The paper 'Psychological Contract Theory' is a great example of a Business Essay. Since the reconceptualization of the psychological theory by Denise Rousseau in the year 2004, psychological contract theory has established itself as one of the significant concepts in the field of management and organization more especially, in managing organizational change (Business dictionary, 2015). By so saying, it means that it is of great importance for management agents to comprehend fully the concept of psychological theory since it involves both implicit and explicit relationship perceptions between the workers and their employers.
Additionally, in order for change to occur in any organization, there must be a close working relationship between the employers and the workers (George, 2009,32) Moreover, Psychological contract offers employees flexibility because organization change revolves also on the ability to adjust the size of the workforce depending on product change and demand. Therefore, Psychological contract works closely with other organization change theory to emphasize the employee-employer commitment, Importance of psychological theory in managing organizations Psychological contract theory is one of the fundamental schools of thought that is used in comprehending the relationship that exists between the employees and the employers as well as the subsequent effects such as work performance and attitudes.
In other words, a Psychological contract can be termed as the explicit and implicit promises that employees and employers make to each other. For instance, an employer may guarantee his employee job training and security, and their work will in return promise loyalty and hard work (Shruthi & Hemanth, 2012). Moreover, Psychological contract is believed to be psychological because of the emotional relationship perceptions involved in terms of promises from both parties.
Furthermore, one of the distinctive features of psychological contracts from other forms of contracts is that psychological contracts can in most cases be implicit. By so saying it means that the relationship perception and promises can be unspoken and unwritten but can be inferred from behavioral actions (Petersitzke, 2009,3). For instance, a worker may believe a promise of an education allowance from their employer because their employer has in the past paid for their fellow worker MBA courses. The underlying concepts in organizational change as far as the psychological contract is concerned are the fact that employment relationship is defined by an exchange.
In other words, in exchange for the worker's contribution, the employer provides certain returns. Additionally, the exchange level is determined by both parties’ expectations. By so saying, it means that the psychological contacts serve as a processing filter of information regarding employment relationships hence in the process, guiding the behavior and attitudes of employees (Barling & Cooper, 2008). Therefore, change agents need to understand psychological theory in order to conceptualize the much-needed motivation of workers towards change.
In other words, career motivation is one of the fundamental elements that defines and shapes workers' psychological contracts. Additionally, with regards to the organization’ s actions and policies, management agents should, therefore, understand that psychological contracts depend heavily on both non-economic and economic returns that are provided by the company. Furthermore, Organization change agents have to study and evaluate psychological contracts within the social context using the social exchange theory of management where government actions, public policies, cultural values, and social norms play a crucial role (Kate, 2012).
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