Psychological Contracts and Generation Y - Coursework Example

Psychological Contracts and Generation Y Student’s Name Institution Affiliation Table of Contents Table of Contents 2 Introduction 3 Background of Psychological Studies 3 Process of Development of Psychological Contracts 4 Implications of Careers for Generation Y 6 Psychological Contracts and Talent Retention 7 References 10 Psychological Contracts and Generation Y Introduction Psychological contracts differ from employment contracts because each type of contract elicits different types of emotions from employees. Whereas employment contracts are more formal than psychological contracts, the former does not evoke the same type of emotional commitment. Therefore, psychological contracts are slowly emerging to be the most binding type of contract between employers and employees, especially generation Y employees (Yow, 2013). A quick review of literature sources reveals that the one of the areas of focus has been to what extent psychological contracts promote talent retention. Researchers have attempted to provide evidence that this type of contracts facilitate better talent retention compared to traditional employment contracts. Consequently, it is prudent to review this information and attempt to ascertain its validity. Additionally, psychological contracts have been associated with career development. Thus, the focus is how psychological contract influences the career development of on generation Y employees. It is also critical to look at the process of development of psychological contracts among generation Y employees. This information is critical in providing insights on why there is a general belief that it is a better type of contract compared to employment contract. Lastly, before embarking on this topic, it would be beneficial to understand the brief background of psychological contracts and its importance in organization behavioral studies. Background of Psychological Studies The history of psychological contracts dates back as far as the late fifties and early sixties. This type of contracts came into being because of the changing relationships between employers and employees. The earliest works on psychological contracts studies was not defined as so; it was only in the early sixties that the term emerged to describe the increased desire for better relationships between employers and employees. There was an increased tendency among employees to adopt an informal working culture whereby the employer would cater for more than the financial expectations of the employees and thus the idea was conceptualized. Therefore, it is important to point out that the idea of psychological contracts germinated during the generation X era, but it gained more popularity, and significance among generation Y. The relationship between psychological contracts and organization behavior is that this topic enables stakeholders to comprehend why people behave the way they do, especially during different engagements. Thus, some of the earliest attempts to quantify the impact of psychological contracts focused on the how this type of contract influenced different job factors such as Herzberg motivators and performance indicators. Chris Argris was the first person to implement psychological contracts at the work place (Briner, 2011). An overview of the history of psychological contract would not be complete without mentioning the contributions of Rousseau. Her works on this topic is regarded as authoritative and provide valuable insights on the matter. Her most important contribution is her statement that psychological contracts draw their strength from the fact that they evoke a strong sense of obligation founded on the perceived promises as indicated in her definition of psychological contracts. Process of Development of Psychological Contracts Psychological contracts shares similar attributes as any other type of contract except that it is difficult or nearly impossible to seek a legal remedy in case of a breach. According to Juan-Espinosa (2012), there are three key developmental phases during formation of psychological contract. The first phase is referred to as the formation phase. Activities that characterize this phase include recruitment and selection, hiring, induction and training. During this stage, employees begin to form expectations. The terms and conditions of the contract are spelled out during recruitment (Juan-Espinosa, 2012). At this point it is critical to note that psychological contracts are intangible contracts and that the signing of a physical employment contract is the only way to validate an employment agreement. The signing of the employment contract promotes further the formation of a psychological contract because in indirectly or indiscreetly formalizes the non-physical contract too. The socialization process during induction and training continues further to build the expectations of the employees; thereby, contributing to the formation process. The second phase is the maintenance phase. During this phase, the critical aspect is the maintenance of a good rapport between involved parties. This stage’s defining traits include balancing of obligations, promotion of employability, and other changes that seek to enhance the relationship in order to achieve the desired outcomes. This stage is more prone to conflicts and misunderstanding because of the various changes that are bound to occur as each party positions itself to achieve the expectations expressed or desired during the formation stage. The final phase of the process is the breach of contract stage. This stage does not necessarily imply a termination of the contract, but rather describes the instances whereby the parties involved are in disagreement. This situation occurs when the parties to the contract had mismatched perceptions and expectations. Activities that characterize this stage include; mediation, re-negotiations, compromises, and terminations or exists as the worst-case scenario. Implications of Careers for Generation Y One of the terms used to describe the generation Y at the workplace is millennium divas. This name describes this generation’s impatience with slow progress, dissatisfaction with lack of prompt performance feedback and unwillingness to compromise their positions at times. This generation values fast career growth and development, thereby, they continuously seek out new opportunities in order to achieve this. Therefore, opportunities for career development are some of the major expectations for generation Y employees. This category of employees is also known to be very demanding from their employers (Hardworth & IDEA, 2010). Consequently, this type of employee also demands for flexible career developments in order to enable them fulfill their organizational and social obligations. In exchange, generation Y employees promise to deliver innovative solutions that give the organization a competitive edge and fulfill any other terms and conditions as expressed in their employment contracts. The notion that generation Y is non-committal is misconstrued because when Hess & Jespen (2009) investigated careers stages and psychological contracts among different employee generations, and they found out that as long as generation Y employees were fulfilled at their workplace the desire to leave was minimal. This finding demonstrates that generation Y employees will always stick around organizations that meet their career developmental desires. Additionally, Hurst & Good (2009) conducted a study on the career exploration habits of graduate generation Y and found out that some respondents replied that they would feel indebted to an employer who played a critical role in influencing their career decisions. Such remarks explain how easily generation Y enter into psychological contracts as well as how employers can harness the best results from these willing employees. Evidently, psychological contracts do influence the career development among generation Y. Psychological Contracts and Talent Retention Hiring is a complex and expensive process and organizations expect a good return on investment after such an exercise. Therefore, high employee turnover is bad for any organization that invests so much in the hiring process. One the effective approaches that human resource officers apply to promote higher employee retention rates is propagating psychological contracts employees. According to Aluvala (2014), generation Y employees are aware of the level of investment that employers undertake in preparing potential employees to become productive members of the team. Consequently, they give back by indicating higher normative allegiance to the organization. This mentality then leads to better employee retention rates among generation Y employees. However, there have been concerns that the obligatory feelings experienced at the initial stages of the employment quickly fade away as the employees begin to realize their initial expectations. These emotions arise because after some time, employees achieve the level of fulfillment that they had desired when entering into psychological contracts and begin to develop a new set of expectations. Human resource consultants are aware of these changes and to continue promoting better retention levels, they engage the employees in different activities such as trainings or promotions in order to reaffirm existing psychological contracts. Yow (2013) affirms this position by noting that whereas higher salaries is a strong motivator among generation y employees, they do appreciate and value intrinsic motivators such as opportunities for greater job security. Thus, psychological contracts evoke higher levels of employee loyalty a factor that is critical for employee retention. Yow’s study is instrumental in explaining the benefits of the psychological contracts because the study population consists of the young employees working in a Malaysian call center. This type of organizations tends to have high employee turnover rates (ACS, 2013; Huesbsch, 2015). Some of the reasons for low employee retentivity such as low salaries (Huesbsch, 2015), high levels of stress, minimal career advancement opportunities; poor supervision (Natalia, 2015) could be addressed through psychological contracts. Despite the contributions of psychological contracts towards achieving better employee retentivity, the approach is not immune to challenges. According to Hauw& De Vos (2010), psychological contracts did not deter staff from experiencing lesser levels of sanguinity during the period of recession. In order to counter these feelings, the authors advised that employers should not cut down on spending on activities that promote higher employee retentivity because such actions would have detrimental effects on the employees’ expectations and heighten the possibility of high turnover rates. This recommendation explains the importance of employers demonstrating their commitment to upholding their end of the bargain in a psychological contract. The move serves to reassure employees that there will be no breach of contract, thereby, securing their commitment to the organization. Besides increased loyalty and increased sense of commitment, another factor that is critical towards lowering turnover rates is employee job attitude. According to Deepthi & Baral (2013) fulfillment of psychological contracts has an impact on job attitude. Specifically, the researchers found out that among generation Y fulfillment of psychological contracts was important in imparting positive job attitudes and was demonstrated by the fact that majority of the respondents who believed that their perceived expectations were being met replied that they were willing to continue to work for their organizations. This response indicates the power of psychological contracts in conditioning the right mental attitudes that makes employees willing to continue working for the same company. Overall, one cannot afford to underestimate the potential of psychological contracts in reducing employee. However, the effectiveness of such contracts depends of the individual and organizational factors (Guest, Ikasson & Witte, 2010). Among the generation Y employees, this task involves a delicate balance of the intrinsic and extrinsic motivators and ability to induce the right perceptions by painting the mental image that reflects the needs of the subject. The skill could be either a talent or that which is perfected through experience. Conclusion Generation Y employees are highly cognizant and responsive to psychological contracts, hence, making the practice increasing popular and valuable. This type of contract dates backs as far as the late fifties and sixties when people began appreciating the impact of perceptions in achieving greater productivity. Over the years, this area of study has grown as indicated by the large numbers of recent literature available on the matter. Importantly, psychological contracting has found unquestionable importance in organizational behavior discipline. Today, evidence based research informs decisions on the psychological contracting process, which is believed to begin during the recruitment and selection stages and ends when there is a breach. The process provides insights on the blend of individual and organizational factors that combine to evoke strong emotional association with the employer. Overall, there is enough research to prove the value of psychological contracts in giving generation Y a sense of career progression. It is also important in driving talent retention because it inspires feelings of greater loyalty, commitment, and positive job attitudes. However, successful continuous implementation of these types of contract remains a challenge. Since there are no formula, persons applying this knowledge have to rely on superior cognitive abilities, which are essentially a talent, or learn through trial and error approaches. The latter approach is relatively time intensive compared to the former. Nonetheless, these are the only ways of learning about psychological contracts and generation Y. References ACS. (2013). Analysis of Call Center Agent Turnover. Vestric. Aluvala, R. (2014). Managing Human Resources in Global Era - Prospects & Challenge (1st ed.). Zenon Academic Publishing,. Conway, N., & Briner, R. (2011). Understanding Psychological Contracts at Work. doi:10.1093/acprof:oso/9780199280643.001.0001 De Hauw, S., & De Vos, A. (2010). Millennials’ Career Perspective and Psychological Contract Expectations: Does the Recession Lead to Lowered Expectations?. J Bus Psychol, 25(2), 293-302. doi:10.1007/s10869-010-9162-9 Deepthi, U., & Baral, R. (2013). Psychological Contract Fulfilment and Its Impact on Employees’ Job Attitudes: Does Generations Make Any Difference? (Ph.D). Indian Institute of Technology – Madras India. Guest, D., Isaksson, K., & Witte, H. (2010). Employment contracts, psychological contracts, and employee well-being. Oxford: Oxford University Press. Hardworth and IDEA. (2010) (pp. 1-60). Retrieved from http://oxygenez.com Hess, N., & Jepsen, D. (2009). Career stage and generational differences in psychological contracts. Career Dev Int, 14(3), 261-283. doi:10.1108/13620430910966433 Huebsch, R. (2015). Standard Employee Turnover in the Call Center Industry. Small Business - Chron.com. Retrieved 15 September 2015, from http://smallbusiness.chron.com/standard-employee-turnover-call-center-industry-36185.html Hurst, J., & Good, L. (2009). Generation Y and career choice. Career Dev Int, 14(6), 570-593. doi:10.1108/13620430910997303 Juana-Espinosa, S. (2012). Human resource management in the digital economy. Hershey, PA: Information Science Reference. Natalia, M. (2015). TurnOver in Call Centers. Gloccal.com. Retrieved 15 September 2015, from http://www.gloccal.com/call-center/call-center-certifications.html Yow, H. (2013). How different is different : a study of the workforce generation differences in relation to employee loyalty within the call centre industry in Malaysia (Degree of Doctor of Business Administration). Southern Cross University, Lismore, NSW. Read More