The Nature of the Psychological Contracts - Assignment Example

Running head: PSYCHOLOGICAL CONTRACTS Name Course Institution Tutor Date Introduction Basically, the psychological contract relates to the expectations that different parties have when entering into a relationship. In the human resource perspective, it relates to the expectations that exist when an employer and employee enters into an agreement. Employers or organisations cannot guarantee lifetime employment to employees (Tekleab, Orvis, Taylor, 2013, p. 362). The nature of these contracts is informal or spoken and is driven by factors such as organisational culture, norms and personalities of parties involved. they are very essential in ensuring that the atmosphere in the work place is accommodative and all of all parties involved are well aware of their duties and responsibilities at all times. The essence of psychological contacts is to reduce the incidence of conflicts and create a smooth flow of work. As such, hiring costs that are associated with employee turnover and dissatisfaction are reduced to the fullest. It is therefore, crucial to keep a balance between employer requirement and the ability of employees to interact socially, professionally and psychological in performance of their duties (Jamil, Raja, Darr, 2013, p. 491). The psychological contract concept has gained a lot of attention in the last two decades. This was following the publication by Rousseau in 1989 (Rousseau, 1989). Its inception however dates back to the 1960s. Argyris coined the psychological contact in 1960 as he sought to explain the relationship between employees and their employers. In his publication, he explained that employees seek satisfaction from working in organisations through incentives that they receive and the relationship that exists between them (Argyris, C, 1960), Employee contribution towards organisations needs to be adequate to have inducements from organisations. Inducements on the other hand should be attractive to employees in order for them to contribute adequately in the organisation as well. Psychological contracts The evolution of psychological contracts has seen it develop into various types that are applicable in different situations. This has been as a result of organisations accepting the concept and using it to determine the types of relationships that they have with their employees. Every employee in the work place is seeking development and advancement in their careers. Psychological contracts are subjective in nature and hence current research has categorised it into factors such as job security, training needs, development of careers, work freedom and autonomy and job satisfaction. Contemporary research regarding the topic has expanded to the need to honour contacts both in an employee and organisational perspective. In this view, concentration has been focused on the formation and contents of the psychological contract. This form of psychological contract is short term in nature. Such a contract is not expected to last long in its implementation. In this view, this kind of contract is specific and the employee is expected to perform duties that they are paid for. Due to the nature of the contract and the kind of work that is done within the organisation, the employee has no obligation towards the employer since the required work is completed (Braekkan, Tunheim, 2013, p. 247). It is under the discretion of the employer to engage the employee at a later period and it is also the choice of the employee to acceptor decline. This will depend ton the experience that both parties have from their transactional relationship. The implication of transactional contracts is a short term one and hence employees and employers do not seek future ties after duties are completed. A good example of transactional contacts is in short contractual engagements which have become common in organisation. Extension of such contracts are based on performance and unforeseen necessities. After one transactional contract, employees go looking for others and the process continues (Rousseau, 1989, 125). Such contracts should only be engage short term labour engagements and not potions that are meant to be permanent. Relational contracts are more open and less specific in nature. The relational psychological contract is based on emotional involvement of the two parties and how they relate in this perspective. Again, the personality aspects come into play and determine how the two parties perceive each other. The way the contact turns out is also determined by the reward in terms of benefits and monetary remuneration to the employee. Employees are expected to offer support in form of their skills and show commitment to their jobs. This should be guided by the interests and needs of the employer. On the other hand, the employer is expected to offer support the employee in terms of social and moral support as a person and those who matter to them; like family and close friends (Lapointe, ÉVandenberghe, Boudrias, 2012, p. 528). Relational contracts are more common than other types. The implication is that employees offer their skills for a given period of time. Labour offered is often skilled in this type of psychological contracts. The relationship between employers and employees is dependent on performance and meeting of expectations by both parties. The effect of relational psychological contracts is also dependent on the kind of relationship built between the two parties if expectations are met then the engagement continues and vice versa (Guest, 2004, p. 542). The difference between transactional and relational contracts is in the diversification between economic and social exchanges. They can also be differentiated on the perspectives of time frame, focus, tangibility and scope. Relational contracts have both tangible and intangible exchanges in nature. They are dynamic and open ended in comparison with transactional ones. The scope is also wider and sometimes may extend to include personal relationship. The conceptual difference between the two is also apparently clear. In this view, Rousseau argues that psychological contracts can therefore be either more relational than transactional in nature or vice versa. However research in the distinction between the two psychological contracts forms has not yielded consistent results. This is as a result of differences in organisations and the perspectives they use to approach psychological contracts. There also exists balanced psychological contracts witch are open agreements with where both parties are expected to contribute to the learning and developmental processes of each other. This is also driven by the success of the employer and the employee as well. External employability is advocated for in this type of psychological contract. In this case the employee is expected to have a continuous development in skills in a way that suits the needs of the employer. The employer on the other hand is expected to enhance the employability of the employee in the context of the organisation both internally. Employers should also facilitate transition and adaptation of new aspects in the organisation (Dabos, Rousseau, 2013, p. 485). The concept of balanced psychological contracts is very crucial for organisations. This is because it frames the expectations of both parties and hence the obligations are well set out. Compared to the past, the concept is being applied increasingly in organisations where they facilitate the well being of employees and in turn they benefit from their productivity. Balanced psychological contracts have the effect of creating long term relationships with employees. Such contracts create a complementary atmosphere where both parties seek to gain in the long terms. The implication that this has on employees is increased job satisfaction and career development. These types of contracts are common in huge organisations which nurture their best talents by exposing them to dynamic environments hence making them more competent in their fields of expertise. Organisations also seek to benefit from these types of contacts through productivity and would be keen on maintaining such employees (Dabos, Rousseau, 2004, p. 52). 2.1 Psychological contracts and relationship to performance Contemporary research has linked organisational performance to psychological contracts. This is one of the reasons that extensive studies have been carried out regarding the topic. Since its inception in the 1960, developments have been made and this has furthered human resource portfolios in maximising output for their employees. The application of psychological contracts requires blending of the several types depending on organisational objectives to achieve growth through employee productivity. In this view, researchers are more interested in linking psychological contracts to organisational performance. Human resource practices are therefore employing innovative ways to ensure that employees give their maximum towards productivity (Coyle-Shapiro & Neuman, 2004). As mentioned earlier, job satisfaction scope, and development of careers are crucial aspects that employees require. The achievement of this is shaped by the types of psychological contracts that are created in the organisation for different individuals. The issues facing contemporary organisations are nature of jobs and the need to downsize to manageable numbers. Technology, markets and products are also constantly changing. Traditional organisational culture s also becoming phased out and new methods of management are emerging. In this view, organisations are working to get the psychological contracts right. The statuses of these contracts are therefore crucial in determining how organisations manage change. Change has the potential of having both positive and negative effects but all this depends on the individual and organisational perspectives. Recessions and globalisation have been the driving factors towards the rethinking of psychological contracts and the ay they shape organisational performance. Findings from surveys by different researchers have found out that contemporary organisations are more effective in fulfilling their promises, though stricter, to employees. In return a turnaround in human resource perspectives and overall performance has been enhanced. In support of his, relational and transracial psychological contracts have become more developed and inclusive with the aim of achieving individual as well as organisational objectives. Further, organisations are trying to with “the talent war” through psychological contracts with their employees. This is all in a bid to describe what entails of a good employee and a good employer. Organisations therefore seek to benefit from fulfilment of psychological contracts (Braekkan, & Tunheim, 2013, p. 247). A majority of employees in the world today would prefer to have control of their careers in future. The same majority would prefer to have guaranteed job safety and security in a single organisation as opposed to changing to different jobs. Only a few employees still prefer the traditional psychological contracts and employment strategies. Meeting these statistics, employers have to appeal to employees in order to achieve their objectives in performance as well The nature of contracts is also dependent on whether employees are core or periphery in nature (McDonald, Makin, 2000, p. 84). Surveys show that temporary workers are more satisfied with their engagements than permanent ones. This is due to the nature of psychological contract which allow for flexibility and engagement of new contracts when the existing ones are not satisfactory. Job performance is dependent on individual skill and experience that one has in the field. Apart from this, the employer employee relationship comes into play when job performance is in question. The ability of the employer to facilitate the performance of duties as per expectation depends on support systems that are availed to them and also the relationship with the employer and other employees as well. This means that employer have to invest further in employees to make the feel obligated to fulfil their responsibilities, given the benefits that accrue from the job. When an employer fails to invest in the workforce, the result is a demotivated workforce that does not perform duties according to expectations they become withdrawn and are less engaged in productive performance in the workplace. Eventually, this causes conflicts and employees may actually leave the organisation (Sonnenberg, Koene, Paauwe, 2011, p. 665). In this view, a psychological contract also revolves around the relational employment contract. Fulfilment of obligations is also dependent on how healthy the employer employee relationship is. Issues such as commitment and trust are basic to meeting the psychological needs of the parties to a psychological contract. Research done in a small insurance company found out that employment responsibilities were reciprocated by management in the company. Employee satisfaction and fulfilment of obligation was linked to performance of other duties such as engaging in volunteer work and other projects. A lot of research has been carried out in regard to the topic and it has been realised that Human resource practices in are significant determiners of how psychological take shape. The human resource approaches towards employees determine the kind of psychological contracts that will be made (Bal, Lange, Zacher, Van der Heijden, 2013, p. 279). This in turn affects the way that employees perceive their work and their overall performance. The contracts made are supposed to meet individual employee needs in a way that maximises their abilities and skills in job performance. In this case, customisation is necessary in terms of communication adaptation, interaction with human resource over specific requirement and overall social interaction. A health psychological contract is crucial when determining the way employees communicate and interact in the company. All these translate to performance as individuals as well as the whole organisation. The human resource portfolio in an organisation forms a strategic part of implementation of organisational plans. These strategies are expected to create unique relationships between employers and employees. The relationships created are unpredictable due to different personalities and requirements. A psychological contract exists between each and every employer and employees. This is the reason why different employees are rewarded differently from their efforts. The employer employee relationship determines the eventual adaptability and performance of specific duties. Psychological contract describes a give and take situation. In this view, the employee gains from rewards that come from the performance of duties and achievement of expected goals or beyond. Rewards are most of the time monetary n terms of remuneration. The employer on the other hand provides the employee with a platform for conducting duties which will in turn bring some profitability to the organisation. Therefore, a healthy psychological contract provides a win win situation for parties involved. 2.2 Psychological contracts and employee turnover Psychological contracts do not only affect the performance of organisations but also has effects on aspects such as organisational turnover. As mentioned earlier, it shapes the relationship between employers and employees to an extent that determines whether the job portfolio can be regarded as permanent, semi permanent or temporary. The overall effect that psychological contracts have is to determine the rate of job retention or other wise. Where psychological contracts are favourable, turnover is low and where they are unfavourable, turnover is high (Braekkan, Tunheim, 2013, p. 250).. Transactional types of contracts result in high turnover rates while balanced and relational contracts have more capability in turnover reduction. 2.3 Psychological contracts and employee satisfaction The output that employees give towards achieving goals for an organisation is determined by their contentment with their current engagements and terms extended. In this view, favourable terms result in better psychological contracts which work towards the relationship with employers. Where psychological contracts meet expectations of employees, they contribute towards their satisfaction and consequently to the productivity and contribution towards thee organisation. The relationship hence is mutual between the two parties (Guest, 2004, p. 543). Employers seek to gain from productivity while employees seek to gain form satisfaction derived from engagement terms. 2.4 Psychological contracts as organisational strategies. In the contemporary competitive world of business and organisations, getting the best, most innovative and productive employees is paramount to achieving goals. First, such strategies are cost effective as hiring costs and training costs are covered by the overall productivity of the organisation .as a result psychological contracts with current employees are very crucial in determining the cost implications that they will have on the organisation. Human resource portfolios are increasingly appreciating the relevance and significance of psychological contracts and how they can either make or break an organisation. They even go as a far as affecting organisational reputations and images (Sonnenberg, Koene, Paauwe, 2011, p. 667). Hence, organisations try to enter into these contracts with the most favourable terms and approaches. As a result, they can attract and appeal to the best talent to join them. Conclusion Psychological contracts are an important part of human resource management and strategizing. The way they are shaped puts a lot at stake regarding employer and employee relationships. In the long run, the status of the organisation is at stake and the performance as a whole. In order for both parties to benefit from the working relationship, the psychological contacts in all forms should be a healthy one. Measures to keep it healthy and solve conflicts when they arise is key to psychological satisfaction in the work place References Argyris, C, 1960, Understanding Organizational Behavior. Homewood, IL: Dorsey Press. Bal, P.M., de Lange, A.,H., Zacher, H. & Van der Heijden, B.,I.J.M. 2013, "A lifespan perspective on psychological contracts and their relations with organizational commitment", European Journal of Work and Organizational Psychology, vol. 22, no. 3, pp. 279. 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