Psychological Contract and Leadership Style

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Institute of Management Sciences
Managerial Leadership

“Effect of Leadership style on Psychological Contract”

Second Monthly Exam
Submitted to:
Sajid Iqbal Dawezai

Irum Azmat
MS-HRM
1st Semester

Date: 24th september, 2012

Introduction:
The topic that I have selected for my review is “effect of leadership style on psychological contract”. In this review, first I would like to introduce the concepts of leadership and psychological contracts. After that, I would be talking about what researchers have found out about the link between leadership styles and the psychological contract, mainly from an employee’s perspective. Leadership:

Leadership is a difficult phenomenon to define. Many authors have tried to come up with one best definition of leadership but none has succeeded so far. Stogdill (1974) had concluded that “there are almost as many definitions of leadership as there are persons who have attempted to define it”. Leadership has been defined from different aspects like traits, behaviors, interaction patterns, roles and relationships with followers. However, many authors have agreed on the central theme of leadership concept i.e. the ability to influence others. For convenience purpose, here a few definitions of leadership will be provided that may prove helpful in getting an insight into this concept. Definitions:

Leaderships is “the behavior of an individual…directing the activities of a group towards a shared goal” (Hemphill & Coons, 1957, p. 7) “Leadership is about articulating visions, embodying values, and creating the environment within which things can be accomplished” (Richards & Engle, 1986, pg. 206) “Leadership sis the ability of an individual to influence, motivate and enable others to contribute towards the effectiveness and success of the organization…” (House et al., 1999, pg. 184) There are a lot of dissimilarities or differences among authors regarding the central theme of influences. (Gary, 1989 15:251) describes these as “…they differ in many respects, including important differences in who exerts influence, the purpose of influence attempts, and the manner in which influence is exerted”. So there does not exist on single concept or theme of leadership on which all authors agree. There are different theories proposed in leadership with the passage of time. Every theory has its own pros and cons. Over the time, these theories have evolved immensely and a lot many new concepts have been introduced related to leadership. In a nutshell, leadership is “Effective leadership increases an organization’s ability to meet all challenges, including the need to obtain a competitive advantage, the need to foster ethical behavior, and the need to manage a diverse workforce fairly and equitably” (Moorhead & Griffin, 2004). Psychological Contract (PC):

“Psychological Contract” (PC), is considered as the implicit understanding that exists between the two parties to the contract, was first being introduced into management literature by Chris Argyris in his 1960 book Understanding Organizational Behavior. (Chu & Fu, 2005). According to Schein (1965) “These expectations not only cover how much work is to be performed for how much pay, but also involve the whole pattern of rights, privileges, and obligations between worker and organizations” (p.11). The author described PC as not just a contract based pay for work but it includes more than that. The mutual rights obligations of the employee and employer are of significant nature as well. Kotter (1973) proposed a definition for PC as an “implicit” contract between organization and its employees which defines the expected give and take from both the parties in this relationship. With the passage of time, new dimensions had been added to the definition of PC. Rousseau (1989) wrote about PC as 'An individual's belief regarding the terms and conditions of a reciprocal exchange agreement between the focal person and another party. A...
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