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Psychological Contract (Breach and Violation (Reasons (Divergent…
Psychological Contract
Definition
- Beliefs that individuals hold regarding promises made, accepted and relied upon between themselves and the organisation -> reciprocal exchange
- Fills the gaps in the employment contract: only regulates hard facts of working together (pay, hours, holiday) but not how people work together
- Need not to be formally agreed on (not necessarily written down)
Kidder & Buchholtz (2002)
- Transactional contract: focus is short-term and economic/monetary exchange -> quid-pro-quo, impersonal
- Relational contract: focus is open-ended and on social exchange (both parties make investments in anticipation of a gain in the future)
-> blurred boundaries between the two types
Outcomes (Guest & Clinton, 2010) Fulfillment leads to lower anxiety, depression, intention to quit; higher self-efficacy, job satisfaction, org. commitment
Breach and Violation
Reasons
Divergent interpretations different perceptions f the meaning of the contract due to misunderstanding or lack of communication
Inability to fulfil employer had the intention to fulfil but was not able to because of external circumstances (e.g. economic crisis)
Reneging a) Opportunism (promising things you cannot keep) b) Negligence (don't care about fulfilment of promises)
Sources
Systems e.g. changing compensation criteria, inconsistent application of career paths, training of skills that are not job-related
Contract makers e.g. recruiters that are not familiar with the actual job and overpromise, co-workers who fail to provide support, managers who say one thing but do another
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Definition Breach: one party perceives another to have failed to fulfil promised obligations (Robinson & Rousseau, 1994)
Changing the contract
Accommodation
- org seeks to modify/clarify the existing contract through isolated, incremental changes (e.g. regular pay increase to PRP)
- works if there is no need for rapid change and no rapid changing environment/circumstances
Transformation
- right solution if there are major changes to be made in a relatively short period of time
- you have to make the changes but make clear that there is no alternative
Tours of Duty (Hoffman, Casnocha & Yeh, 2013)
- Argues that psy. contract must be built around the concept of employability, because you cannot guarantee permanent employment anymore in times of rapid change and instability
- Companies provided training, advancement, and an unspoken guarantee of employment, while employees provided loyalty, effort and a moderation of wage demands
-> both try to add value to each other; employer invests in employability, employee invests in adaptability
1) Hiring employees for a defined "tour of duty": guarantee 2-4 years to build a reciprocal exchange and provide people with all necessary resources to build employability
-> clearly define mutual benefits and obligations
2) Encourage employees building professional networks outside the firm: maintain relationships and enhance skills by e.g. attending conferences to increase employability
-> make an employees' network a priority in hiring
3) Develop active alumni-networks: keep in contact and encourage involvement with the firm to maintain a chance of re-employment -> use exit-interviews to establish long-term relationships
Implications
- In times of less security and decreasing union power, the psychological contract is an important means to fill the gaps in the transactional contract (Guest, 1998)
- Can partly resolve the power issues between underrepresented employees and monolithic organisations because it makes it more difficult for organisations to renege the transactional contract (Guest, 1998)
- Important to recognise the changes in the workforce (more qualified, knowledge worker) for the constitution of the psychological contract (Guest, 2008)
- Old contract: Loyalty and effort in exchange for job security and career advancement (promotion for performance)
- New contract: organisations cannot guarantee job security anymore -> performance in exchange for relevant training and development to secure employability
Formation
4 Phases (Rousseau, 2001)
- Pre-employment: professional norms and societal beliefs
- Recruitment process: promises are exchanged, messages and actions evaluated in this regard
- Post-entry: contract is adapted through experiences in e.g. socialisation
- Ongoing process of exchanges: experiences and promises are incorporated in contract
Different factors on different levels involved (Guest & Clinton, 2010)
- Societal /marco level: Cultural norms and values about what constitutes obligations and violations
- Organisational/meso level: signals provided by HR policies
- Individual/micro level: career strategy, personal values, experiences from previous employment
Perceptions of Fulfillment
and Obligations
(Guest, 2004)
Do employers fulfil the contract?
- Individual level: some indication that those with heavier domestic responsibilities report lower fulfilment
- Work level: higher number of HR practices -> broader contract but also greater fulfillment
- Sectoral level: higher fulfilment in private sector in general
- National level: Germans -> very positive but narrow; UK -> broader but less fulfilled
Do workers meet their obligations?
- Individual level: older workers and women more likely to report that they fulfil their obligations
- Work level: higher number of HR practices -> higher fulfilment of obligations
- National level: Germans -> higher fulfilment, Sweden -> lower fulfillment
Employer's view
- average number of promises made to permanent staff: 11.5 out of 15 listed
- typical employers has boradly positive view of their fulfilment (3.9 out of 5) and of their workers meeting obligations (3.7 out of 5)
- temporary workforce associated with ferwe promises made to perm/temp, but more fulfillment
Issues with the concept (Guest, 1998)
- Questions regarding content validity: Different definitions that show that the contract is formed of e.g. expectations, promises, obligations etc. -> It has to be clearly specified of what the contract consists because there is a huge difference in failure to meet obligations and failure to meet expectations
- Questions regarding construct validity: Legal contracts can only be changed with the consent of both parties but the psychological contract is rarely a document between equal forces -> not a legal methaphor; not clear who is the second party of the contract: supervisor? Organisation? (Agency problem); not clear how the presence of a psy. contract is established
-Questions regarding concept redundancy: The emphasis on employee perceptions of the psychological contract raises questions whether the evaluation of the state of the contract really differs from job satisfaction and org. commitment
Implications for HRM (Guest, 2008)
-Idea: Psychological contract as source of competitive advantage -> gains for the organisation through improved performance and retention due to job satisfaction, higher commitment and greater autonomy -> connected to high-road approach to HRM
- Psychological contract as possible explanation for the “Black Box” between HRM and performance -> deal between employer and employee to ensure the achievement of both, individual and organisational aims
- Important to recognise the changes in the workforce (more qualified, knowledge worker) for the constitution of the psychological contract
- Evidence confirms that greater use of HR practices is associated with greater number of promises in the psychological contract, but also greater fulfilment and better levels of perceived fairness and trust in management -> HR as important actor for the employment relationship and the psychological contract