The Fluidity Of Economic Dynamics Management
From the view of Argyris the terminology of psychological contract involves an agreement between employees and their employer. Also, Schein recognizes the concept of psychological contract to be underpinned by a valued build for mutual trust and confidence, working terms and conditions existing between employees and their organization. Schein (2009) also outlined that these mutual understanding may vary within and across organizations at specific times depending on both internal and external socio economic conditions which may be beyond the employers control.
With reference to Argyris (1960) and Schein (2009), the theory of psychological contract can then be comprehensively defined as; undocumented agreement existing between an employee and his/her employer whereby both players have essential needs which they expect to be mutually fulfilled in order to realize a common goal.
Guest (1998 p. 650) argues that, psychological contract is not a theory; nor is it a measure; he rather claims that "the psychological contract is somewhat awkwardly within conventional psychological analysis". Following from guests claim and further research, it is however important to note that psychological contract as a concept, was deduced from theories like the Social exchange theory (Blau 1964) and the Equity theory by (Adams 1964). According to Turner (2001), the social exchange theory was expanded in 1970s and 1780s by Richard Emerson and Karen Cook. Their research was able to come to the conclusion that the exchange of social and material resources is a fundamental form of human interaction. With its origin from earlier theories developed in psychology, the school of thought on social exchange focused on how interaction patterns are influenced by power relationships between individuals, and the resulting efforts to achieve balance in exchange relations (Cook, 1996). More so, Aswathappa (2005) explains Adams Equity theory which posits that, when an employee observes that he/she is not fairly rewarded for their effort and input towards employer's success, such employee will seek for equity and fairness. The summary of Adams frame work basically lays emphases on pay structure, and also suggests that employees hold high importance to how they are being treated by their employers. According to Adams (1964), employees may be demoralized when they observe they are not treated fairly which may result to reduced productivity, high absenteeism and increased employee turnover.
Going forward, research suggests that Psychological contracts vary between individuals, because of diverse human wants and needs. Guzzo and Noonan (1994) posits that, psychological contract are extremely reliant on a person's behavior and perceptions. Rousseau (1989) engaged in a methodological study of the content of psychological contract and proposed that it is "an individual's belief regarding the terms and conditions of a reciprocal exchange agreement between the focal person and another party. A psychological contract emerges when one party believes that a promise of future returns has been made, a contribution has been given and thus, an obligation has been created to provide future benefits" (Rousseau,1989 p.123). What has influenced employees to consider the psychological contract seriously?
Changes presently affecting the workplace which include:
â€¢ The type of jobs: employees are on part time and temporary contracts in most cases, most of the jobs are being outsourced, tight job descriptions a, and functional flexibility is in.
â€¢ Organizations' have downsized and delayered: 'leanness' which means doing more with less, so individual employees have to carry more work load.
â€¢ Markets, technology and products are continuously evolving: with customer demands becoming very high, quality and service standards are relentlessly riseing up.
â€¢ Technology and finance are not more distinctive sources of competitive advantage: 'human capital' has become more important to business performance in the knowledgeâ€based economy.
â€¢ Traditional organisational structures are becoming more decentralized: teams are every so often the basic building block; new methods of managing are compulsory.
The effect of all these changes is that employees are gradually acknowledged as the key business drivers (competitive advantage to the organization). The capability of the business to add progress lies with the frontâ€line employees, or 'human capital'. Organisations that aspire to progress have to get the most out of its people who are its resources. In order accomplish this, employers have to have a positive relationship with its employees so as to know what they expect from their work. The psychological contract offers a framework for checking employee attitudes and priorities on those dimensions that can be key to improving performance.
According to Guest and Conway (2000), there are a number of practices and policies which can help organizations to derive a healthy and well balanced psychological contract between them and their employees, such practices includes;
1, employee's role and responsibilities within the organization must be clearly defined to avoid overlaps.
2, employees should be encouraged to provide support between colleagues and ultimately from superiors to lower level employees in order to build a healthy work environment.
3, Presence of friendliness between employees at the place of work can cultivate improved sense of participation which is likely to motivate the high working Morales.
4, Employers must show reasonableness in delegating workloads and targets for task completion to avert situations of the employees giving in to work pressure.
5, any organizational change that may directly or indirectly affect the employee should have his/her involvement in the decision making process related to that change.
6, Employees should be entrusted with some autonomy control over their delegated responsibilities in order to engage them better and show that their employers trust them enough with working independently.
Therefore, in order to obtain a Critical evaluation of the so called theory
of 'psychological contract' and how it can influence the achievement of organizational success or failure, this paper will hence focus on arguments and critiques with different views and research derivations of the subject matter.
To begin with, Cullinane and Dundon (2006) cited that despite the fact that psychological contract may not have originated from Human Resource Management, it is however a crucial component to understanding the concept of psychological contract. As elaborated earlier, the psychological contract represents an undocumented agreement existing amid an employee and his/her employer whereas each player is entrusted with diverse duties and responsibilities focused towards a common goal, and is propelled by extreme reliance on mutual trust and confidence. The psychological contract is automatically in existence during the inception of any new employment, the newly employed then begins to inculcate a vague perception of the requirements of his new job in relation to its expected outcomes. Likewise, the employer on the other hand expects a high performance standard from the employee in order to fulfill his/her expectations. The key players at the core of these 'psycho-socio' expectations are the supervisors, managers, and most especially the HR professionals. As reiterated by Rousseau (1990), discernments of individuals differ a great deal, mostly as a function of the nature of the job, level of engagement the job provides the employer and at times satisfaction and fulfillment which the individual derive from their jobs. According to (Rousseau, 1990 p.398), this interprets that the intents of an employee to remain short-term or long-term with a particular employer proposes that psychological contract is "a construct relevant to employment".
For many years, a number of academics have meticulously investigated the concept of psychological contract and have established that it can derive to definite outcomes. With reference to an example by Shore and Tetrick (1994), which reveals that the psychological contract can diminish employees' insecurity through building and fostering a system whereby a mutual agreement in a work environment is in existence. They went on to illustrate that mutual understanding can mold employees' conducts with little or no control to meet with set organizational objectives. Also, it can offer employees the sense of belonging, meaning that they are influential in the organizations achievements through motivational merit recognitions. To buttress this point, Vroom and Yetton (1981) assessed the Vrooms Expectancy theory which denotes a simple frame work whereby organization leaders may motivate subordinate employees by involving them in decision making as part of employee engagement strategy. However, such involvement must be of valence to the employer. Crowthe et al (2006) further explained Vroom's (1964) "Valence" as the emotional orientation people place with respect to outcomes. For example, some employees appreciate extrinsic motivators such as; time-off and financial benefits. Management must discover what employees place values on because, Crowthe et al (2006) also mentioned that motivational factors and employee wants are highly personalized, therefore, it is challenging and often time demanding and costly for organizations to meet every employers need based on their diverse expectations. In other words those decision making aspects should be in favor of both the organization and the employees.
Additionally, similar arguments have been raised by Human Resource academics like; McDonald and Makin 2000; Sturges et al. 2005, they are all of the opinion that the psychological contract may have a severe effect on employee commitment, employment relationships, employee engagement, job satisfaction and ultimately organizational performance.
As posited by (Knights & Kennedy, 2005), job satisfaction can be referred to as an employee's hopes regarding motivational rewards, remuneration, job evaluation, job security, career advancement, training and development. Equally, employers also have their fair share of expectations from the employees. Taking for instance, employees; being ready to commit to working extra hours when need arises, pro proactive at work through multi-tasking and eradicating limits on responsibilities, should be loyal to the organizational goals and objectives, remaining with their employer for not less than two years and ensuring employers information are treated with optimum confidentiality. Basically, these expectations are generally underpinned by a huge amount of trust confidence and objectivity.
In a CIPD (2010) report titled 'The psychological contract' by David Guest, he arrived at a conclusion that there are some key observations concerned with the concept of psychological contract that must be underscored at this present time. To begin with, Guest pointed out that the extent to which a particular organization implements people management policies and practices would determine the encouragement on fostering the existence of psychological contract. Such practices are extremely at the mercy of an organization's HR strategy, business managers and the level of employment relations being deployed within that organization. In addition, if HR managers and organizational leaders are able to deduce what their employees' consider as fair practices, there is a high chance that such knowledge would yield improved performance for both players. Similarly, in an earlier publishing by CIPD (2005) also reiterated that mutual understating and confidence in psychological contract may also produce increased job satisfaction for employees and high performance for the organization. However, CIPD (2005) mentioned that managing the psychological contract is a continuous process for HR managers which is highly tasking these days, considering the fluid nature of external socio-economic global environment which warrants constant changes within organizations in order to shake off the ripple effects.
With reference to Guest (2004, p.545) notion about psychological which puts forward that, "the notion of psychological contracts as stated by (Shore & Tetrick, 1994; Rousseau, 1995) has provided tangible evidence as regards understanding employment relations, since most of the vital facets are grounded on individual views: most employment relations are unspoken or at least not on paper, and therefore both parties may have different understandings about them". The success of psychological contract can be established in the conclusions of the research by Guest and Conway (2002). They established that existence of the psychological contract within an organization is advantageous in relation to employment relationships. More explicitly, they suggest that the psychological contract is useful for organizations in meeting employees' needs and for employees to achieve their responsibilities and targets, which in turn enhances job satisfaction and employee commitment. When an organization fails to fulfill its promises and duties towards its employee, a rupture of the psychological contract occurs and abuse of the contract is often the employee's response to the breach. Both parties can experience a psychological contract breach at some point (Robinson and Rousseau, 1994). Breach may lead to lowering of the individual's performance and a lack of commitment toward the organization. As stated earlier, psychological contracts vary between individual, thus (Chen et al. 2008) elaborates that it is very uncommon for all employees to have same responses to violation of psychological contract by their employers. In a similar light, not every organization would react in the same way to psychological contract violations by employees.
Aichinger and Barnes (2010) advocate that since the mid 1990s the literature on the psychological contract has developed significantly. Some of the elements which have propelled to these changes include; economic conditions, global competition, technological evolution and extensive work hours.
The psychological contract can play a significant role in the maintenance of good employee relations and organizational performance if both parties involved keep to the contract. Nowadays, some job descriptions may include lengthy working hours and through the use of internet constant work even outside the office. However, organizations should ensure that employees maintain a life work balance attitude, or else a breach of individual's psychological contract may occur and this can have a negative impact on the employee's performance and to the organization as a whole.
As cited by CIPD (2005), in 'Managing change: the role of the psychological contract', psychological contract can play an important role in organizational relationships given the today's need for change and is viewed as an accepted term among contemporary HR practitioners'. Since it is assumed that psychological contract can assist HR managers to apply beneficial policies and practices regarding how employees are management throughout a change process and also observe efficiently the application and consequences of such policies and practices.
On the other hand, it has been emphasized that the psychological contract refers to the discrete interpretation and perception of an individual; it is not unbiased, universal approach that managers can take on board in order to achieve a desired outcome or outcomes, for example enhanced organizational performance and employee commitment, which is considered to be one of the key limitations concerning the psychological contract and its effectiveness to an organization.
Moreover, throughout the broad literature on the psychological contract, greater importance is given to employees' perspective. Most articles refer to the individual's independent expectations of the organization and the results if these are not accomplished. This statement can be linked with the view of Guest (2004) who advocates that a possible issues faced with psychological contract is concerned with lack of elaborate research carried out on the organizational perspective and ways in which organizations respond to the breach of expectations by the employee. Rousseau (1990) differentiates between the responsibilities and expectations of both the employees and the organizations and strongly argues that the assumption that expectations should be seen as obligations by both parties is not often the case in real life practice. He also denotes that most employees' expectations are concerned with the general work environment and working conditions, whereas commitments which are not satisfied can give way to undesired emotional consequence on the employee morale which in most cases is negative.
Looking at employees' context, a number of factors may be responsible for the diversified perceptions of fairness and expectations as regards psychological contracts, some of which are externally propelled and others motivated from within. At this stage of this essay, it is important to introduce types of psychological contracts for critical evaluation of why individual perceptions vary. Anderson and Schalk(1998) outlines types of psychological contract as; relational and transactional contracts, which are subjective of five dimensions. Firstly, 'focus', which, looks at the scope of the employee, this considers if the employee's primary motivator is mainly on financial gains, emotional or social desires. It is very important for an organization to understand the different needs of individuals. Another dimension is 'time', which considers the agreed duration of the contract between employee and the organization. Thirdly is 'stability'. According to Anderson and Schalk (1998), transactional contracts are established and fixed, on the other hand relational contracts are flexible, dynamic and subject to change at any time. The forth dimension, refers to the level of impact of the work on the employee. While the last dimension is tangibility, which varies depending on if it is a relational or transactional contract. Employees' responsibilities are more abstract in relational contracts, whereas in transactional contracts the expectations of employees are very clear and specific. It can therefore be suggested that Psychological contracts can vary depending on the organization structure, culture and the type of existing contracts; for this reason, it is very challenging for organizations to place excessive prominence on psychological contracts.
Thomas and Feldman (2009) are of the opinion that there is a lot of gap still existing in the study of psychological contract, they suggest that more research is required on the subject, especially in areas of diverse interpretations and perceptions at different stages of an employee's life and work experience in order for organizations to be able to comprehend them. Present-day global social and economic fluctuations point toward a shift from previous organizational management strategies which necessitate change in the way employees and organizations form psychological contracts. There are noteworthy disparities between the former and the new constructs taken into considerations while arriving at psychological contracts. In the former, the employment relations were much more simplified whereby; the employee is in need of job security and the job was to be for "life". But in recent days, organizations have to deal with several other matters, which encompass employee retention, development, employee perception of fairness, work-life balance. Furthermore change is an ongoing process and thus the psychological contract may fail to be identified by organizations due to ambiguity involved in meeting up with rate of change.
In a negative note, (Dulac et al., 2008;Conway and Briner 2002) points out the tendency for psychological contract to be breached at some point by both an employee and organization. They explained further that the consequences of such breach will have a significant effect on employee loyalty and organizational performance. The theory of psychological contract implies a resultant deterioration in the performance of the organization at some point.
As presented in Robinson and Rousseau (1994) 'Violating the psychological contract not the exception but the norm', some facets of the theory of psychological contract requires more in-depth study. For example, Organ (1998;1990) suggests that "employee behavior goes beyond the contract, in terms of 'extra-role' behavior and organizational citizenship behavior".
Arnold (1996) in his research of psychological contract came to the conclusion that though the in-depth emphasis on psychological contracts in recent years produced a number of valid findings, the 'concept' however seems to still have some gaps. He noted that there is a collective recognition that the psychological contract are derives from explicit subjective individual discernment of the organization, and for this reason, there cannot be an off-shelf approach about how human resource manager within organizations can deal with the psychological contracts of different employees. Besides, he debates that there are obscurities whether involved parties are even aware of the presence of such psychological contracts and that is the reason why he recommends further research.
In conclusion, this essay has argued for and against the clarity and usefulness of psychological contract in attaining organizational success and failure based on existing literature and evidence by HR expert. Though there is wide-ranging contextual basis on which researchers have put forward definitions of the subject, and also highlights of impact of the psychological contract on employees and organizations, most of these researchers yet suggest a need for more research work to be carried out because some points are unclear and descriptive. Apparently, the foremost problem of the psychological contract is that it is highly based on individuals' views and as it is, many employees may have diverse needs and opinions. For this reason the psychological contract cannot be generalized with expectations of collective acceptance. Also, research on dealing with the psychological contract has demonstrated to be beneficial for human resource managers and subsequently, organizations in order to understand how it can be converted into a competitive advantage through motivating employees to gaining job satisfaction which transcends to beneficial impact on organizations' enhanced performance and success. This essay has also looked at a number of common challenges concerning the mutual agreeability of these psychological contracts between parties, since they are subject to perceptions of the individuals and how people make dissimilar interpretations of justice or fairness may appeal to employees differently as it can appeal to the human resource manager within an organization.
Despite the need for further research to be carried out in order order to clarify the content of the psychological contract and how organizations should manage it, it is nonetheless already an important frame work for the success of organizations, this is part of reason why whereas the world is experiencing recession, people and organizations are facing the ripple effects of global crisis, it is pertinent for organizations to ensure that bottom-up communication exists within organizations. In addition to, taking into cognizance what employees expect from their jobs, they should also take into consideration the changing needs of the organization. Consequently, they should have a twofold standpoint that psychological contracts may sometimes lack, especially with situations of cuts in wages, right sizing and the uncertainty that has overcome employees, it is worthwhile to take into account the desires of employees in order not to violate the psychological contracts and face a possibility of deteriorating performance leading to business failure. HR professionals should engage people in the every process and not leave them uninvolved. As Sims (1994 p.380) states, the "psychological contract requires an emphasis on talking with people, not at people". More so, he suggests that organizations should device groundbreaking strategies that enhance employees' motivation and take account of the distinguishing needs of each employee in order to achieve a desired result for both parties. This should include career-advancement programs, and efficiently communicate messages all over the organization ensuring the message cuts across every single employee and also encourage employees to use feedback channels which is used as a medium to clarify any doubts and misconceptions which ensures all employees have an indepth understanding of the changes and current conditions that an organization is facing. (CIPD 2005) Managing change is very challenging for contemporary organizations and the psychological contract can play a significant role.
Nonetheless, having identified some limitations that need to be clarified, this essay is of the view that the psychological contract is useful to organizations and is an vital tool for effectively managing employee commitment and performance which organizations needs in order to overcome current economic conditions.
Article name: The Fluidity Of Economic Dynamics Management essay, research paper, dissertation