The Psychological Contract - Essay Example

The Psychological Contract Faculty The Psychological Contract Argyris conducted a study on employer and employee relationship in two factories during 1960s and introduced the term Psychological Contract. This study was based on the observations and interviews of foremen and employees. Argyris developed his understanding of psychological work contract and norms of the relationship between foreman and employees. Productivity and grievances are the two major concerns covered in this study. This study indicated that there is a relationship between the productivity and the lowering of grievances among the employees (Wellin, 2007). Rousseau (1989) defines the psychological contract as “an individual’s beliefs regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party” (p. 123). There are various aspects of the work force like variations in the job, nature of job, challenges of the work and other areas that have been considered as growing areas of interests (Hughes and Palmer, 2007). There has been various human resource management issues related to the contingent work force that provided one of the most appropriate areas of studies for the professionals and researchers. According to Feldman (2006 as cited by Hughes and Palmer, 2007) the Bureau of Labour Statistics (2005) revealed that the contingent workers formed nearly 10% of the workforce in early 2005. George and Kelly-Patternson (2007) covered different importance of psychological contract within various professional groups. The present economy has transformed from the manufacturing to service and service to knowledge based economy. The experience and skills of individuals have become base for economy. The psychological contract is high in the knowledge based industry. Success of the projects depends on the psychological contract. Psychological contract is explained with respect to emotional aspects of loyalty of employees and support from the organisation (Grimmer and Oddy, 2006). There are individual perspectives of employees, perception of the employees and mutual promise among the employer and employees (Rousseau, 1995). Working relationship of the individuals and organisation is covered in psychological contract (Sparrow and Cooper, 1998). Psychological contract is explained with the use of the term “unwritten expectations” (Wellin, 2007). These expectations are ever-changing and continuously operating between the all the members of the organisation. There are transactional psychological contract and relational psychological contract. Transactional contract works well with the temporary, contingent or non permanent employees. These are obligations of short term (Grimmer and Oddy, 2006). Relational contracts consist of the social and emotional factors. These factors are loyalty and support (Grimmer and Oddy, 2006). Relationship is based on relation rather than monetary issues. Relational psychological contracts consist of affection, attachment and commitments. These factors are more important for some employees of the company who can be permanent, experienced and look for more than remunerative support. Individual for training, career development and job security are some of the attractions of the relational contracts (Grimmer and Oddy, 2006). These obligations are reciprocal with the expectations of employers. These relational factors strengthen the base for long-term employment relationship. These require investments from both sides of employees/employers relationship. These provide job security to the employees and provide reciprocation with security (Hughes and Palmer, 2007). On the other hand, pure monetary benefits are the main feature of the transactional psychological contract (Hughes and Palmer, 2007). There are different views that have been included in the psychological contract studies such as particularism, violation, power distance and contract level. Freese and Schalk (2008) explained different aspects of administrative and professional psychological contracts. These are developed on the basis of different ideologies (Freese and Schalk, 2008). Psychological experiences of an individual and nature of job impacts the psychological experience and psychological contract. Job insecurity and unpredictability are the major aspects of the short term jobs such as contracts or project basis works. Transactional types of psychological contracts helps in minimise these insecurity and unpredictability associated with the employment. Permanent employees or the non-contingent workers have advantage over the temporary employees. They receive psychological contracts transactional and relational contracts. They have the balanced psychological contract. This is the reason for variations in the commitments of temporary and permanent jobs, loyalty and overall productivity of the employee. Therefore there are three types of psychological contract transactional, relational and balanced. In the present business environment the balanced psychological contract is practiced. However in each type of psychological contract there are certain expectations of each party with each other. Economic obligations such as work like house of waiting, overtime payments, performance level, additional efforts and others are included in short term economic obligations (Rousseau, 1995). There are different aspects of the formal relationship of the contract that impacts the psychological contract that is based on informal relationships. McLean Parks et al. (1998) state “the dimensions of psychological contracts, more so than content, are more generalsable across contingent work arrangements than other types of jobs.” According to Hughes and Palmer (2007) the transactional aspects of the psychological contract is usually predictable for a work situation. Workers perceive certain obligations as expected from the client organisations. Similarly the relational aspects are also predictable for the employees. The nature, feature and other aspects of the psychological contract changes with the time. Business environment of an organisation changes with time (Deery, Iverson and Walsh, 2006). The revolution bought from internet technology has also changed the psychological contract. The business environment in the past was comparatively stable than this age of information technology. The number of competitors and competition in the business environment is increasing. In the past the psychological contract was based on transaction. Employees expected status and position and companies expected performance from them (Grimmer and Oddy, 2007). According to Freese and Schalk (2008) presented the unilateral view of the psychological contract. This was based on individualism. Mutual expectations and obligations are linked with the individual belief with the context of a relationship (Freese and Schalk, 2008). There are various phases in the employment and individual belief has control in that. The behaviour of individual employee impacts these phases. Employees’ perception of the organisation’s expectations and obligations also impacts the psychological contract. The psychological contract can be identified with the three forms of measurement Rousseau and Tijoriwala (1998 as cited by Freese and Schalk, 2008) i.e. feature-oriented, Content-oriented and evaluation oriented. Feature oriented assessment is based on the attributes and dimensions of the contract. These attributes are used for comparing the contract. Time impacts the characteristics of the contract. At different phases of time, the psychological contract may differ from each other. Content centred measurement is based on specific terms of any contract in a particular time. Promises are made from both the parties for the opportunities they can have for specific obligations. According to Freese and Schalk (2008) content oriented tasks can be “the provision of opportunities for training, security, challenging tasks, flexible working hours; confidentiality, working overtime when needed, and delivering good services.” Evaluation oriented assessment consists of degree of fulfilment and change or violation in the psychological contract. Training and development opportunities help employees to develop themselves. Employer provides these opportunities to employees. Employees are paid for the overtime they do (Freese and Schalk, 2008). Breach of psychological contract has negative implications on both the parties (Deery, Iverson and Walsh, 2006; Delcampo, 2007; Grimmer and Oddy, 2007; Bal, 2009). There are various studies that covered the implications of breach of psychological contract in terms of reduction of loyalty and level of commitment among the employees. Commitment and trust of the employees and employers gets adversely affected with the breach of psychological contract (Bal, 2009). In order to maintain the psychological contract both parties need to meet the obligations and expectations for each other (Grimmer and Oddy, 2007). The employees’ and employer’s perspectives can be different and it is important for the employer to understand perception of employees regarding the same. This is possible if the communication is regular and clear among the employees and employers (Deery, Iverson and Walsh, 2006; Delcampo, 2007). In order to conclude, it is clear that the psychological contract is a set of promises from employers and employees. These promises are perceived expectations of both the parties. Employers expect hard work and efforts, maintaining the consistency of the brand image and reputation of the company and continuous performance improvements. Breach of psychological contract may affect the level of motivation, commitment and trust of the employees. These factors would impact the overall productivity of the employees. Employees expect regular payment, opportunities to develop their skills and grow with the organisation, recognition for ideas and hard work, effective feedback mechanism, recognition to new ideas, respectful treatment and safe work environment. Similarly the employers expect commitment and loyalty from the employees. Employees and employers need to maintain certain level of mutual obligations for each other so that the psychological contract is maintained among them. This helps in maintaining the overall productivity of the organisation and serving its stakeholders. Reference: Bal, P. M. (2009) Age and Psychological Contract Breach in Relation to Work Outcomes, Rozenberg Publishers available at Google Books Deery, S. J., Iverson, R. D., & Walsh, J. T. (2006) Toward a better understanding of psychological contract breach: A study of customer service employees. Journal of Applied Psychology, 91(1), 166-175. Delcampo, R (2007) Psychological Contract Violation: an Individual Difference Perspective, International Journal of Management. Volume: 24. Issue: 1 Freese C and Schalk,R (2008 )How to measure the psychological contract? A critical criteria-based review of measures South African Journal of Psychology, 38(2), pp.269-286 retrieved on 6 October 2010 from http://arno.uvt.nl/show.cgi?fid=93082 Grimmer, M and Oddy M (2007) 8 Violation of the Psychological Contract: The Mediating Effect of Relational versus Transactional Beliefs, Australian Journal of Management. Vol: 32. ( 1) Page Number: 153 Hughes L W and Palmer, D K (2007) An Investigation of the Effects of Psychological Contract and Organization-Based Self-Esteem on Organizational Commitment in a Sample of Permanent and Contingent Workers, Journal of Leadership & Organizational Studies. Vol.: 14. ( 2.) McLean Parks, J., & Smith, F. (1998). Organizational contracting: ‘a rational exchange?’. In: Halpern, J. and Stern, R. (eds). Debating rationality: Non-rational elements of organizational decision making, pp. 125-154. Ithaca: ILR Press. Morrison, E.W., and Robinson, S.L. "When Employees Feel Betrayed: A Model of How Psychological Contract Violation Develops." Academy of Management Review, 22, 1 (1997), 226-256 Rousseau, D.M. (1989), “Psychological and implied contracts in organizations”, Employee Rights and Responsibilities Journal, Vol. 2, pp. 121-39. Sparrow, P. & Cooper, C.L. 1998, New organizational forms: The strategic relevance of future psychological contract scenarios, Canadian Journal of Administrative Sciences, vol. 15, pp. 356-71. Van den Brande, I, Sels, L., Janssens, M. & Overlaet, B. 2000. Assessing the nature of psychological contracts. Working paper Organisation Studies, Katholieke Universiteit Leuven. Wellin, M (2007) Using the Personal Deal to Increase Business Performance http://www.researchandmarkets.com/reports/444761/managing_the_psychological_contract_using.pdf Read More