on how managers implement the contract. Guest (1998) argues that the psychological contract is crucial in influencing effort and performance. Patterson et al (1998) as cited in McKenna and Beech (2008) suggest that “where there is a mutual understanding and perception of fairness then performance is likely to be enhanced (pg 42). The authors continue to argue that such understanding may lead to a healthy and positive climate of satisfaction at the workplace, fostering good working relations between employees and managers through positive attitudes and behaviours. Such a climate may also lead to healthy communication between the different channels in an organisation and effective co-operation between staffs from different levels. However, where there is no mutual understanding, or where the psychological contract is not honoured, this may result in a negative climate where the communication is poor, co-operation may be non-existent, and employees may waste a lot of valuable time worrying and discussing about the social situation, job security, future prospects etc instead of working together to achieve goals (McKenna and Beech, 2008). Most of the literature studied in conjunction with the psychological contract leads to suggest that a large amount of effort in making sure that the contract is honoured has to come from managers as representatives of their given organisation. This is because management is in the position of authority to make decisions and also carries the responsibility of managing human resources through a human relations point of view. This may imply that it is management’s responsibility to understand the differences in people’s perceptions by identifying the diversity of opinions and backgrounds that employees bring to the organisation. Furthermore, the HRM function is responsible for ensuring that the original expectations of the psychological contract are still adhered to during periods of organisational change through continual implementation of HRM practises like training and development, teamwork, benefits, planning and appraisal (McKenna and Beech, 2008). The authors continue to say that such practises result in increased productivity from employees through greater understanding of the organisation’s goals and greater co-operation between peer groups. It can be concluded that it is the organisation’s or management’s decision to implement changes in the organisation, and hence, it is also their responsibility to make sure that the psychological contract, if changed as a result, is done in a manner that would not undermine employee contribution, through effective communication of the new challenges and objectives to the employees. This helps employees understand new standards of performance and new objectives to be met and work in co-ordination towards them. This may in turn ensure fairness in HRM’s reward structure and satisfaction from the employees (see McKenna and Beech, 2008, Pg 41). Hence the proposition that ‘management of the psychological contract is a core task of management’ is true to a large extent, but is also dependent upon employee perception and contribution towards this task of management. Bibliography Cullinane, N and Dundon, T. (2006). The Psychological Contract: a Critical Review. International Journal of Management Reviews. 8(2): 113-129. French, W.L., Kast, F.E. and Rosenweig, J.E. Understanding Human Behaviour in Organisations. Harper and Row (1985): 42-43 Garrow, V.H. (2003). Managing on the Edge: Psychological Contracts in Transition. Roffey Park: London Guest, D. (1998). Is the Psychological Contract Worth Taking Seriously? Journal of Organizational Behaviour. 19: 649-64. Guest, D., and Conway, N. (2002). Communicating the Psychological Contract: an Employer Perspective: Human Resource Management Journal. 12(2): 22-38. Lester, S., and Kickul, J. (2001). Psychological Contracts in the 21st Century: What Employees Value Most and how well Organisations are responding to these Expectations. Human Resource Planning. 24(1): 10-21. McKenna, E., and Beech, N. (2008). Human Resource Management. 2nd edition. Pearson: England. Mullins, L.J. (1999). Management and Organisational Behaviour. FT: London Nadin, S. and Cassell, C. (2007). New Deal for Old: Exploring the Psychological Contract in a Small Firm Environment: International Small Business Journal. 25(4): 417-43. Patterson, M.G., West, M.A., Lawthorn, R., and Nickell, S. (1998). Impact of People Management Practises on Business Performance, (Issues in People Management No 22). Institute of Personnel Development: London Winter, R., and Jackson, B. (2006). State of the Psychological Contract: Manager and Employee Perspectives within an Australian Credit Union. Employee Relations. 28: 421-434(14). Read More