Importance of Psychological Contract (PC) in the Workplace
Furloughs, lay-off, redundancies, and chapter 11 are often heard words due to the current pandemic and it is the need of the hour to understand, evaluate and communicate the “Psychological Contracts” to avoid disappointments, misunderstanding, and disputes between employers and employees.
As Armstrong (2014) very briefly defined PC is a “set of unwritten expectations that exist between individual employees and their employers”, and this includes informal arrangements, perceptions, assumptions, mutual trust, and invisible implicit feelings.
Figure 1 (Source: Hirstein, 2012)
Why is it Important?
Guest et al (1996, as cited by Armstrong, 2014) mention that PC is connected to higher employee commitment, employee satisfaction, and better employment relation, therefore it is better and worth considering it seriously. A Psychological Contract has far more influence in a workplace than a written employment contract, determining how an employee performs and conducts in a workplace (Enright, 2021).
Figure 2: Employment Vs Psychological Contract (Source: Bubble, 2021)
According to the study conducted by Clerq et al (2021), they mention that employees get demotivated, distressed and tired when they get angry due to broken promises by their employers, and further, they suggest that especially supervisory managers along with Human Resource Department, must do their best to avoid adverse feelings with their employees.
Likewise, in a study conducted by Du and Liu (2020), they conclude the findings that a positive Psychological Contract has a better relationship with the employer and organization as it promotes a sense of belonging and may encourage them to regard themselves as internal members and make them more integrated into the Organization and helps to create a pleasant workplace.
To develop a positive PC at the workplace, Armstrong (2014) has suggested the steps of stating the expectations, inform and agree to the expectations, the culture of transparency and treating the employees as participants.
Google and Psychological Contract
Conclusion
More than a written Employment Contract which is seldom used after commencement of employment, it is of utmost importance for organizations to understand and maintain a positive Psychological Contract for the betterment of the employees and the organization, especially at a difficult time such as the current pandemic. The studies have proved that a positive phycological contract will lead to a pleasant workplace with high employee commitments, satisfactions, and relations, thereby leading to competitive advantage, driven by employees from resource-based view theory.
References
Armstrong, M., 2014. Armstrong’s Handbook of
Human Resource Management. 13th ed. London: Kogan Page.
Bubble, S.,
2021. Psychological Contract PowerPoint Template. [Online]
Available at: https://www.sketchbubble.com/en/presentation-psychological-contract.html
[Accessed 23 July 2021].
Clerq, D. D., Azeem, M. U. & Haq, I. U., 2021. But they promised! How psychological contracts influence the impact of felt violations on job-related anxiety and performance. Personnel Review, 50(2), pp. 648-666.
D'Onfro, J.,
2015. How Google’s culture of transparency helps it prevent
‘backstabbing’. [Online]
Available at: https://www.businessinsider.com.au/google-culture-of-transparency-2015-4
[Accessed 25 July 2021].
Du, Y. &
Liu, H., 2020. Analysis of the Influence of Psychological Contract on Employee
Safety Behaviors against COVID-19. International Journal of Environmental
Research and Public Health, 17(18).
Enright, J.,
2021. What is the psychological contract?. [Online]
Available at: https://www.charliehr.com/blog/what-is-the-psychological-contract/
[Accessed 23 July 2021].
Hirstein, W., 2012. Mindmelding:
two brains, one consciousness?. [Online]
Available at: https://blog.oup.com/2012/04/mindmelding-hirstein-brain-thinking/
[Accessed 25 July 2021].
Rasberry, T.
M., 2021. The Role of Psychological Contracts in the Employer-Employee. [Online]
Available at: https://www.ukg.com/resources/role-psychological-contracts-employer-employee-relationship.pdf
[Accessed 23 July 2021].
Agreed Fayaz. The quality of the psychological contract heavily influences how employees behave from day to day. When workers perceive that the contributions they make to the organisation and what they receive back from the employer are balanced, there can be positive outcomes. The psychological contract recognizes the responsibilities from both parties in terms of behaviour and communication. And taking a moment to remind ourselves of its importance, and the potential impact when it's broken, will support commitment and productivity levels long term.
ReplyDeleteVery interesting Article Fayaz. Since both employee and the employer have separate responsibilities to guard against potential breaches, psychological contract is the responsibility of both. Thankyou for sharing.
ReplyDeleteVery interesting article Fayaz. According to Rousseau and McLean Parks (1993), psychological contract is important to reduce uncertainly in social relation, define the role of organization and employees, and decentralize power relationships. Psychological contract is very important for organizations, which play an important role to improve human capital management in workplace. It also can raise productivity and focus better on performance and skills of workforce to gain the competitive advantages. You have nicely explained the topic by taking Google company as an example. Thanks for sharing.
ReplyDeleteHello, Fayaz. You've chosen an excellent topic. The importance of a positive psychological contract at work cannot be overstated. Humans are not robots; they contain millions of nerves that are inextricably linked to the brain. It will allow a person with a restricted ability for effective feeling to engage in a task. Some tasks are really necessary to keep going for a long time. You used Google as an example. They foster an open company culture in order to demonstrate that they trust and empower their staff.
ReplyDeleteAll the best.
Hi Fayaz, You have gathered the details very nicely! The psychological contract is the responsibility of both the employee and the employer. Both have separate responsibilities to guard against potential breaches. For the employer, it’s about making sure not to give the wrong perception to an employee and to make sure promises are upheld. For the employee, it’s about managing their expectations so that difficult situations or adverse personal circumstances aren’t seen as negatively impacting productivity and aren’t seen as a worker “acting out”.
ReplyDeleteAgreed with you Fayaz. The psychological contract ensures a strong relationship between the employees and employer which makes the employee committed to his duty. A healthy or positive psychological contract is a continuous image of the employment relationship that involves the ongoing management and adjustment of beliefs and commitments on both sides.
ReplyDeleteVery interesting reading Fayaz. PC plays a vital role for organization success. Because as you mentioned trustworthiness, transparent are qualitative variables which we can't measure in a correct manner and these are highly subjective. To perform on the job, PC is very much important. It will impact to the LTO as well. If there is a lack of trustworthiness, transparent, then employees are trying to leave or not focus on KPIs.
ReplyDeleteThe psychological contract is an important agreement between employees and employers. Psychological contract has been built and developed base on the communication between the parties. A good communication will make the parties understand each other expectations, obligations and promises, from that the organization can manage people better and effort them to improve the skills and knowledge of people at work which can increase productivity, performances and gain competitive advantages. Individual psychological contracts allow the employee to see the quality of their role in the organization. Psychological contract is very important for the business, which plays an important role to improve human capital management in workplace.
ReplyDeleteSatisfaction, Motivation, Happiness...etc. all these are emotion created from our psychology. These positive emotions lead the people to act loyally and efficiently. So it is important to maintain good psychological contract with employees for the betterment of both organizations and employees as you explained in the article. Good job Fayaz.
ReplyDeleteVery interesting article Fayaz,People do not always agree, but negotiations are very important in business. Promoting mutual respect helps improve communication and reduces conflicts and stress in the workplace. Reducing a minimum of work and promoting respect helps to build mental security
ReplyDeleteThe psychological contract is a vital contract between workers and employers. A psychological contract is based on the parties' communication. People may be managed better, and their skills and knowledge improved at work if they communicate well. An employee's position in the company may be assessed psychologically. Psychological contract is vital for company, as it helps to enhance human resource management. You have explained it very well with suitable examples like Google in your post Fayaz.
ReplyDeleteBy establishing a set of mutually agreed-upon ground principles, the psychological contract is utilized to preserve a favorable employee-employer relationship. It emphasizes the ‘human side' of a professional relationship over the purely commercial or transactional side. The following procedures, however, must be completed to build a positive psychological contract. 1) Define expectations throughout the recruitment process; 2) Communicate with both the employer and the employee 3) Adopt a policy of transparency about corporate policies and procedures; and 4) respect employees as stakeholders.
ReplyDeleteIndeed. Phycological contracts allow the employees to see their values and their position inside the business by themselves. It also acts as a self satisfaction for the employees and also as fact for the motivation as well. However, some articles reviews that, there may be some disadvantages come out of these contract. For example, since the insights of the employees are not directly communicated to the higher authorities, there may be instances that the worker leave the organization due to dissatisfaction in worst case scenario. Good write-up
ReplyDeleteIndividual psychological contracts help employees to understand their worth and position in the company. It also ensures that neither party has unreasonable expectations of the other. It also allows for amending the contract conditions if necessary, which is accomplished through constant communication. thanks Fayaz for sharing.
ReplyDelete