Managing the Psychological Contract in a changing work environment


The psychological contract is the employee's perception of the mutual obligations existing with their employer', in order to better explain this statement, within a formal employee contract, there is a psychological contract which is an unwritten set of expectations between the employee and the employer.  It includes informal arrangements, mutual beliefs, common understanding and perceptions between the two parties (Rousseau, 1990).

Many organization behavior theory indicates the psychological relationship of an employee with the organization is must move forward with changing the work environment, as per (Patrick, 2007) when a psychological contract is positive with the employee, then it creates an impact on job satisfaction, organizational commitment, positive attitudes, employee’s loyalty, adapting competitive advantage, higher productivity and efficiency. However, when the Psychological Contract changes to the negative, then the behavioral change in the employee will lead to eventually, him leaving the organization. Then usually the organization pays the price since they have invested in the selection process, training, and development of these employees. This is an expensive process. If the organization doesn’t work on retaining its people, they are more likely to leave and work for the competition. As cited by May et al. L Harter (2004) The feeling of fulfillment of expectations differentiates psychological contract, keeping positive with changing the work environment is vital.

The Aitken Spence Hotel Management ( Pvt) Ltd ( ASHM) believes that motivations come from the relationship between the individual and the organization, they work to keep the psychological contract much as possible in positive.

Fig. 1 The motivation between the individual and the organization in psychological contract
(ASHM Annual Report 2018)

As per the diagram above, the psychological contract is basically a set of expectations. The individual has a set of results or rewards that he or she expects in return for doing the work of the organization. This would be the person’s wages, promotion, feedback, staff development. Similarly, the organization has certain expectations of what it wants the individual to contribute to the work of the organization, and certain rewards and outcomes that it will give the individual in return. This the way that Aitken Spence keeps the psychological contract positive by evaluating the expectations of both the parties in a rapidly changing context (ASHM, 2018).

As per video clip, elaborate what are Psychological contracts and how will be relating to employment?
Video 1.0

Psychological contracts

Sharing Research Studies
 Source: Jacqueline 2019
Video 1.0 shows how employees change with the organizational changes, how they concern about the new relationships, how they give to the organization based on what they get from the organization, understanding employee’s behavior, and reaction when the breach of Psychological contracts. These points very important to understand how Psychological contracts change with changing the work environments and to retain employees.

According to (ICASL, 2015) In order to Employee Engagement and Psychological Contract, both need a clear message. Communication is a key element to have a better message in relation to the Psychological Contract, lack of communication can adversely impact the Employee Engagement and Psychological Contract. Without operative two-way conversation, the contract between employee and employer can become unwarranted and contract breach can occur. Organizations to avoid this kind of misunderstanding in the changing work environment monthly evaluations, performance appraisals, one to one discussions been adapted to keep the psychological contract positive with employees. 


Given the on top of the indication to counsel that an employee’s considerably influenced performance and approaches by communication. one among the energetic forces behind the psychological contract between employers and worker’s modifications within the balance of the mutual agreement (Anderson and Schalk,1998). a number of the external surroundings and also the individual factors driving psychological contract analysis area unit illustrated in figure two.

Fig. 2 Factors influencing the growth in psychological contract research

(Anderson and Schalk, 1998: 643)

According to Aggarwal et.al, (2007) different human resource practices can shape and influence the interpretation of psychological contracts of employees has been highlighted below.
  • Evaluation of performance.
  • Fair distribution of pay.
  • Development opportunities and provision of feedback to employees.
  • Training and Development as expectations.
  • Rewarding employees according to their own perceptions of their needs.
Any organization not practicing the above positive factors, it is inevitable a breach will be the result of the psychological contract. Aitken Spence Hotel Management (Pvt) Ltd, influences the above factors to have positive growth into the psychological contract.     

As per Stevenson, (2018) a niche happens once one party observes the opposite as failing to justify guarantees.
Those include:
  • Pay - secure will increase weren't consummated,
  • Promotion - a secure promotion doesn’t happen within the expected timeframe,
  • Type of labor - necessary responsibilities of the worker were twisted,
  • Training - worker doesn’t receive the secure coaching,
  • Feedback -secure performance reviews were inadequate or absent.

Stevenson, (2018) & Lezing, (2001) more illustrates that employers can see negative emotions from the worker likes anger, disloyalty, or sadness. Also, the connection between the two hurts as a result of there's an absence of trust and respect, this may result in Commitment on a part of the worker will cut back, less job satisfaction, withdrawal of behavior, the worker is a smaller amount willing to figure arduous, to share ideas, and to be a decent work subject.

As per the Aitken Spence Hotel Management Oman sector, as given in Fig. 1 above all employees are given formal contracts and kept a closed review to identify and reward the individual who achieved organization expectations. The government of Oman introduced the Omanization program which future recruitment will fill only through Omanis. As given in Fig.2 above Environment & Organizational level factors such as globalization and downsizing affected the employee's psychological contract even legislation evidently says imminent employment only should be the Omanis. Aitken Spence failed to communicate the existing employees to keep the psychological contract positive, in return experience long-standing employees left the company.   
  
In conclusion, the psychological contract is the responsibility of each worker and therefore, the employer and employee each have separate responsibilities to protect against potential breaches. Despite its problems, it's argued that partnership represents the way forward for establishing a far better relationship and for restoring the psychological contract to at least one supported mutual trust, commitment, and reciprocity. Empirical proof has shown that this sort of psychological contract is useful to each organization and staff. Moreover, if the foundations underpinning its squares measure healthy, it represents a way of overcoming a number of the difficulties related to structure amendment. 

References:
Aitken Spence Hotel Management (Pvt) Ltd (ASHM) Annual Report 2018.
Anderson, N. and Schalk, R. (1998) ‘The psychological contract in retrospect and prospect Journal of Organizational Behavior, Vol. 19, pp. 637-647.
Herriot (1996) Applying the Contracting Model in an organization. Occupation and Plan Psychology, Vol 25, pp 21-45.
Institute of Chartered Accountants of Sri Lanka, Chartered Licentiate Study Journal Vol 150, 2001.
Institute of Chartered Accountant of Sri Lanka Processional Journal Vol. 1525, 2015.
Lezing 2001 ‘Changes in psychological contracts’- Paper Workshop.
May. D. A Gilson and L Harter (2004) ‘The Psychological Conditions of Meaningfulness, Safety and Availability and the Engagement of Human Spirit at Work’, Journal of Occupation and Organizational Psychology, Vol 77, pp 11-37.
Mason Stevenson (2018) How to Apply psychological contracts Vol. 05.
Mason Stevenson (2018), The Importance of the Psychological Contract, Vol. 08.
Patrick M. IIMB Management Review, Journal Vol 19 No 3 September 2007.
Rousseau, D. M. (1990). ‘New hire perceptions of their own and their employer’s obligations: A study of psychological contracts’. Journal of Organizational Behavior. Vol. 11, 389-400.
Upasana Aggarwal, Sumita Datta, and Shivganesh Bhargava, (September 2007) The Relationship between Human Resource Practices, Psychological Contract & Management Review, Vol 15 No 2; 








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Comments

  1. Unknown22 November 2019 at 20:30

    This is an interesting article and very important aspects of an employee retention in the organisation. However as described clearly there are environmental and organisational factors influence the behavior of the employee specially in terms of the breach of psychological contract. Therefore the change management is very critical. The changes can occur due to many reasons such as technology change, change in customer expectations and change in rules and regulations. This may result in the reduction of the staff, redundancy of the staff and restructuring. This is a unavoidable circumstance between the employer-employer relationship.

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed24 November 2019 at 23:09

      As cited by May et al. L Harter (2004) The feeling of fulfillment of expectations differentiates psychological contract, keeping positive with changing the work environment is vital, as you stated above every change in the organization should be able to adapted by the employee to keep the psychological contract positive.

      Delete
    2. Krishanthini Punniyamoorthy26 November 2019 at 06:51

      Well explained article on psychological contract, it's simply an unwritten contact between employer and employees, bother parties have their own unwritten mutual expectation on each other, if this contract work positively it leads to employee's job satisfaction, and positive attitudes towards the company, if not employees may quit from the organization or they won't give their best to the company so the contract should carryout in a healthy way to get the competitiive advantage.

      Delete
    3. Mohamed Sinan Muhamed1 December 2019 at 04:26

      Rayton and Yalabik (2014) conducted a study to explore two links, firstly between Psychological Contract Breach (PCB) and work engagement, and secondly between job satisfaction, and work engagement. The conclusions are drawn wherever job satisfaction mediates the relationship between PCB and work engagement, as you commented when these elements been balanced by the employer in return employees will retained in the organization will lead to long term competitive advantage.

      Delete
  2. Ravi Prasad Kodithuwakku29 December 2019 at 08:00

    The effective management of the psychological contract in modern organizations has never been more crucial for managers. This is essentially because of the subjective and fluid nature of this concept, differences in personal values, and an accelerated pace of change in the operating environment of organizations. A good employment relationship creates an enabling environment for employees enhancing performance and productivity. It is also the bedrock of job satisfaction, motivation, commitment, citizenship behavior, and employee retention. These factors are key determinants of organizational success and sustainability.

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed29 December 2019 at 19:50

      Employee relationship and psychological contract has common factors both work in one on one, when employee relationship is positive psychological contract also will be positive. As stated job satisfaction, motivation, commitment, citizenship behavior, and employee retention, enhancing performance and productivity will happen with the positive employee relationship, on the other hand these factors also will common in to keep the psychological contract positive (Patrick, 2007).

      Delete
  3. Shiyamila Kumarapeliyage10 January 2020 at 10:27

    Such a valuable topic Sinan. Changes at the macro level such as, increasing market competition and customer demands, slower economic growth, globalisation, rising product innovation and
    the impact of advanced forms of information technology have placed pressure on organisations to be flatter, faster and more flexible and to manage change rather than be submerged by it. In such case, companies do not realise they are violating an unwritten but important social contract they have with workers; they are unaware of the impact they are having (Sharpe, nd). Hence I strongly believe managing work environment change in an effective manner is vital and required.

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed13 January 2020 at 03:33

      Yes Shiyamila, managing work environment change in an effective manner is needed but the change should be done after analysis the employees psychological level to keep them agreeable for the adaption (Herriot, 1996).

      Delete
  4. Zaharan Mohamed16 January 2020 at 18:42

    you have touched upon an excellent subject Sinan, psychological contract and the employment contract define the employer-employee relationship. , the psychological contract includes informal arrangements, mutual beliefs, common ground and perceptions between the two parties (Rousseau; 1990)

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed21 January 2020 at 02:41

      Further to that, as defined by Stevenson ( 2018), psychological contract is an unwritten set of expectations between the employee and the employer. It includes informal arrangements, this is more powerful tool with connecting to employee retention. positive PC will give,
      1. Lower turnover intention
      2. Increased job performance
      3. Positive behaviors

      Delete
  5. Dinithi Chandrasoma23 January 2020 at 00:28

    Hi Sinan, Would like to share my own experience. since I am working at a subsidiary company of international company , the one of the senior manager used to have a psychological contract with his subordinates and the surprising part is his team is coming with him for last twenty years. Not only professional way but also personal way he manage to keep in touch with each and every employee and very eye catching scenario is they are very loyal and committed with the unity. That is the most important thing i have seen among all the other departments teams.

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed11 February 2020 at 23:01

      As given in figure 02 factors influencing the growth in psychological contract research, Anderson and Schalk, 1998, you point can be classified under individual level factor, which will motivate to keep the psychological contract positive.

      Delete
  6. Thiagika8 February 2020 at 07:35

    Good content Sinan.
    Employees have other expectations as an addition of what is usually specifically known in formal, written or legally binding employment contracts. The efficient management of the psychological contract in current organizations has never been more critical for managers. s. A good employment bond creates an enabling surroundings for employees enhancing performance and efficiency. It is also the bedrock of job satisfaction, enthusiasm, commitment, citizenship performance, and employee retention. These factors are key determinants of organizational achievement and sustainability (Akinyemi, 2009).

    ReplyDelete
    Replies
    1. Mohamed Sinan Muhamed11 February 2020 at 23:07

      As per your comment to obtain satisfaction, enthusiasm, commitment, citizenship performance ...employer and employee each have separate responsibilities to protect against potential breaches. The partnership represents the way forward for establishing a far better relationship (Stevenson 2018). that will Steve the above point to achieve.

      Delete

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