The Decline of the Traditional Career and the Growth of Non-standard Work Arrangements - Essay Example

Have the decline of the traditional career and the growth of non-standard work arrangements led to a fundamental shift in the nature of the psychological contract? Table of Content Chapter Page. Introduction 02 The Obligation 04 Psychological Contract Violation and its Impact 05 The Parameters of Psychological Contract 08 The Effect of Psychological Contract in UK 09 Owners, Managers and Employee Relationship 11 Conclusion 12 Reference 13 1.0 Introduction Have the decline of the traditional career and the growth of non-standard work arrangements led to a fundamental shift in the nature of the psychological contract for both managerial and non-managerial employees? Non-standard employment relations such as part-time work, temporary help, contract employment, short-term and contingent work, and independent contracting, are becoming increasingly prominent and popular in recent years (Annual Review of Sociology, arjournals.annualreviews.org, referred on 16.04.2006)1. A sense of insecurity, whether real or imagined, has increased among all types of workers. There is evidence of substantial changes in work and job profiles. The issues involved have far-reaching implications. This could lead to increased polarization of the work force, income disparities which is quite conspicuous now, and new forms of social exclusion. It may not be the end of work but its attenuation in terms of quality of life and of working life will boomerang. Have there been a decline of the traditional career and the growth of non-standard work arrangements and has this led to a fundamental shift in the nature of the psychological contract. This paper takes a close look at what could have been and what is. What is a contract? Contracts are a ubiquitous and binding feature seen in organisations the world over. A Contract serves as a bond that brings together employees and employers together to achieve the organisational goal. Although macro research has paid some attention to the study of contracts, such as by Williamson, 1975 (Robinson, Kraatz, & Rousseau, Changing Obligations and the Psychological Contract: A Longitudinal Study, Research Notes) 2, an elaborate study or focus on the research on this field leaves a lot to be desired. “Technological advancement is assumed to be the most irresistible driver of change. Technology will create new jobs and transform existing work to higher skill levels, or information technology will destroy jobs or degrade them into less skilled, more routine work (Changing Nature of Work 1999). The widespread shortage of IT workers suggests that jobs are being created on a large scale. Worker surveys indicate that skills and responsibilities have increased due to digital technology (Changing Nature of Work 1999)” (Kalleberg, NON-STANDARD EMPLOYMENT RELATIONS: Part-time, Temporary and Contract Work, www.cete.org, referred on 16.04.2006)3. “Martin and Butler (2000) found "widespread agreement" in the literature that the old employment contract is dead or dying. In its place, a variety of non-standard work forms such as part time, self-employment, temporary, contingent, and contractual have taken over. The U.S showed an increase of 29.4% in 1995 (Changing Nature 1999). In Australia, the proportion of part-timers tripled during the period 1973-1998 (Marginson 2000). Part-time work increased in the United Kingdom substantially during the same period (Will “Nonstandard” Work be the Norm?)” (Kalleberg, NONSTANDARD EMPLOYMENT RELATIONS: Part-time, Temporary and Contract Work, www.cete.org, referred on 16.04.2006)4. 2.0 The Obligation In any organisation the relationship between the employer and the employee during the initial period of employment may seem biased, especially by the employee leading to a negative thought and approach. This will affect and create a significant change in his or her view of a contract. This will invariably affect their relationship. The development of a relationship and its consequence can and will change perceived obligations. This can be attributed the failure of one individual failing to fulfill his or her obligation to the other. Obligations are based upon acceptance of a promise or favour. The failure of one person to comply with such an obligation can erode the relationship between the two parties and may even be a cause of mistrust. The same theory stands good in the relationship between an employee and an employer. Non-committal to obligations by an employer can affect not only what an employee feels towards the organisation but also what the employee feels obligated to offer in return. An employee who experiences a non-obligatory vibe may no longer want to maintain a long-term relationship with his or her employer for the simple reason of feeling insecure. The employee may feel that the employer is not obligated to provide job security and radiate the same feeling towards the employer. Work is affected as the employee feels much less obligated to be loyal and may even under par because of the relational dimension of the null contract value. Thus a psychological contract is a perceived as a belief what an employer is obliged to provide in return for reciprocal returns from his or her employee. The psychological contract is a continuous process lasting the entire cycle of an employee’s tenure with his or her employer. The longer the relationship between the two endures, the repeated interactions, and the continuous cycles of contribution and reciprocity, the broader the array of contributions and inducements within the contract. 3.0 Psychological Contract Violation and its Impact A violation occurs when one party in the relationship perceives another to have failed to fulfill promised obligation(s). Since contracts emerge under assumptions of good faith and fair dealing (MacNeil, 1985) and involve reliance by parties to the contract, on the promise to the other, violation of the contract can have serious repercussion to the signed parties. Employees have been known to have unrealistic expectations from their employers, and when their expectations are unmet, it is obvious that employees become less interested and retaliate or show their displeasure by under-performing, and subsequently leaving their current job. “Violations decrease trust. When rules of friendship are violated, trust and respect decline (Davis and Todd, 1985). When an employer breaks a rule in his or her work relationship, trust is lost. Gabarro and Athos (1976) identified a number of bases of trust within business relationships: beliefs regarding the other’s integrity, motives and intentions, behavioural consistency, openness, and discreteness. All these factors can be undermined through psychological contract violation. Trust may also be lost in an employer’s motive because a violation can be interpreted as the employer’s original idea to build and maintain a mutually beneficial relationship has changed or otherwise. Thus, Psychological contract violation by the employer will be negatively associated with the employee’s trust in the employer It will be negatively associated with job satisfaction and organisational satisfaction. It will be negatively associated with the employee’s intent to remain with the employer. It will be positively associated with the actual employee turnover”. (Robinson & Rousseau, Psychological Contract Violation and its Impact, Violating the Psychological Contract: Not the Exception but the Norm, Journal of Organizational Behavior, Page 248)5 This above scenario may not hold good for all employer-employee relationship. Psychological contract violations may have a different impact upon employees whose career motives differ. Specifically those employee’s who place greater emphasis on the employment relationship itself, will be more negatively influenced by the violation than those who do not. Rousseau (1990) identified careerism as an important factor in determining a desired employment relationship. Individuals high on careerism perceive their current employer as an instrumental stepping-stone up the inter-organizational career ladder and are likely to adopt a more ‘transactional’ employment relationship with their employer. This relationship is not intended to be long term and what is exchanged has a short term focus. These employee’s values are the more immediate rewards of the relationship such as pay, training, and credentials to obtain a better job in another organization. This motivational pattern is frequently ascribed to MBAs and other young professionals (Business Week, 1998)” (Robinson & Rousseau, Psychological Contract Violation and its Impact, Violating the Psychological Contract: Not the Exception but the Norm, Journal of Organizational Behavior, Page 249)6 . The break of the Psychological contract and the rise of Information Technology has led to a change in the work perspective of potential employees. “Temporary and self-employed workers are on the rise here. The high rate of innovation within the Information and Communication Technology (ICT) sector, and lower barriers to entry for online businesses are incentives for self-employment. Between 1979 and 1998, the proportion of managerial and professional workers who were self-employed in the United Kingdom grew by almost 300 per cent. Over three-quarters of those in self-employment in the United Kingdom are individuals, and none of them have employees reporting to them. Individual e-lancers use the Internet to construct vibrant networks and supporting infrastructures and these sustain their independence from any single contractor agent and increase their labour market security. In the United Kingdom, independents working in design, fashion, broadcasting and the Internet now make up 10 per cent of the workforce and generate £50 billion a year, a figure which is set to rise to £80 billion in the next decade, or 6 per cent of the UKs economic output” (Toward job economies? Employment in the Information society, World Employment Report 2001, ILO, 4.2 Structural employment dynamics of the information economy, www.bib.ulb.ac.be referred on 17.04.2006)7 4.0 The Parameters of Psychological Contract “Contemporary research has led to the belief that there are two parameters to the theory of psychological contract. Primarily, a psychological contract exists at an individual level, that is, the individual’s belief in his or her relationship with the other. This is distinct and different from an ‘implied contract’, which, refers to a third party’s interpretation of an exchange involving others (Rousseau, 1989; as shown in Rousseau and Anton, 1988; Rousseau and Aquino, 1993), and from ‘normative contracts’, in which, members of a social unit such as a department or a team, share a common set of psychological contracts with another party, such as a supervisor or a firm as described by Nicholson and Johns (1985). The other parameter of the theory of psychological contract is that individual beliefs comprising the contract involve sets of reciprocal obligations, not just expectations. Obligations arising from the exchange of promises constitute the building blocks of the psychological contract. Although obligations are a form of expectation, not all expectations held by a person need to be promissory or entail a belief in mutuality or reciprocity”(Rousseau, Putting Boundaries on the use of the concept, Page 668, The Problem of the Psychological Contract Considered, Journal of Organizational Behavior, Page Vol.19, Special Issue: The Psychological Contract at Work, (1998), pp.665-671)8. 5.0 The Effect of Psychological Contract in UK The long standing problem of short-term in British industry needs to be resolved. Within companies, continuous improvements are needed in management practice, corporate governance and organisational design. Productivity is about how productive people are at work. Clearly their skills, motivation and commitment are key elements to an organisation’s success. It is in this context that the UK Government introduced a number of new arrangements, including tax incentives in the 2000 and 2001 budgets, to encourage employee commitment and motivation through the use of employee shareholding, with the aim of improving Britain’s productivity performance. “Two other developments that were incorporated by British companies to improve corporate performance was the introduction of the European Works Council Directive (EWCD), and the European Information and Consultation Directive (EICD). The UK initially exempted itself from EWCD, but has since agreed to comply. Then the EICD, designed to encourage information disclosure and consultation with employees was approved. In addition to these developments, the rapid pace of change in corporate governance structures and the legislative framework in the UK and Europe, necessitated a need to re-examine the impact of corporate governance on economic performance, including as regards its impact on employee involvement and hence commitment, motivation and productivity. Much of the recent academic literature has taken a fairly narrow view of corporate governance, focusing on the role of Executive/Manager Shareholders, CEO compensation, Board Composition and the degree of participation of institutional investors in voting and decision-making”(Michie & Oughton (2003), HRM, Employee Share Ownership and Corporate Performance, Research and Practice in Human Resource Management, 11(1), 15-36)9. Employee participation offers an antidote to corporate power. That ensures the interests of employees, as well as shareholders, are taken into account in company decision-making. There are a variety of mechanisms that companies may use to enable employee participation, from direct participation in day-to-day decision making to Board level participation. Employee share-ownership offers a second route to increasing employee influence, provided that employees own a significant stake and their voting rights are pooled. “One of the theoretical foundations of studies of corporate governance is the principal-agent problem and agency theory. Principal-agent models have been developed to analyse explicit contractual relationships when contracting partners have divergent interests and there is imperfect information. It is evident that within the firm the agency problem is not confined to the relationship between owners and managers. There are embedded agency problems that include relationships between owners and managers; managers and non-managerial employees; and owners and non-managerial employees. These relationships reflect embedded imperfect information problems and misaligned incentives that run throughout the firm. Employee share-ownership provides one mechanism for aligning the interests of employees and owners and the interests of managers and non-managerial employees. The other theoretical foundation of study of corporate governance is about who takes decisions within companies, and this must necessarily include the extent to which employees participate in strategic and operational decision-making”(Michie & Oughton (2003), HRM, Employee Share Ownership and Corporate Performance)10. Finally, the question of what motivates different types of shareholders. It can be assumed without doubt that shareholders are motivated by wealth and profits and those investors make the best use of available information. This approach, therefore, glosses over the possibility that different types of shareholders may have different objectives. These three sets of reasons imply that employee ownership and participation have important effects on corporate governance. It is also evident that employee ownership, employee participation, involvement and cooperation, and shareholder activism have joint and interactive effects on motivation, productivity and corporate performance 6.0 Owners, Managers and Employee Relationship “A number of studies have explored the impact of employee representation and participation on productivity, profitability and measures of employee job satisfaction and well being. Employee participation at the workplace is regarded important in generating and sustaining company loyalty and commitment to the organisation. However, establishing and sharing a company ethos and culture is seen as a desirable outcome for organisational success. Incentive schemes may be impracticable where results depend on team effort. To operate well, incentives in such cases need to go beyond simple appeal and instead engender collective trust and commitment. Encouraging employee participation through a particular route of ownership-stakes has taken a number of forms over the years. From worker co-ops to management buy-outs, share ownership by employees has long been the subject of corporate and public policy. As noted, the March 2000 and 2001 budgets in Britain introduced incentives designed to encourage employees share ownership. To be successful over the long term, companies need to innovate both in what they produce or offer and in the way in which they produce or the processes they adopt. The active participation of the work force is seen as increasingly important in these processes, particularly in high value added sectors and the ‘new economy’ more generally”( Michie & Oughton (2003), Owners, Managers and Employee, HRM, Employee Share Ownership and Corporate Performance)11. 7.0 Conclusion One of the most fascinating aspects of psychological contract in the workplace is the resilience it faces in the change of individual employee’s experience. Its versatility in explaining the dynamics of employment suggests that the psychological contract along with related constructs such as violation and change, have had a central role to play in organizational behaviour by bettering the dynamics and specs of the employment relationship. The last fifteen years has seen a number of researchers concerned with the changing nature of the employment relationship. Organisations have been forced, due to competition and globalization into organisational changes. Changes and its implication on the breakdown of the traditional relationship is a key behind the renewed interest in the concept of the psychological contract (Rousseau, 1990), and in particular with psychological contract violation and its consequences (Robinson & Rousseau, 1994; Turnley & Feldman, 1999, 2000). A study confirmed the following: supervisor and subordinate perceptions are most likely to differ on the extent to which the organisation violated its obligations to provide fair pay, advancement opportunities, and a good employment relationship. In addition, the greater the degree of psychological contract breach reported by subordinates, the less committed are they to the organisation and this reflected on their attitude to the job. Moreover, when psychological contract breach is perceived, supervisors and subordinates attributions regarding the reasons for the breach are likely to differ. The finding also suggested that subordinates are more likely to attribute breach to the organisations intentional disregard for the commitments that it had made to the employee, while supervisors are more inclined to attribute breach to situations beyond the organisations direct control 8.0 Reference Annual Review of Sociology, Vol. 26: 341-365, Volume publication date August 2000, http://arjournals.annualreviews.org/doi/abs/10.1146/annurev.soc.26.1.341 Sandra L.Robinson, Matthew S. Kraatz, Denise M. Rousseau, Changing Obligations and the Psychological Contract: A Longitudinal Study, Research Notes, Page 137 Arne L. Kalleberg, NONSTANDARD EMPLOYMENT RELATIONS: Part-time, Temporary and Contract Work, http://www.cete.org/acve/docgen.asp?tbl=mr&ID=101 Department of Sociology, University of North Carolina at Chapel Hill, Chapel Hill, North Carolina 27599-3210; e-mail: Arne_Kalleberg@unc.edu Sandra L. Robinson & Denise M. Rousseau, Psychological Contract Violation and its Impact, Violating the Psychological Contract: Not the Exception but the Norm, Journal of Organizational Behavior, Page 248, Vol.15, No.3, (May, 1994), pp.245-259. Sandra L. Robinson & Denise M. Rousseau, Psychological Contract Violation and its Impact, Violating the Psychological Contract: Not the Exception but the Norm, Journal of Organizational Behavior, Page 249, Vol.15, No.3, (May, 1994), pp.245-259. Toward job economies? Employment in the Information society, World Employment Report 2001, ILO, 4.2 Structural employment dynamics of the information economy http://www.bib.ulb.ac.be/cdrom/wer_lawitie/chapter/ch_04_2.htm Denise M. Rousseau, Putting Boundaries on the use of the concept, Page 668, The Problem of the Psychological Contract Considered, Journal of Organizational Behavior, Page Vol.19, Special Issue: The Psychological Contract at Work, (1998), pp.665-671 Jonathan Michie & Christine Oughton (2003), HRM, Employee Share Ownership and Corporate Performance, Research and Practice in Human Resource Management, 11(1), 15-36, http://rphrm.curtin.edu.au/2003/issue1/employee.html. Read More