How far psychological contracts benefit to the companies?

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What is psychological contracts?

According to Rosseau & Tijoriwala (1998), explained that psychological contracts is dealing with two parties significantly of implicit obligations; others stress a need to understand peoples’ expectations and others recommend that reciprocal mutuality as a core cause of psychological contracts  (Cullinane & Dundon, 2006).

Also psychological contracts deals with implicit reciprocal promises and obligations where can describe as a dualistic approach between two parties such as employee and manager. The following figure 1.1 illustrates that how psychological contracts work.

Figure 1.1 psychological contracts work


Source: (Cullinane & Dundon, 2006) Model

Generally there are two types of psychological contracts such as transactional & relational. Transactional psychological stands for economic returns, closed ended & static. Also in this type both parties try to maximize their goals. Relational psychological contracts deals with non-economic returns, open ended & dynamic. Relational contracts try to maximize current and future outcomes for both parties (Kingshott, 2006).

Benefits of Psychological Contracts:


When discuss about the advantages of psychological contracts, it has agility, loyalty and empathy qualities. Agility means the employer can change the employees, working with psychological contracts. Finally it provides real time relationship between the two parties.

When discuss about the loyalty, it is massive asset for the employees. When shows loyalty to the company by an employee, it means lot. Psychological contracts exists between two parties and contract will go for a long time. 

Other benefit is empathy, means ability to understand one another. When the employer & employee can understand one another, it creates a positive work environment and employee feel to do fullest capacity to the organizational works.

Also, the contract itself is not formal and codified, it exists in a state of flux.  It is constantly developing based on communication between the employer and the employee.  While consistent communication positively impacts the psychological contract, it is worth noting a lack of communication can negatively impact the contract.  This includes conversations, voice tone, body language and even implication or inference between the two parties.

Without effective two-way conversation, the contract between employee and employer (or even employee and employee) can become imbalanced.

A balanced contract shows employees their employer values and respects them and finds their role within the company important to its success.  This leads to increases in productivity and a positive impact on the business itself.  Consistent interaction between employer and employee can improve employee loyalty and further allows the employee to use their talent to promote and progress the company’s goals.

Psychological contracts can go wrong:

A breach is the result of a psychological contract gone wrong.  A breach occurs when one party perceives the other as failing to fulfill promises.  Those include:

  • Pay – promised increases were not fulfilled
  • Promotion – a promised promotion doesn’t happen in the expected timeframe
  • Type of work – important responsibilities of the employee were misrepresented
  • Training – Employee doesn’t receive the promised training
  • Feedback – Promised performance reviews were inadequate or absent 

Typically, employers will see negative emotions from the employee such as anger, betrayal, or sadness.  Also, the relationship between the two suffers because there is a lack of trust and respect.  Commitment on the part of the employee is reduced.  There is less job satisfaction.  There may also be a withdrawal of behavior.  For instance, the employee is less willing to work hard, to share ideas, and to be a good work citizen, can build up inefficiency and many more HR issues.

Reference

Cullinane, N., & Dundon, T. (2006). The psychological contract: A critical review. International Journal of Management Reviews, 8(2), 113–129. https://doi.org/10.1111/j.1468-2370.2006.00123.x

 


Comments

  1. E127918December 17, 2021 at 1:39 AM

    In many cases, a psychological contact is just as crucial as, if not more important than, a regular job contract. A psychological contract is more often than not made without the use of any written or vocal communication. The psychological contract is a constantly moving and changing goal post because it is only created in the imagination of the employee. As a result, effective communication between direct supervisors and employees is critical. These discussions must be an open venue for two-way communication in order to demonstrate a balance between what the employee wants and what the business can provide. These discussions should take place on a frequent basis to account for changes in the business and the individual, as well as to ensure that there is still alignment.

    ReplyDelete
  2. HareenthDecember 18, 2021 at 11:39 PM

    This is a quite interesting topic indeed. Both the parties got to have mutual respect support and friendship to maximise the contact. Some instances misunderstanding takes place. Ego plays a major role here.

    ReplyDelete

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