Psychological contract theories of managing

Employees in large organisations do not identify any single person as the 'employer'. Line managers are important in making day-to-day decisions but employees are also affected by decisions taken by senior management and HR. Employees may have little idea who, if anyone, is personally responsible for decisions affecting their welfare or the future of the business.

Psychological contract theories of managing

And this is a challenge that many employees and their organizations face in trying to keep up the pace with a constantly changing business environment. Most of the pressures that business organizations face constantly has come from changes in their economic environment such as increase in global or international competition, reduced growth, and even in some instances, declining markets, thereby making the organization to cut costs, reduce prices of commodities in order to achieve significant productivity improvements.

This report focuses on these changes that have occurred and considers the implications for effective management of human resources, with much focus on the constantly changing psychological contract in an increasingly insecure environment.

The present day understanding of the concept of what the psychological contract is has evolved from a couple of different definitions. The term has been defined in different forms, but taking a closer look at the concept, it Psychological contract theories of managing to be something of a contradiction.

A contract can simply be defined as the legal arrangement between two or more parties that involves the exchange of a legal tender for a commodity or service.

Psychological contract theories of managing

Taking a look at the perceived history of the psychological contract, reference has been made to what is written in the Bible as far back as the BC. It talks about the mutual expectations between the Jewish people and their God.

Simply put, the psychological contract refers to the mutual expectations and obligations that two parties have of each other in a relationship whatever it is Psychological contract theories of managing how these mutual expectations affect and modify their behavior over time.

The Psychological Contract

Apart from the expectations, it is also concerned with the obligations that each person or party has of the other. However, it is term used most commonly for business organizations in which it describes the expectations and obligations that an employee has of the organization he or she is working in and the expectations that the organizations itself has of the employee.

Nonetheless, this same concept can still apply for other forms of relationship — between a husband and wife, or any other form of relationship. The psychological contract is a complex concept and it differs in many respects from other types of contracts partly because of the several elements which are involved.

But more importantly, it is different because the participants of the contract — the employee and the employer — may assume different expectations as regards the employment relationship.

In most employment situations, very few features of the supposed relationship between the employer and the employee would have been discussed, with majority of the other components being inferred only. And these elements are subject to changes as the expectations of the individual and the organization changes.

However, extensive literature search has revealed little or no information about the influence of the psychological contract on the public sector. There is mounting pressure on public organizations to be able to deliver very high quality services which are customer centered.

And this has resulted in a need to improve the performance of this sector of the economy. And in order to be able to achieve this, much emphasis needs to be placed on practices that can boost the sector.

Psychological contract theories of managing

One of this is the employment relationship between employers of labor in the public sector and their employees. So far, it seems that the expectations employers usually the government or associated bodies have towards their employees and vice versa have been altered and augmented.

Researchers have identified that there has been a shift from a relational contract which focuses on long-term job security, trust and organizational loyalty to a transactional contract which emphasizes the physical monetizable aspects of the relationship such as pay rewards Hiltrop This then means that a less certain set of agreements have superseded the traditional employment relationship.

Therefore, the significance of these needs to be explored. There has been conflicting evidences as to the existence of the psychological contract of the public sector worker. At the same time, some other researchers have said that there is indeed an existing psychological contract which is well managed in the public workplace Janssens et al However, there is a wide variance between the psychological contract found in the private sector and what obtains in the public sector.

This study tries to explore and examine the management of the psychological contract in the public sector. There seems to be an existing pattern of contract found in the whole of the public sector, especially as related to the central coordinating body — usually the government — which differs in a long way from what is found in the private sector.

Public civil servants demand relatively larger expectations from their employers than workers in other sectors. This then indicate that there is a very strong psychological contract, which if well managed, can be exploited to yield increased productivity.

Also, most of these public workers remain loyal to the psychological contract earlier established which mostly places more emphasis on long-term employment. Most workers in the public sector complain about their employers not meeting their promises with regard to pay. In the short term, this causes a breach in the psychological contract because there is a disparity between what the employees expect and what is actually being done.

The question now arises: The study of the psychological contract in the public sector is important because of two major reasons. This is because in the relationship between the employer and the employee, both parties have their own individual views on the mutual expectations from each party.

And it is important to know that the psychological contract itself is about the subjective perceptions of the individuals involved.

CIPD viewpoint

The second importance is drawn from the fact that although the psychological contract in the public sector, as it is in most other sectors, contains the obligations, concerns and expectations of each individual party, it still gives room for background factors to modulate the attitudes and behavior of the individuals involved.

This then points to the changing nature of the psychological contract and the need to manage it appropriately. On a long term basis, the intended increase in productivity would not be achieved. All these point to the need to explore carefully how managing of the psychological contract occurs in the public sector of the economy.

To ascertain the nature of the psychological contract in the public sector 2. To identify how the psychological contract is being managed in the public sector.A psychological contract, a concept developed in contemporary research by organizational scholar Denise Rousseau, represents the mutual beliefs, perceptions and informal obligations between an employer and an employee.

It sets the dynamics for the relationship and defines the detailed practicality of the work to be done. Fairness is a significant part of the psychological contract, bound up in equity theory – employees need to perceive that they’re being treated fairly to sustain a healthy psychological contract.

The psychological contract is different from a legal contract of employment which will, in many cases, offer only a limited and uncertain representation of the reality of the employment relationship.

The legal contract refers to a written agreement about the mutual obligations of the employer and the worker. Delivers Engaged Employee Delivers Superior Performance Organizational and Individual Targets Luiz, Bruno de Paula Organization Behavior – Professor Joe Chevarlley Page 3 B.

Based on your theory of management and today’s environment, answer the following questions: a. The psychological contract is different from a legal contract of employment which will, in many cases, offer only a limited and uncertain representation of the reality of the employment relationship.

The legal contract refers to a written agreement about the mutual obligations of the employer and the worker. The Psychological Contract only really came back to prominence in the s as a result of the economic downturn which led to mergers, restructures and down-sizing while before that it was kept a low profile during the 70’s and 80’s.

Psychological contract - Wikipedia