The psychological contract
The employment relationship contains a
combination of beliefs held by individuals and that organization’s employers
about what they expect of one another. This is the psychological contract, and
it is vital to understand the psychological contract and its significance as a
key aspect of relationships with employees when formulating and implementing
reward policy (Armstrong, 2007).
Definition of the psychological contract
A psychological contract is a system of beliefs
that encompasses the actions employees believe are expected of them and what
response that employees expect in return from the employer (Armstrong, 2007). Stiles,
Gratton & Truss (2001) are defines ‘The psychological contract is set of
reciprocal expectations between an individual employee and the organization’. As
described by Guest et al (1996) It is concerned with assumptions,
expectations, promises and mutual obligations. It creates attitudes and
emotions that form and govern behavior. A psychological contract is implicit.
It is also dynamic – it develops over time as experience accumulates,
employment conditions change, and employees re-evaluate their expectations (Armstrong,
2007).
Employees may expect to be treated fairly as
human beings, to be provided with work that uses their abilities, to be
rewarded equitably in accordance with that employee’s contribution, to be able
to develop and display competency, to have opportunities for further develop,
to know what is expected of employee and to be given feedback (preferably
positive) on how employee are doing. Employers may expect employees to do best
on behalf of the organization, to be fully committed to the values, to be
compliant and loyal, and to enhance the image of the organization with the customers
and suppliers. Sometimes these assumptions are justified – often are not.
Mutual misunderstandings can cause friction and stress and lead to
recriminations and poor performance or to a termination of the employment
relationship (Armstrong, 2007).
To summarize, in the words of Guest and Conway
(1998), the psychological contract lacks many of the characteristics of the
formal contract generally not written down, somewhat blurred at the edges, and
cannot be enforced in a court or tribunal. That believe ‘The psychological contract’
is best seen as a metaphor. A word or phrase borrowed from another context
which helps to make sense of experience. The psychological contract is a way of
interpreting the state of the employment relationship and helping to plot
significant changes’ (Armstrong, 2007).
The employment relationship and the psychological contract
The concept of the employment relationship is linked to that of the psychological contract. As described by Guest et al (1996), the psychological contract may provide some indication of the answers to the two fundamental employment relationship questions that individuals pose:
‘What employee can reasonably
expect from the organization?’ and ‘What employee should reasonably be expected
to contribute in return?’ But, unlikely that the psychological contract and
therefore the employment relationship will ever be fully understood by either
part (Armstrong,
2010).
As Armstrong (2010) stated that the
aspects of the employment relationship covered by the psychological contact
will include from the employee’s point of view:
- how employees are treated in terms
of fairness, equity and consistency.
- security of employment.
- scope to demonstrate competence.
- career expectations and the
opportunity to develop skills.
- involvement and influence.
- trust in the management of the
organization to keep their promises.
From the employer’s point of view,
the psychological contract covers such aspects of the employment relationship
as competence, effort, compliance, commitment and loyalty (Armstrong,
2010).
References
Armstrong, M, 2007, A handbook of employee
reward and management practice, 2nd edn, Kogan Page, London UK, pp. 147-148
Armstrong, M, 2010, in Employee relations, Armstrong’s
essential human resource management practice, Kogan Page, London UK, pp. 296-297
Guest, DE et al, 1996, The State of
the Psychological Contract in Employment, Chartered
Institute of Personnel and Development, London
UK
Guest, DE and Conway, N, 1998, Fairness at
Work and the Psychological Contract,
IPD, London UK
Stiles, P, Gratton, L and Truss, C, 2001,
Performance management and the psychological
contract, Human Resource Management Journal 7, pp. 57–66
In psychological theory, the main paradigm shift in an employment relationship is largely seen from the employee's point of view and is labelled as a 'psychological contract' of the employer's understanding of the employer's relationship with the employer and the employment relationship (1995).
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ReplyDeletePsychological contract refers to mutual unwritten expectations that exist between an employee and his/her employer regarding polices and practices in their organization. Psychological contract influences the job attitudes and performance of employees ( Patrick, 2008).
ReplyDeleteAgree with you Tuan, A psychological contract is a system of beliefs that encompasses the actions employees believe are expected of them by their employer. It is concerned with assumptions, expectations, promises and mutual obligations. It creates attitudes and emotions that form and govern behavior. The psychological contract lacks many of the characteristics of the formal contract. It can't be enforced in a court or tribunal and is dynamic - it develops over time as experience accumulates (Armstrong, 2007).
ReplyDeleteConcept of the psychological contract has become an important focus area for management researchers and practitioners in recent years because of the dominant resource-based view of the firm (Wocke & Sutherland, 2008). The central idea is that employees are key to sustainable competitive advantage, it follows that relationships between employers and employees are critical to ensuring productivity and the continued release of innovation and creativity. The traditional psychological contract that remain in organizations was characterized by stability, certainty, and development (Tipples &Verry, 2006).
ReplyDeleteWe all are familiar with contracts. In an organization HR person’s require potential new candidates to sign different forms of contracts prior joining the organization or during the course of employment. However, a psychological contract is an unwritten set of expectations set between the employee and the employer. These includes informal arrangements, mutual beliefs, common ground and perceptions between the two parties (Stevenson, 2018).
ReplyDeleteIn contrast to the psychological contract, alegal contract is one that is more formal, written down and verbalized between the two parties. This suggests that both parties have read and agreed to its terms and conditions. In such an instance, this type of contract becomes quite difficult to change without some degree of consent between the contracting parties.
ReplyDeleteRousseau (2001) describes four phases in the formation and evolution of psychological contracts. First in the pre-employment phase, professional standards and social beliefs play a general role. Second, in the recruitment process, more specific components of psychological contracts are formed. Psychological contracts progress during recruitment through an interactive process where promises are exchanged, and the actions and messages of the employer and the employees are assessed.
ReplyDeleteAgree with you. It is a psychological contract according to Armstrong (2014) has mentioned that it is consist of the approaches and methods adopted by employers to deal with employees either collectively through their trade unions or individually. This includes providing employees with a voice and developing communications between them and management.
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ReplyDeleteFurther, we understand when the relationship between organization and the employee lacks trust, they are unlikely to have productive performance conversations that generate positive results, therefore, the phycological contract is very important to have better results (Pulakos & Leary, 2008).
ReplyDeleteHi Tuan, Moreover Rousseau (1989) defines the psychological contract “an employee’s beliefs regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party” (Rousseau, 1989,123). Psychological contract in general when it is considered written, it has “the power of self-fulfilling prophecies: they can create the future” (Rousseau, 1995,9) of the employee cognition forms the psychological contract, it becomes a contradictory responsibility.
ReplyDeleteA psychological contract can be understood as a ‘deal’ between employer and employee concerning ‘the perception of the two parties, employer and employee, of what their mutual obligations are towards each other.(CIPD 2005).Psychological contracts consist of unofficial assumptions and perceptions, often untested, of the workplace relationship that exists between employer and employee. Although they are rarely written down formally and explicitly, they have a powerful impact on employee motivation and performance. They are closely bound up with notions of employment, employability and ‘career’(MacKenzie 2020).
ReplyDeleteArgyris (1960) used the term ‘psychological work contract’ to describe an embeddedness of the power of perception and the values held by both parties (organization and individual) to the employment relationship. According to Schein (1978), these expectations between the organization and individual employee do not only cover how much work is to be performed for how much pay, but also a whole set of obligations, privileges and rights. Schein’s insightful contribution alerts us to the idea that labour unrest, employee dissatisfaction and worker alienation comes from violations of the psychological contract that are dressed up as explicit issues such as pay, working hours and conditions of employment which form the basis of a negotiable rather than a psychological agenda.
ReplyDeleteArmstrong (2014) defines the psychological contract as the expectations that exist between individual employees and their employers which is a set of reciprocals but unwritten. Like in any relationship, the length, and quality of their relationship can be significantly affected since both parties have informal expectations of each other that are even unwritten (CIPD, 2019). The current 'psychological contract' concept attempts to capture the idea of employees' explicit and implicit expectations about what their work will deliver (Edwards, 2003).
ReplyDeleteAmidst many confusions in this regard, adhering to below steps could eliminate complications and develop a positive psychological contract (Armstrong, 2014).
Define expectations during recruitment and induction programmes.
Communicate and agree expectations as part of the continuing dialogue that is implicit in good performance management practices.
Adopt a policy of transparency on company policies and procedures and on management’s proposals and decisions as they affect people.
Generally, treat people as stakeholders, relying on consensus and cooperation rather than control and coercion.
Psychological contract is a belief that the main expectation of employees in return for their input to the company was a level of employment stability both in terms of working environment and job security (Sarantinos, 2007). What is important in determining the continuation of the psychological contract is the extent to which the beliefs, values, expectations and aspirations are perceived to be met or violated and the extent of trust that exists within the relationship (Middlemiss, 2011).
ReplyDeleteArmstrong, M (2017), The psychological contract governs the continuing development of the employment relationship, which is constantly evolving over time. But how the contract is developing and the impact it makes may not be fully understood by any of the parties involved. Spindler (1994) comments that: ‘In a psychological contract the rights and obligations of the parties have not been articulated much less agreed to. The parties do not express their expectations and, in fact, may be quite incapable of doing so.’
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