Critically discuss the concept of the psychological contract. Explain why an understanding of the concept is argued to be important in the effective management of human resources.

Topics: Employment, Breach of contract, Management Pages: 7 (2250 words) Published: December 8, 2013


Human Resource Management
Question 5
Critically discuss the concept of the psychological contract. Explain why an understanding of the concept is argued to be important in the effective management of human resources.

It would seem that with evidence of trends facing towards globalization, downsizing and the restructuring of organizations Psychological Contracts are now playing a more vital part in modern and contemporary employment relationships. Sandra L. Robinson (1996) believes that as a result of this organizations have made rapid and constant changes, and have had to alter their employment relationships and the Psychological Contracts that underlie them. This essay will describe in detail what Psychological Contracts are the extent to which they are used, breaching of Psychological Contracts and then evaluate the contracts drawing on apposing and supporting theories. This term ‘Psychological Contracts’ first used in the 1960’s, has come to be more widely used recently as a guideline for the analysis of the impact of changes in employment on the individual Rousseau 1995; Guest (1998). Descriptions and definitions of the Psychological Contract emerged in the work of organizational and behavioral theorist Chris Argyris and Edgar Schien. There have been many others who have contributed ideas to the subject, either choosing to focus specifically on the psychological contract, or trying to gain a new perspective entirely. The Psychological contract is a wide and varied concept and has been subjected to a range of theoretical studies and interpretations. The key fundamental element of Psychological Contract is that it is concerned with the often implicit expectations, obligations and promises that each side, the individual and the organization, is believed to have made about what each other owes and expects to receive from the other. Put in another way the contract refers distinctly between the relationship between the employer and the employees. [] The contract specifically concerns mutual expectations of inputs and outcomes. Guest and Conway (2004) would describe it as ‘the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other’ Schien also reinforces this definition with his own which states that the between the employee and employer there is an’ unwritten set of reciprocal expectations’. Employees believe that they are obliged to behave or perform in a certain way and believe that their employer has certain obligations toward them. Between these individuals there is a Psychological Contract. The Psychological Contract is vital to the organization as employees are becoming increasingly monitored; therefore the management of the contract is fundamental in shaping the employee for the organizations benefits and use. The contract is usually perceived from the view of the employee but to completely gain understanding and appreciate the contract both sides must be understood. In terms of employment, the Psychological Contract is the balance between employee treatment and what the employee brings to the organization. A model of the Psychological Contract can provide a powerful analytic tool linking organizational policy and practice to worker experience and reactions. The kind of model that might be used centers on the state of the Psychological Contract, defined in terms of core employment relations concepts such as fairness, trust and delivery of the deal. John Storey (1995) We can explore the antecedents (organizational context, policy and practice) and consequences (employment attitudes and behaviors) along the lines set out in the table below. In the table shown the causes and factors of the Psychological Contracts are outlined and fairness is established in this model. Simply put, depending on the ‘state’ of the contract in terms of fairness and trust, the...
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