The Psychological Contract Shein (1980) explained the concept of the psychological contract as a set of mutual expectations held between the employee and employer within the workplace. It is an unwritten set of expectations operating at all times. It can also be described as individual beliefs shaped by the organisation that relates to the expectation the employee has in terms of pay, fair treatment, opportunities etc and the expectations that the employer has in terms of performance, loyalty, etc.
Key Characteristics of the Psychological Contract The psychological contract has roots in the following theories: Equity theory: he employees disposition towards their psychological contract will remain positive as long as they feel the treatment they receive is fair in comparison to others. Exchange theory: this describes how the employee invests and contributes to their work in return for a particular reward or outcome Expectancy theory: this explains how the employees expectations affects their motivation and performance.
Content of the Psychological Contract The content of the psychological contract varies for both employer and employee. Essentially, as long as the following factors are fulfilled then the ontract will remain, however if any are violated it can have damaging long- term effects, which will be discussed later.
Employee expectations Reasonable job security pay matches performance Opportunities for learning and development Opportunities for performance Supportive working climate Employer expectations High performance levels oyalty to organisation Commitment to organisational goals and values Creativity Ability to self-develop Violation of the Psychological Contract If the psychological contract is violated in any way, for example if the employer does not hold up their end of the bargain, then it can have either a hort term effect if it is a simple breach, or long-term, damaging effects.
Violation is an emotional affective state that follows from the belief that the organisation has failed to adequately fulfil the employees expectation. Violation of the psychological contract can trigger: Emotional responses: This is when the employee displays frustration, anger and depression. Attitudinal responses: This is when the employees attitude towards their workplace becomes negative and can include a loss of motivation, cynicism and loss of organisational commitment Behaviour responses: This includes absenteeism, decreased motivation and resistance o change.
Violation of the psychological contract does not always necessarily result in these affects if dealt with accordingly. The employees reactions can be less damaging if -The error is identified and rectified – If the employee perceives the error as tolerable and understands it was beyond the employers control – If it is outweighed by the attractiveness of the job How does the organisational change affect the psychological contract?
Organisational change can affect the psychological change negatively if it breaches the expectations the employee has, for example if the change esults in a pay decrease or an unpopular decision. See diagram 1 for the process. Relational & Transactional Psychological Contracts A relational psychological contract is one which has evolved over time as a partnership developed between the employee and employer, A transactional contract is one which is focused upon short-term largely financial benefits to the employee or employer.
A relational contract can include the following: Job security Involves mostly core workers Internal career structure Promotion opportunities Learning and development opportunities Commitment and loyalty to organisation Shared interests Focus on achieving organisational goals A transactional contract can include: Employability nvolves mostly ‘peripheral’ workers Career managed by employee Employee responsible to self develop Commitment to self Self interests Short term financial gains The Debate There has been recent interest in the movement from a relational psychological contract into a more transactional style. 0th sides of the debate have been analysed, with Guest & Conway (2002) emphasising that the traditional (relational) contract is still very much existent and Atkinson (2003) arguing that the transactional contract is now the more dominant of he two within the 21st century workplace. In Guest and Conway’s article they talk about the golden age when the working environment was more stable and predictable. Over the years, many changes have been introduced into the workplace – such as advancing technologies, equal opportunities and family- friendly policies.
However, with change brings a loss of predictability, which has triggered increased interest in the psychological contract. The interest arises from a belief that increased change makes it more difficult to deliver the promises, commitment and obligations that lie at the heart of the notion f a psychological contract. For the past seven years, the CIPD has sponsored a survey of the current state of the psychological contract in order to determine if there really has been a breakdown in trust and commitment. The results suggested that the traditional psychological contract is alive and well.
The article states ‘if the traditional promises that make up the psychological contract are supposed to be about a fair days work for a fair days pay then the old psychological contract still seems to be alive and well’. The main issue highlighted within the article is the increased levels of stress that employees ave reported, however Guest and Conway advise that if HR managers deal with this accordingly then it should not affect the psychological contract. In contract with this, Atkinson (2003) wrote an article emphasising the shift from relational to transactional style of contracts.
She writes about how job security, career structures and loyalty between employer and employees are things of the past as employees are expected to take responsibility for developing their own skills, have several careers in a life time and consider themselves to be “me plc”. She argues that the “old deal” was an exchange of ob securi¶y’ for loyalty and conformance, whereas the “new deal” has its focus on the development of skills and employability in return for high performance, flexibility and short-term commitment.
Summary of Findings In conclusion, the psychological contract is very much alive within organisations however whether it is evolving into a transactional approach may vary. It is due to the younger generation that a transactional approach is gaining attention as the new generations attitude towards working life has contributed greatly to a changed attitude. They have more focus on their ocial lives, a decent salary and often use jobs as a ‘stepping stone.
They can have numerous jobs throughout their lives, whereas their parents and grandparents were more interested in seeking a job for life from a young age. Saying that, will finalise the debate by saying it can completely vary dependent on the organisational type, the type of employees, the cultural differences, etc. For example, a retailing store may hold more of a transactional psychological contract, with seasonal staff working temporarily for the organisation and many students, part-time workers seeking ‘extra cash’ contributing to a high staff turnover.
These jobs are just a stepping stone and a source of extra money in return for high performance levels during peak trading periods for the company. Job security, benefits and loyalty are not considered by these types of workers and employers. However, in another establishment, such as the NHS for example, employees are more likely to be seeking a secure, full-time job which can offer job security and benefits. Many NHS employees are loyal and remain with the organisation for years, developing and progressing over time in return for a good working relationship, job benefits, staff relationships, etc.