INTRODUCTION The topic of psychological contracts between employees and organizations has received renewed attention over the past 10 years. While the earliest work on this topic defined psychological contracts as the shared perceptions between employees and employers regarding what each party owed the other in the employment relationship (cf. , Argy ris; K otter and Schein), more recent work has defined the psychological contract as an individual's perception of what he / she owes the employer and the inducements the individual believes that he / she is owed in return (Rousseau, 1989). Change and its implications for the breakdown of the traditional relationships is a key factor behind the renewed interest in the concept of the psychological contract.
The concept of the psychological contract has attracted considerable academic and management interest and is currently utilized in a variety of ways in a wide range of situations. It is important to recognise that researchers have used the concept of the psychological contract in a variety of different ways. Where almost all recent work on the concept is in agreement is that an understanding of the content of the psychological contract is changing as the nature of work changes, and also due to changes across employees' life cycle and employment situations. The wider 'psychological contract' comprised a set of unwritten expectations indicative of a relationship that serves the well-being of individuals and the organization. The 'psychological contract' denotes the perception which employees have of the delivery of expectations and promises by their employer.
It covers such issues as commitment, trust, sense of fairness, perception of leadership and work / life balance. There are today debates about the usefulness of the concept "psychological contract." OBJECTIVE " A positive psychological contract is worth taking seriously because it is strongly linked to higher commitment to the organization, higher employee satisfaction and better employee relationship " The objective for this essay is to discuss the above statement made by Professor David Guest. The statement will be discussed from two different approaches, the supportive and the critical approach to the psychological contract. STRUCTURE Part 1. An overview on how the psychological contract is linked to the organization from people management to business performance. Furthermore how the psychological contract may have influence on the employees attitudes, commitment, satisfaction & relationships.
Part 2. A supportive approach to the statement from two different points of views; the positive and the poor the psychological contract. The positive view will give a picture of the balanced psychological contract which argues why it is worth taking a psychological contract seriously. The poor view will give a picture of the imbalanced psychological contract with focus on the environmental changes, which also argues for why it is worth taking a psychological contract seriously. Both views are relevant as they give two different sides of the supportive approach.
Part 3. A critical approach to the statement with focus on the debates on the usefulness of the concept and the lack of measurement agreement. This approach will argue for why it is not worth taking a psychological contract seriously. LIMITATIONS The essay will focus on the discussion or debates made around the concept psychological contract to better clarify why or why not it is worth taking the psychological contract seriously. It will not conclude on rather if the statement is true or false as there are many aspects influencing the statement which have not been include due to word limitation. Such as the concept of the psychological contract may be differentiated and categorized as being transactional or relational in nature.
Recent debates about the salience of relational versus transactional contracts, and about the existence of other forms of contracts, need to be resolved by further empirical work. Based on this will this essay not distinguish between the different types of psychological contract. The view of the poor psychological contract will mainly focus on the employee as we know less about employer perspectives. Thus we have evidence of contract violation from the perspective of the victim not the perpetrator. Most research focuses on employees' perceptions of the breach of expectations by the employer. 1.
The Psychological contract We know from research led by David Guest (2000) that there is a link between the use of human resources management practices, positive psychological contract and how the business performs. The link is not directly causative between human resources management practices and organizational performance, but that it depends on the quality and the commitment of the people doing the work. Figure 1. People management, psychological contract and business performance Source: People management and the bottom line by David Guest, 2001 Figure 1. illustrates that people management practices and psychological contract affects employee satisfaction, commitment and flexibility - and these characteristics are associated with higher productivity and improved products and services, which feed through in turn to the firm's financial results. The psychological contract can have many influences on employee attitudes, commitment, satisfaction & relationships and can 'shape' workplace behaviour.
As illustrated in figure 1. 2. Figure 1. 2 A model of the psychological contract Source: HR practices and Business performance: "The evidence" by Mike Emmott, Employee Relations Chartered Institute of Personnel and Development Both individual and organisational factors appear to be associated with the development of the psychological contract. Individual determinants include experiences and expectations which may have been formed about the employment relationships, prior to employment, during recruitment, during early organisational socialisation or from experiences in the course of employment. These experiences and expectations may vary according to individual difference factors such as age, gender, level of education, union membership, non work commitments etc.
Organisational factors influencing the development of the psychological contract include human resource policies and practices which may indicate certain promises or obligations on the part of the employer and expectations of employees. 2. The supportive approach 2. 1 The positive psychological contract Good people management practices are associated with a positive psychological contract based on trust, fairness, and delivery of the deal.
Latest research has confirmed that a balanced psychological contract contributes to enhance: . Commitment (including affective commitment which is positively related to higher performance). Job satisfaction (which is related to higher motivation, lower workplace stress and more satisfied customers). Intention to stay with the organization (i.
e. retention). In an ideal situation the employer respects and looks after the well-being of the employee throughout the duration of employment. In return the employee is loyal and trustworthy which consequently increases productive behaviour and thus the success of the organization. Employees who are relationally oriented to the organization are more likely to behave as organisational a citizen; that is, going the "extra mile", pursuing corporate interests and activities, behaving cooperatively, and generally contributing to organisational effectiveness.
A positive psychological contract creates some benefits such as: . The interdependent psychological contract lets the employees consider the company as a 'people association' where mutual trust and loyalty are strongly encouraged... Mutual loyalty also means that the employees do not leave the company voluntarily in a time of economic turmoil, but work even harder to turn the company around... Under the long-term employment arrangements the employees mostly evolve corporate-specific knowledge and capabilities, particularly the social knowledge which encourages the interpersonal communication and cooperation... Because many of the knowledge components accumulated by the employees are based on experience and specific to the corporate context, they are mostly tacit.
Therefore the long-term psychological contract encourages understanding and cooperation... This employees' knowledge can also help to explain why many large companies have created their competitive advantages especially through cumulative process innovations. A positive psychological contract is necessary for a continuing harmonious relationship between the employee and the organization. 2. 2 The poor psychological contract The world of work has experienced huge change over the last decade or so.
The organizations have to be able to compete on costs and do things better, produce new products and services and get them to market more quickly. The pace of change in organizations has thus accelerated, which has also impacted the relationships between organizations and the people they employ. Figure 2 illustrates the link between the external environment and the psychological contract. Figure 2.
The external environmental influences on the psychological contract. Changes in the global environment have resulted in organizations making many changes that affect the working patterns of their employees. In a world of ever fiercer competition, employee commitment is even more crucial to organizations. So organizations want employees to be committed and cope with ever increasing demands. In return, individuals expect the organization to provide some job security, career prospects, a sense of belonging, and fair treatment. The old psychological contract between organizations and employees of job security for hard work and loyalty has become less valid as organizations are finding it increasingly difficult to keep their side of the contract.
In contrast to earlier generations, this working generation has to handle the constant fear of redundancy and the reality of mind-boggling change, including perpetual reorganization, continual re-engineering of processes, and the introduction of new technology. People are continually asked to do more, and many are under pressure to work excessively long hours without always being paid overtime. This leads to a poor psychological contract. A poor psychological contract may affect the employees in many ways by creating some negative symptoms and behaviours: Symptoms o Insecure about job o Fear of the unknown o Mistrust of management o Uncertain of skills and abilities o Lack of loyalty o High stress levels o Low self-esteem o Dependent on the organization Behaviours o Narrow-minded o Aversion to risk o Low productivity o Depressed o Increased absenteeism o Low morale o Loss of pride in the organization o Increased resistance to change o Acts of sabotage Consequently, the psychological contract is imbalanced: organizations' expectations have not changed (if anything, they want or need the loyalty and commitment of employees in greater measure), but they are less able to meet the expectations of employees as implied in the old psychological contract. Unless some adjustments are made, the psychological contract will remain out of balance. Recent surveys and papers have highlighted the burgeoning dilemma of loyalty.
Since relationships (including employment relationships) are healthiest if based on both parties fulfilling their mutual obligations, new approaches need to be found. 3. The critical approach There is evidence that employees with different understandings of their psychological contracts respond differently to contract violation and to planned organisational change. For example, employees in Singapore, with an unstructured labour market and many short term contracts show a lower sense of obligation to employers than US employees, and less perceived violation when changes are introduced. While most individuals are not out to deceive others, mild deception may occur due to the fact that everyone has their own unique interpretation of the contents of their psychological contract. This indicates that the psychological contract implies a uniformity of expectations and overlooks diversity.
There are debates about the usefulness of the concept. For example, Sparrow and March ington (1998) argue that the psychological contract concept has been useful in capturing the complex changes at work in times of uncertainly. It acts as an organization wide framework of analysis and captures concerns over new employment practices. However, Guest (1998) argues that it is operational ised to include so many different psychological variables, with very little known about the relationships between them, that the psychological contract becomes an analytic nightmare. Guest and Conway (1998) suggest that it is best viewed as a useful metaphor for helping make sense of the state of the employment relationship and plotting significant changes in this relationship. They use the notion as a tool for change for practitioners by referring to the goal of healthy psychological contracts- reflecting a range of management practices which they argue will lead to improved employee motivation and commitment.
Debates about the usefulness of the concept also focus on measurement issues. As research has tended to focus on the use of the concept of the psychological contract for explaining research findings, or for informing management practice less attention has been paid, to date, to explicitly considering how the concept is to be measured. Often the psychological contract is measured indirectly, for example via commitment and loyalty, which is contentious, or in terms of contract breach. Some recent research has devised measures in which, the content of the psychological contract is typically broken down into various objective and subjective components which are then measured on survey questionnaires. For example, Westwood, Sparrow and Leung (2001) measured the promises and commitments perceived to have been made by organizations and the obligations which employees perceive they have made.
Other research, especially on work-family issues, takes a more qualitative approach to this subjective concept. However, there remains a lack of agreement about how the psychological contract should be measured. CONCLUSION The concept of the psychological contract has attracted considerable academic and management interest and is currently utilized in a variety of ways in a wide range of situations. It is important to recognise that researchers have used the concept of the psychological contract in a variety of different ways. Where almost all recent work on the concept is in agreement is that an understanding of the content of the psychological contract is changing as the nature of work changes, and also due to changes across employees' life cycle and employment situations. Change and its implications for the breakdown of the traditional relationships is a key factor behind the renewed interest in the concept of the psychological contract.
In conclusion on the statement " A positive psychological contract is worth taking seriously because it is strongly linked to higher commitment to the organization, higher employee satisfaction and better employee relationship " by David Guest is still being debated due to various reasons included in the supportive and critical approach. The supportive approach to the statement, including both views the positive and poor psychological contract, concludes that the psychological contract is worth taken seriously and is a useful concept for understanding what employees and employers expect of a job and a work environment. The contract comprises is a powerful determinant of employees' behaviours. As a result of the positive psychological contract, employees get higher commitment to the organization, higher satisfaction and better employee relationship they learn to depend on the organization for job stability, annual raises, confirmation of their worth, directions for professional development, and, in some cases, social interactions. The organization obtains competitive workforces that are highly educated and involved in their organisations's urvival and prosperity, and employees who want to change the way they work to achieve a better balance between work and home life. A poor psychological contract shows how important a positive psychological contract is for both the employee and employer.
Organizations have been forced, due to competition and the globalization of business, into various organizational change programmes. The organizational changes often results in a poor psychological contract which, in turn, has a detrimental impact on attitudes such as organizational commitment and result in various withdrawal behaviours such as lack of cooperation and leaving the organization. By implication, as change becomes more pervasive, the damage to attitudes and behaviour becomes greater. The critical approach to the statement concludes through debates that the concept psychological contract is not worth taken seriously as the contract implies a uniformity of expectations and overlooks diversity.
Further debates on the usefulness of the concept also focus on measurement issues. As research has tended to focus on the use of the concept of the psychological contract for explaining research findings, or for informing management practice less attention has been paid, to date, to explicitly considering how the concept is to be measured. This lack of agreement about how the psychological contract should be measured makes it difficult to evaluate the contract. REFERENCES Magazines, Journals and articles: Magazines & Journals Articles People management People management and the bottom line by David Guest, 2001 Employee Motivation and the Psychological Contract by David Guest and Conway, N. , volume 21, 1997 Journal of Vocational Behaviour volume 61 Understanding the links between work status, the psychological contract, and attitudes by Conway, N.
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