PSYCHOLOGICAL CONTRACT AND EMPLOYMENT RELATIONSHIP

Topics: Employment, Trade union, Recruitment Pages: 50 (6340 words) Published: March 16, 2014
PSYCHOLOGICAL CONTRACT AND EMPLOYMENT RELATIONSHIP

Harold Andrew Patrick
Coordinator OB and HRM, Institute of Management, Christ University, Bangalore haroldpatrick@christuniversity.in

Abstract
Psychological 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. This study is aims at developing a deeper understanding about psychological contract and employment relationship.

Six psychological contract variables (relational contract,

transactional contract, employer‟s commitment/obligation to employee, employee‟s commitment/obligation to employer, employer‟s relationship with employee, and employee‟s relationship with employer) were measured on 202 employees from 15 IT companies from randomly chosen for the study. A 52 item Psychological Contract Questionnaire adapted from Psychological Contract Scale (Millward & Hopkins, 1998) and Psychological Contract Inventory (Rousseau, 1995) was used for data collection. The study revealed that relational contract was dominant in the IT companies under study. Employees‟ commitment/obligation to employers was higher than employers‟ commitment/obligation to employees. Employees‟ relationship with employers was also stronger than employers‟ relationship with employees. Implications of the study for IT industry have been discussed for harnessing the energy, knowledge and creativity of employees for competitive advantage.

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Electronic copy available at: http://ssrn.com/abstract=1284775

INTRODUCTION
Psychological contract has now become an accepted part of the thinking and vocabulary of human resource practitioners. Relationships between employers and employees in many modern Indian organizations resemble a marriage under stress, characterised by poor communication and low levels of trust. Neither is getting the full benefits from the employment relationship, which has to be a top priority for organizations. Getting people to turn up for work is the easy bit. Getting them to go the extra mile requires effort and imagination. Employers should be looking to generate passion and enthusiasm, and to make work a happier experience for all their employees. This can be achieved by building a positive psychological contract which results in good employment relatioships.

In the new people-economy, organizations cannot survive unless they have the right kind of knowledge. It is people who drive organizations to success or failure. People as a resource have gained a paramount importance as reflected in most of the annual reports and comments from CEOs. This turnaround in attitude is because access to other resources is no longer limited. Capital flows freely across borders; technology is available at a price to CEOs who cannot develop it; raw material is free to be transported across the globe; and information is available to any hitchhiker on the digital highway. Globalization has created an all-important quality standard. The world economy has increasingly become service- oriented.

People who can bring practical knowledge to corporations and manage information are really scarce today. They represent the new individualism which is displacing the traditional collectivistic perspective. They are becoming increasingly valuable. Such people are most conspicuous in the information technology field in India. They look upon their employment as a challenge to effectively apply their unique knowledge to their workplace. Their redefined roles have caused drastic changes in their expectations from the organization and vice versa.

Knowledge assets contributed by such employees promote continuous innovation, originality of service, anticipating customer needs and leveraging all organizational

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Electronic copy available at: http://ssrn.com/abstract=1284775

capabilities. Knowledge assets constitute...

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