Psycological Contract

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The psychological contract is a little difficult to define because as George (2009, pg3) states it ‘is implicit in that it is unspoken, unwritten and often only becomes apparent when it is breached, causing feelings of violation’ none the less it is extremely important part of the business and can be what ‘binds the employee and the employer together’ (Robinson and Rousseau, citied in George 2009 pg4) ‘through the mutual expectations of input and outcome’ outlined by Businessballs (2010) CIPD (2004, p5) outlines some of the things that people look for in a psychological contract: Employee attitude surveys undertaken by the CIPD since 1996 have been analysed by David Guest, Kings College London, and Neil Conway, Birkbeck College. The surveys have consistently focused on a number of key issues, including: satisfaction, motivation, fairness, trust, job security, loyalty, work–life balance, commitment. Downsizing is the process of removing layers from the company, sometimes known as retrenchment, involving potential redundancies, wage cuts and other general cut backs (Rollinson p41). In this text I will be looking at the effects downsizing can have on the psychological contract whether it can reduce the likelihood of a violation, with particular interest in what makes this ‘contract’ so important, what both the employer and employee are looking for within it and how other factors such as age and social media can have an impact. Businessballs(2010)back up the fact that ‘the psychological contract refers to the relationship between an employer and its employees’ and, in employment terms, it is about finding the balance between how the employee is treated by its employer, and what the employee puts into the job. CIPD (2004) surveys show that ‘90% of HR managers think the psychological contract is a useful concept for helping to manage the employment relationship’ this is brought by the, increasing, realisation that employee motivation, satisfaction and commitment can be very influential in the overall business performance, and if an employer can establish and maintain a positive psychological contract with its employee a sustainable business value is more likely to be met (CIPD 2004). So essentially it is a form of guarantee where ‘if each does his or her part, the relationship will be mutually beneficial’ (Robinson and Rousseau, citied in George 2009 pg4). This brings me to my first reason supporting the fact that Downsizing could reduce the likelihood of a psychological contract violation. In a recent survey it showed that staff given an adequate voice are more likely to be engaged and satisfied (CIPD 2009, p2). With downsizing likely to result in the removal of layers of supervision and middle management, the employee voice is more likely to be expressed as those remaining are likely to have more responsibilities and a say in day to day decisions through the process of empowerment (Rollinson 2008, p522) all things likely to strengthen the psychological contract, as if the employee is working harder the employer will be pleased and the employee will enjoy having more of a say and new responsibilities. In addition to this (CIPD 2009 p7) survey showed that ‘Direct’ channels of voice between employees and line managers/senior leaders are both more common and seen as more important than ‘indirect’ or ‘representative’ channels’ their surveys also showed one to one meetings with line managers to be ‘the most important facilitator of voice’ so again this is likely to be made easier through the process of downsizing as they will have the time to deal with less people and with the hierarchy likely to be ‘flatter… and lateral rather than vertical communication is much more common.’ (Rollinson 2008, p522). However there is a lot of evidence to suggest downsizing is likely to have a negative effect on the psychological contract represented by ‘a number of rigorous empirical studies has shown that many empowerment initiatives fail to...
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