Advantages and Disadvantages of Psychological Contract

Advantages and Disadvantages of Psychological Contract Outline and critically evaluate the concept of the ‘psychological contract’. Why is an understanding of the psychological contract considered to be important to the management of the contemporary employment relationship? The concept of psychological contract Introductions There are two kinds of contracts which are the formal, written economic contract as well as the euqally important, informal and unwritten psychological contract. It’s all about how people think they should be treated. Both involve rights, obligations and expectations on the part of employer and the employee. The key feature of the word ‘contracts’ is exchange in term of reward or the effort that employee puts in etc. For instance, the level of effort which employee puts in or employee’s perception can be affected by how they are being treated by the organization. A quite large research literature on the psychological contract has been produced in only a short time with the ke y players being, in the United States, Denise Rousseau (Rousseau, 1995, 2001), Schein (1980) etc. Although much of the interest in the psychological contract is recent, its roots go back a long time, it having originally been discussed by Argyris (1960). History The concept of a â€Å"psychological contract† was first coined by Argyris (1960); it refers to employer and employee expectations of the employment relationship as well as represents the mutual beliefs, perceptions and informal obligations between an employer and an employee. Expanding the concept of the contract was Schein (1980). According to Schien it may be defined as an†Ãƒ ¢Ã¢â€š ¬Ã‚ ¦unwritten set of expectations operating at all times between every member of an organization and the various managers and others in that organization.† More recently Rousseau and her co- workers (Robinson and Rousseau, 1994) have suggested a more specific definition of the psychological contract. According to them, the psychological contract is characterised not only by expectations, but by promissory and reciprocal obligations. When these obligations are broken, they produce more emotional and extreme reactions than weaker expectations produce feelings of disappointment. Broken obligations lead to feelings of anger and reassessment of the individual’s relationships with the organization. Content The term psychology is derived from the Greek, meaning ‘mind, spirit or soul’ and contract is that the expectations concern non- tangible, psychological issues. There are significant elements of all definitions of the psychological contract include: 1.3.1 integration of beliefs, values, expectations and aspirations of employer and employee, the beliefs of implicit promises and obligations are included, the level to which these are perceived to be met or violated and the level of trust within the relationship. 1.3.2 All the expectations must not be made explicit. It could be the implici t deal between employers and employees. Fairness and good faith are involved. 1.3.3 An significant feacture of the concept is it can be repeatedly re-negotiated, changing with an individual’s, and an organisation’s, expectations, and in shifting economic and social contexts. Yet, a snapshot of one point in time was only provided thus capturing only one stage in this social process. 1.3.4 Because it is based on individual perceptions individuals in the same organisation or job may perceive different psychological contracts, which will, in turn, influence the ways in which they perceive organisational events for instance redundancies or developing or modifying a flexitime system.