Control and Regulation of Labor Relations - Essay Example

The Employment Relationship The employment relationship is based on a contract entered into by equal parties but it is in fact a relationship characterised by parties with unequal power. Introduction The relationship between employee and employer has been a tenacious one ever since the industrial revolution when modern scientific management techniques were first used. For all practical purposes, the connection between employees and employers has a simple foundation since employers are supposed to provide a healthy working environment along with adequate salaries while employees are supposed to give their loyalty and best work to the employer. In practice however, the relationship is filled with questions that beg for answers and an unequal level of power depending on the situation placed on the employer or the employee. The Inequality While employment and the process of working for a particular employer may be defined in legal terms with contract documents and legal definitions which try to be as exact as possible, it is the psychological contract between the employer and the employee which is difficult to define and creates the inequality in the relationship. Any company would like to keep individuals working for the company engaged and motivated in their work. However, the process of engaging individuals as well as providing the motivation to all concerned parties is not an easy one (Vance, 2006). Establishing the psychological contract requires careful management, an understanding of what motivates certain individuals and understanding the work-life balance which prevents employees from burning out (Erdogan, 2005). These responsibilities may be considered as a part of the equation on the side of the employer but then dedication and devotion must also be offered from the employee to create a balanced psychological contract. There are several examples of companies employing effective policies and others where the policies may not be that effective and these can be discussed in the light of theoretical analysis to show how company policies can influence the employment relationship with a view to the psychological contract. The Psychological Contract Robinson and Rousseau (1994) suggest that the psychological contract is significant for all sides of the employment contract and those employees who are given employment with the company always hope to obtain more benefits from their employment in future. As per the meaning of the term the psychological contract is the implicit contract of various understandings between the company and the workers as they relate to both the expectations of the employees and the obligations of the employer (Emott, 2006). For example, as reported by Welch (2005), when employees are heavily rewarded for high performance with companies such as GE, the psychological contract of the employees is bound to be affected in a positive way since it shows that the company cares about them and will treat them equitably. Guest (2004) takes an even wider view of the psychological contract in recruitment situations where new bonds are being formed and he firmly recommends that a full understanding of the psychological contract should be based on the idea of fairness to both parties as well as mutual trust between them. In practice, this may be difficult to achieve for all companies since at the time of recruitment or early on in a career, both parties may have very little time to create any implicit bonds. As Hendry and Jenkins (1997) conclude, since the contract is implicit, it is difficult to estimate how it will be impacted with changes in the future but at the same time it is important to think about the psychological contract before any change in the employment relationship is declared. Perhaps the best example of a sudden change in the psychological relationship which shows the power of the employer over the employee comes from Apple Inc. after Steve Jobs came back to the company as the CEO. As soon as Steve returned, he made dramatic changes within the company which badly affected the psychological contract and employment relationship for many employees. The changes certainly showed that the employer had more power than the employee because in the past, while the company was being controlled by previous CEOs, it had developed a very leisurely atmosphere which was good for morale but it was hurting the output. Deutschman (2000) describes the conditions before Job’s return to the company by saying: “Before Steves takeover, the campus had a leisurely atmosphere. Staffers loved to hang around smoking and chatting in the courtyard of the R&D complex, which always had ashtrays stocked at the outside and inside doors of all six of its buildings. Some employees seemed to spend most of their time throwing Frisbees to their dogs on the lawns (Deutschman, 2000, Pg. 3).” Steve changed that psychological contract for the better with a new agenda that prohibited smoking anywhere on Apple property. Dogs were banned from the company premises and it looked like, “Steve was pushing his own lifestyle on 10,000 others (Deutschman, 2000, Pg. 3).” These steps made quite a lot of employees unhappy since smoking in the courtyard allowed individuals of different departments to interact with each other and people who worked long hours for the company had hardly any time to be with their pets. The old and established psychological contact was being broken and it would seem that Steve’s changes could lead to disaster because such steps caused some senior individuals to leave the company. While these steps appear to go against the demands of maintaining the psychological contact for establishing a positive relationship, they worked at Apple due to the management skills of the leadership and very soon, the company began improving itself. The record breaking profits, the high sale figures and the value appreciation for shareholders clearly show that his ideas of changing the psychological employment contract have worked wonders (Deutschman, 2000). The company employees became proactive and started to interact with the boss at the top on a deeper level as discussed by Deutschman (2000) who says that: “People started to realize that Steve could assert his authority over seemingly any aspect of the companys life. Apple was going to follow the vision of a single person, from the no-smoking rules to the editing of the TV advertisements. Steve was clearly in charge, and Steve was seemingly everywhere (Deutschman, 2000, Pg. 3)”. Thus, employee engagement as well as the psychological contract were both enhanced but not before many individuals left the company citing personal differences with the policies initiated by the new regime. It goes to show that the psychological contract can also create negative emotions and resentment leading to individuals removing themselves from service (Clarke and Robertson, 2005). However, in some cases, it may be an eventuality that the employer has to be prepared to accept. Conclusion As shown by the examples from GE and Apple, the psychological contract and a positive relationship between the employer and the employee are not things which come naturally. However, once they have been established in a positive manner by the management of any given company, the benefits can be substantial. With this view the reward system based on employee differentiation at GE is intrinsically linked to the philosophy of the company to improve itself and the performance level of its employees (Welch, 2005). For GE, that creates improved employee commitment and increased levels of individual motivation. On the other hand, Apple managed to change the psychological contract of its employees simply due to the leadership skills of their CEO who was able to convince most of the big players in the company that he was not trying to destroy Apple Inc but rather to improve its condition. The relationship between the employer and the employee had to be changed for the company to function the way the head of the company wanted it to, but that change certainly came at a heavy cost even though the benefits reaped show that it was a good decision. Overall, it is certainly true that the approach of the company to employee management and the policies used by the company can certainly affect the level of commitment and engagement of the employees since that is what forms the basis of the employment relationship. However, knowing how to change the level in a positive manner is essential for successful management since mismanagement in this regard can only lead to difficulties for the company as a whole. As the companies of the future gain a deeper understanding of the psychological contract, they are likely to become better companies as well as better places for employment for the employees. Word Count: 1,605 Works Cited Clarke, S. and Robertson, I. 2005, ‘A meta-analytic review of the Big Five personality factors and accident involvement in occupational and non-occupational settings’, Journal of Occupational & Organizational Psychology, vol. 78, no. 3, pp. 355-376. Deutschman, A. 2000, ‘The once and future Steve Jobs’, Salon.com, [Online] Available at: http://archive.salon.com/tech/books/2000/10/11/jobs_excerpt/index.html Emott, M. 2006, ‘A review of research into the making and breaking of psychological contracts’, People Management, vol. 12 no. 1, pp. 47-48. Erdogan, B. 2005, ‘Enhancing Career Benefits of Employee’s Proactive Personality’, Personnel Psychology, vol. 58, no. 4, pp. 859-891. Guest, D. 2004, ‘The Psychology of the Employment Relationship: An Analysis Based on the Psychological Contract’, Applied Psychology: An International Review, vol. 53 no. 4, pp541-555. Hendry, C. and Jenkins, R. 1997, ‘Psychological contracts and new deals’ Human Resource Management Journal; vol. 7, no. 1, pp. 38-44. Robinson, S. and Rousseau, D. 1994, ‘Violating the psychological contract: not the exception but the norm’, Journal of Organizational Behavior, vol. 15, no. 3, pp. 245-259. Vance, R. 2006, Employee Engagement and Commitment, SHRM Foundation. Welch, J. 2005, Winning, HarperCollins. Read More