The Psychological Contract-1
The Psychological Contract-1
Abstract
The concept of the psychological contract has attracted much attention and concern in
recent decades. Many researchers have argued about its existence and effects that can
create within an organization. This paper examines the concept of the psychological
contract by presenting both sides of the argument, including, the limitations and benefits
of the psychological contract as identified by many researchers. The main objective of
the paper is to provide evidence of the usefulness of the psychological contract to
contemporary human resources (HR) practitioners. Current economic conditions play an
important role in how HR specialists should treat the different needs of individuals and
try to find and implement new strategies and techniques in order to achieve better
results for both the employee and the organization.
Introduction
the way both organizations and employees function. There are different arguments
concerning the value of the psychological contract to practitioners nowadays and this
changing expectation of both employees and employers have led to differences between
According to Knights & Kennedy (2005 p.57) “the origins of the psychological
contract date back to the writings of Argyris (1960) and Schein (1980)”.
Argyris (1960) used the concept in order to explain an agreement between a group of
employees and their supervisor. Schein (2009) perceives the psychological contract as a
valuable construct for understanding the terms and conditions between employees and
their organization, and how that relationship can vary across organizations and time.
employee and each party has expectations that need to be fulfilled in order to achieve
the desired outcome. Although as a concept it has emerged from theories such as the
social exchange theory (Blau 1964) and the equity theory (Adams 1964), “the
Noonan (1994) state, they are therefore highly dependent on the individual’s personality
and perceptions. Concern has been raised in previous decades regarding the
psychological contract, Rousseau (1989) explored its content thoroughly and suggested
that the psychological contract is “an individual's belief regarding the terms and
conditions of a reciprocal exchange agreement between the focal person and another
party. A psychological contract emerges when one party believes that a promise of
future returns has been made, a contribution has been given and thus, an obligation has
As Cullinane and Dundon (2006, p.113) mention, even though the psychological
contract has not emerged from the field of Human Resource Management (HRM) it is a
contract is an unwritten contract between an employer and an employee and each party
has different obligations and criteria in order to meet mutual expectations and is highly
dependent on trust and perceived fairness. The psychological contract is formed by the
time an individual is hired; the individual then forms specific impressions about the
nature of the work and it outcomes. Similarly, the employer expects a certain
performance from the employee in order to fulfill his/her expectations. At the heart of
mentions, the perceptions of those newly employed differ depending on the type of
employment”(p.398).
Over the years several searchers have treated the psychological contract at great
length and have concluded that it can generate to specific results. For example, Shore
and Tetrick (1994) suggest that the psychological contract can decrease employees’
behaviors without intense supervision and it can also provide the employee with the
feeling that they can influence the organization and achieve recognition by fulfilling all
Moreover, it is argued (e.g. Sturges et al. 2005, McDonald and Makin 2000) that
According to (Knights & Kennedy, 2005 p.58), job satisfaction is the individual’s
and understanding from the organization. Similarly the employer has several
expectations of the employee, for example being effective in the workplace, being ready
to work extra hours if necessary, being committed to the firm, working for at least two
years in the organization and treat the company’s information confidentially. These are
some general expectations that both sides may have and they are dependent on trust and
perceived fairness.
suggests that there are several points about the psychological contract that should be
emphasized nowadays. First, the level of people management practices that a company
implements has a strong influence on the psychological contract. These practices are
highly dependent on HR practitioners and the human resource strategies and techniques
that a company implements. In addition, employees’ perception of fairness and trust can
lead to valuable outcomes for both parties. Compliance with the psychological contract
can result in job satisfaction and benefits for both employees and the organization. It is
suggested (CIPD 2005) that managing the psychological contract is an ongoing process
for human resources managers nowadays in order to make the mission and vision of the
As Guest (2004, p.545) states, “the notion of psychological contracts (e.g. Shore
& Tetrick, 1994; Rousseau, 1995) has proved useful for understanding employment
relations, since many of their important aspects are based on perceptions: most
employment relations are implicit or at least not written, and thus parties may have
can be found in the results of the study by Guest and Conway (2002). They concluded
contract is valuable in order for senior managers meet employees’ needs and for
employees to fulfill their responsibilities, which enhance job satisfaction and employee
commitment. When the organization fails to fulfill promises and obligations towards an
employee, a breach of the psychological contract occurs and violation of the contract is
the employee’s response to the breach. Both parties can experience a psychological
contract violation or breach at some point (Robinson and Rousseau, 1994). Violation
each individual, so (Chen et al. 2008) it is very unusual that all employees would have
similar reactions to contract breach as well as not all supervisors would react in the
Aichinger and Barnes (2010, p.190) suggest that since the mid 1990s the literature
on the psychological contract has evolved significantly. Some of the reasons that have
technology and long working hours. The psychological contract can play a significant
Nowadays, job descriptions may include long working hours and through the use of
technology constant work even outside the office. However, HR practitioners should
ensure that employees maintain a balance between work and life, otherwise a breach of
the individual’s psychological contract can occur and this can have a negative impact on
relationships given the today’s need for change and is viewed as an accepted term
people’s management during this period of change and monitor effectively the
On the other hand, it has been highlighted that the psychological contract refers
universal approach that managers can take into consideration in order to achieve the
individual’s subjective expectations of the organization and the results if these are not
met. This statement can be associated with the opinion of Guest (2004) who suggests
that a potential challenge of the psychological contract is that there is not a lot of
research on the perspective of the employer and how the organization reacts to the
expectations and obligations of both parties and argues that not all expectations are
working conditions, while obligations that are not fulfilled can have an emotional effect
on the employee.
contracts. Anderson and Schalk, (1998, p.641) identify these as transactional and
relational contracts, which are influenced by five dimensions. The first is focus, which,
refers to the scope of the employee. Is his motivation based solely on money or are
understand the different needs of individuals. The second dimension is time, which
refers to the agreed length of the contract between the individual and the organization.
Third is stability. Transactional contracts are stable and inflexible while relational
contracts are more adaptable and dynamic in relational contracts. Forth, scope indicates
the level of influence of the work on the individual. Fifth, is tangibility, which varies
organization and the type of contracts and this is why it is very difficult for HR
experience play an important role in shaping employees beliefs and opinions and alter
the way individuals comprehend mutual obligations within the organization. Thomas
and Feldman (2009) suggest that there is a definite gap and thus further research is
perceptions at different stages of an employee’s life and work experience in order for
adjustment in the way people form psychological contracts. There are significant
differences between the old and new psychological contracts. In the former, the
organizational relationships were much simpler; the employee wanted job security and
the job was considered for “life”. Nowadays, managers have to deal with several other
individual, work-life balance. Furthermore change is an ongoing process and thus the
It is said (e.g. Dulac et al., 2008 and Conway and Briner 2002) that at some
point, all psychological contracts will be violated by both parties. If the consequences of
performance, the hypothesis of the psychological contract implies that there will be a
Rousseau (1994) present in their article ‘Violating the psychological contract: not the
exception but the norm’, some aspects of the psychological contract need more in depth
investigation. For instance, they suggest that “employee behavior goes beyond the
Organ, 1998,1990)” and that in addition to breach by the employer there should be a
Arnold (1996, p.518) concludes that although the in-depth focus on the
psychological contracts in recent years has led to key findings, the ‘concept’ seems to
have some gaps. There is a collective acceptance that the psychological contract derives
from explicit subjective individual perception of the organization, and this is why there
cannot be general guidance about how human resource manager should deal with the
contracts of different employees. Moreover, he argues that it is not totally clear whether
the concerned parties are even conscious of the existence of these contracts and that that
Discussion
Throughout this essay I have provided evidence for and against the clarity and
subject and researchers offer definitions and highlight the impact of the psychological
contract on individuals and organizations, they suggest that further research needs to be
conducted because some points are vague. The main issue of the psychological contract
is that it is based on individuals’ perceptions and each employee can have different
needs and perceptions. For this reason the psychological contract cannot be generalized
and have collective acceptance. On the other hand, research on managing the
understanding how it can be used to enable employees to achieve job satisfaction that
can have a positive impact on organizations’ performance and growth. There are some
empirical challenges concerning the subjectivity of these contracts, meaning that they
depend on the personality of the individual and different interpretations can be made
upon justice or fairness can appear to different employees that a human resource
already a vital tool for the effectiveness of a company. That is why nowadays while the
whole world is in recession and organizations and people are facing the impacts of
global crisis, it is important for human resources managers to ensure that bottom-up
what employees want, they should also take into account the changing needs of the
organization. Thus, they should have a dual perspective that psychological contracts
may lack. With cuts in wages and the uncertainty that has overcome employees it is
useful to take into consideration the needs of people in order not to breach
should engage people in the changing process and not leave them uninvolved. As Sims
(1994 p.380) states, the “psychological contract requires an emphasis on talking with
pioneering strategies that enhance employees’ motivation and take account of the
distinctive needs of each individual in order to achieve a desirable outcome for both
employees have a clear understanding of the changes and current conditions that an
contemporary organizations and the psychological contract can play a significant role.
psychological contract is useful for today’s HR professionals and is an essential tool for
economic conditions.
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