Stephen and Timothy (2002) explain the psychological contract as an unwritten agreement that exists between employees and employers. This agreement
will define the mutual expectations, what management expects from workers and
what workers will expect from the management. Also, management is usually expected to
treat employees justly, provide acceptable working conditions, clearly
communicate what is a fair day’s work, and finally give feedback on how well an
employee is doing. Whereas employees are expected to respond by demonstrating a
good attitude, following directions and showing loyalty to the organization
(Stephen and Timothy, 2002).
The
current 'psychological contract' concept attempts to capture the idea of
employees' explicit and implicit expectations about what their work will
deliver (Edwards, 2003).The analysis of this definition of a psychological
contract often emphasizes the importance of principles in and in the
relationship of employment Equity, justice, dignity, and confidence are among
the values that are often argued to be fundamental to the effectiveness of the
employment relationship and the accomplishment of the goals of the
organizations (Leat, 2007).
According to Rousseau (1989), the psychological contract can be defined as
relations between organizations and their members that derive from two forms
of unwritten contracts. Further, these are individual beliefs in a reciprocal
obligation between the individual and the organization. The definition
'psychological contract' discusses many areas such as subjective expectations,
beliefs and obligations and finally as perceived by the employer and the
worker. This is the core to understanding employment relationship and this
concept first emerged in the early 1960s. The concept of psychological contract has
been primarily studied from the viewpoint of the employee through the notion
describes the expectations of both employers and individual workers (CIPD,
2019).
CIPD (2019) further explains the legal contract of employment offers only
a limited representation of the employment relationship on its own, mainly because
workers contributing little to its terms beyond accepting them. In this logic,
the psychological contract may be more influential as it explains the insights
of the relationship between employers and workers and it influences how people
behave from day to day. Everyday actions and statements made by one party – and
how they are perceived and interpreted by the other is the core of how
psychological contract is built on. Unlike the legal contract of employment
signed by employers and workers, the psychological contract is intangible by nature
(CIPD, 2019).
Armstrong (2014) defines the psychological contract as the expectations that
exist between individual employees and their employers which is a set of reciprocals
but unwritten.
The psychological contract is more than just a transaction regulated
by a legal contract, it emphasizes that the relationship between employers and
workers are much more. Like in any relationship, the length, and quality of their
relationship can be significantly affected since both parties have informal
expectations of each other that are even unwritten (CIPD, 2019). From my
experience working for many local and multinational companies, most of these
unwritten promises were fulfilled unless there is an organizational change
that’s limiting the ability to do so.
Irrespective of the expectations of an individual worker, employers
should be transparent about what they offer, and consult with the current and
future workforce on the employee value proposition in order to manage the
psychological contract effectively. Also, in order to understand and adjust the
perceived balance of what employees contribute and what they get back, they
should also strengthen the capability of line managers (CIPD, 2019).
Below are some general aspects that psychological contract may cover the employment relationship:
Below are some general aspects that psychological contract may cover the employment relationship:
- Job security
- Career prospects
- Training and development
- Perceived fairness of pay and benefits
- Manager support
- Employer’s reputation and the impact on society
(CIPD, 2019)
Psychological contract provides a powerful foundation for the employers to pay attention to the ’human’ side of the employment relationship, such as individuals’ values, motivations, and ambitions. However, this varies across time and individuals. For example, job security is not something everyone desires these days and it is rarely the main offer of the modern employment relationship. But the availability of training and development like opportunities might be more attractive (CIPD, 2019). This is proven to be a fact-based on our company data gathered during initial job interviews because people these days are more keen to know about their career progression opportunities available and other training provided rather than asking about job security related questions.
Psychological contract provides a powerful foundation for the employers to pay attention to the ’human’ side of the employment relationship, such as individuals’ values, motivations, and ambitions. However, this varies across time and individuals. For example, job security is not something everyone desires these days and it is rarely the main offer of the modern employment relationship. But the availability of training and development like opportunities might be more attractive (CIPD, 2019). This is proven to be a fact-based on our company data gathered during initial job interviews because people these days are more keen to know about their career progression opportunities available and other training provided rather than asking about job security related questions.
As per Rousseau (1989), typically the development, maintenance, and
violation of psychological and implied contracts are described along with their
organizational implications. So, what would happen if management is derelict in
keeping its part of the bargain is that it will then have negative effects on
employee performance and satisfaction. According to a study done on restaurant
managers, they have found that psychological contract violations were related to
greater intentions to quit the job, another study conducted on a variety of
different industries found they were associated with lower levels of
productivity, higher levels of theft, and greater work withdrawal (Stephen and Timothy,
2002). One good example I can bring in from the organization I work for is that people who
initially joined the company when its first launched in Sri Lanka, expected promotions
or growth within a shorter time period and employers initially acknowledged but
couldn’t cope up with that later mainly due to lack of results and growth of
the company. Eventually, these employees left the company mainly due to this
reason of the violation of the psychological contract.
References
Armstrong, M. (2014). Armstrong's handbook of human resource management practice. 13th
ed. London: Kogan Page, p.210.
Chartered Institute of Personnel and Development
2019, 12th February 2019, London: The Psychological Contract [Online],
Available https://www.cipd.co.uk/knowledge/fundamentals/relations/employees/psychological-factsheet#6110 [Accessed 13 September 2019].
Edwards, P. (2003). Industrial relations. 2nd ed. Oxford: Blackwell Publishing Ltd, p.15.
Edwards, P. (2003). Industrial relations. 2nd ed. Oxford: Blackwell Publishing Ltd, p.15.
Leat, M. (2007). Exploring
employee relations. 2nd ed. London: Routledge, p.9.
Rousseau, D. (1989). Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, [online] 2(2), pp.121-139. Available at: https://www.researchgate.net/publication/226857215_Psychological_and_Implied_Contracts_in_Organisations [Accessed 12 September 2019].
Stephen, P. and Timothy, A. (2013). Organizational Behavior. 15th ed.
Boston: Pearson, p.278.
I agree. Kataria( 2015) has also researched that violations of the psychological contract can cause harmful effects to the attitude and the behavior of an employee having a drastic negative impact on employee satisfaction and performance.
ReplyDeleteYes Kanchana, failure to uphold a contract creates a sense of wrongdoing, deception and cheating with broad consequences for the relationship of employment (Rousseau, 1989).
DeleteAgreed, the psychological contract is a mutually unwritten expectation within an employee and an employer concerning procedures and practices in the organization. The psychological contract affects employees' work attitude and job performance. Psychological contracts are dynamic, and they evolve through organizational experience. They basically emphasize that individuals have a sense of control over what is expected in the organization and the belief structure of their expectations, which can influence the future of employees in the organization because Employees are an individual to the contract and can choose to fulfill their obligations. It increases certainty by creating predictability, a sense of work safety and a function of control among the employees. It revolves around a fair understanding of the effort/reward relationship and thus reciprocity(Katzman, 2019).
ReplyDeleteThank you for your comments, Sahan. To date, the flavor of psychological contract research has been to treat the psychological contract of a person in isolation without taking into account the impact of co-workers and the social context (Conway and Briner, 2009). This is some other aspect for us to think about in detail.
DeleteEmployers nowadays are looking through their working life for different things than they were ten years ago. Employees with busy schedules, 60 hours of work in a week, weekend practice, regular meetings require a balance of family life, community engagement and leisure.Employees are currently looking for perks such as support programs, family leave, flexible hours, quick advancement and financial assistance programs. As the size and complexity of corporate companies increased, communities developed standards of a better work-life balance, reinforced by legislation (Bala,2013)
ReplyDeleteAgree with your comment. French workers avoid overtime work, work an average (and legally mandated) 35-hour workweek, and enjoy one of the world's longest statutory holiday periods. While the French, for example, admire the hard work of Americans and Asians, they agree that quality of life is often more important than work success and add great importance to their leisure time. But few would argue that during scheduled hours they work hard and have a reputation for high productivity. This reputation is partly due to a French tradition of craftsmanship and partly due to the fact that a high percentage of French workers are employed in small, independent companies where quality is respected (Steers, 2010).
DeleteTo develop the psychological contract we have to follow some steps: Define expectations during recruitment and induction programmes,Communicate and agree expectations as part of the continuing dialogue that is implicit in good performance management practices, Adopt a policy of transparency on company policies and procedures and on management’s proposals and decisions as they affect people.Generally treat people as stakeholders, relying on consensus and cooperation rather than control and coercion.
ReplyDeleteThank you for your comment. Further, Rousseau (2001) distinguishes four stages in the formation and evolution of psychological contracts. First, professional standards and social beliefs play a general role in the pre-employment phase. Second, in the recruitment process, more specific components of psychological contracts are formed. Psychological contracts evolve during recruitment through an interactive process where promises are exchanged, and the actions and messages of the employer and the employees are evaluated.
DeleteTo add a few points to your article which summarizes a wide range of literature on the subject of psychological contract, research by O'Donohue et al (2007) outlined the significance of the psychological contract specifically with the knowledge workers (programmers, physicians, engineers and other white collar workers). These workers often operate independently and their work can not be monitored or measured easily (compared to blue collar workers in a manufacturing line producing good) hence importance of a strong psychological contract to the organization is higher.
ReplyDeleteThank you for your comment. Yes, significance of the psychological contract may vary based on number of reasons. Indeed, a recent meta-analysis Of Bal et al. (2008) found the relationship between breach of contract and trust and affective commitment among younger workers to be stronger, while the relationship between breach of contract and job satisfaction among older workers was stronger. The authors suggested that the moderating role of age depends on the type of psychological contract fulfillment as an explanation for these opposite moderating effects of age. Although the psychological contract is often studied as a single construct, psychological contract is generally acknowledged to consist of multiple dimensions or factors (De Vos et al., 2003).
DeleteHi Anjula, there is no denying the impact of psychological on the smooth operation of a company. End of the day, it is the responsibility of both parties, employers and employees, to ensure a strong contract is maintained while safeguarding breaches. These can be mitigated by not giving the wrong perception to the employee and keeping promises. Employees, on the other hand, should manager their expectations to avoid 'acting out' (Stevenson, 2016).
ReplyDeleteThank you for your comment Jehan. Psychological contract fulfillment can have a positive impact on employee engagement. Research of 135 workers from 16 multinational companies in Taiwan by Chi and Chen (2007) finds a positive relationship between perceived psychological contract fulfillment and employee commitment. Coyle-Shapiro and Kessler (2000) also find a significant positive association in another study between employee engagement and employee psychological contract fulfillment established through the organization's different HR practices.
DeleteWhile psychological contract is important for the employee to be productive and engaged in the workplace, it is important that the organization too plays their part in the commitment (Al-miman, 2017). The organization is expected to maintain the psychological contract with the employee in ways of providing necessities for job satisfaction, financial and non-financial benefits on time and giving due recognition when needed.
ReplyDeleteThank you for your comment Shan. If both the individual and the organization perceive the psychological contract to be fair and equitable, the relationship will be satisfied and will continue. But if any party sees a contract imbalance or inequality, a change may be initiated. The employee can, for example, request a pay raise or promotion, may decrease their efforts, or look elsewhere for a job. The organization can also initiate change by asking the individual to improve his or her skills through training, transferring the person to another job, or completely terminating the job of the person (Van Fleet, Seperich and Van Fleet, 2014).
DeleteYes Anjul, according to Armstrong, (2006) Job satisfaction is the fulfillment which an employee feels in relation to their jobs and work place. It brings the question, whether the employee is happy or content at their jobs. An employee may be measuring their atisfaction in financial, non-financial or psychological contract terms. Job satisfaction degree levels of people range from extreme dissatisfaction to extreme satisfaction. People also posses various aspects attitudes regarding their jobs such as, type of job done, amount of pay, co workers subordinates and supervisors.
ReplyDeleteHi Sheron, thank you for your comment. According to George (2009), meta-analysis has shown a clear connection between breach of the psychological contract and job satisfaction. However, the links between psychological contracts and motivation may be wider and may be associated with the formation of psychological contracts and organizational socialization, as well as with the type of psychological contract.
DeleteAgreed, the demands of the modern economic environment have led to a change in psychological contact between the company and the employee. The contract that was created today is more transactional and about self-actualization. Organizations and their administrators need to be aware of this transition, and today more than ever time and effort is required to shape and manage the right kind of psychological contract with their employees and prospective employees.
ReplyDeleteYes Chathura. In recent years, psychological contracts have come to the fore due to rapid institutional change where a minimal rate of change had previously existed. This may have been the product of privatization and deregulation (as in public utilities) or merely a rapid increase in domestic and international competition.
DeleteAs a result, most organizations have undergone radical changes, including "downsizing" or "delaying." Flatter organizational structures were designed to allow organizations to respond faster to rapid environmental changes. Such adjustments have led to a psychological contract re-evaluation, particularly from the viewpoint of employees who see change as being implemented in a top-down manner, without much consultation. Employees are gradually seeing a change from 'relational contracts' based on a long-term relationship between the employer and the worker to 'transactional contracts' that are often shorter and can carry extra burdens on the worker, along with greater complexity and possibly higher stress levels (Brooks, 2006).