Psychological Contract

The primary purpose of this assignment is to judge whether the United Kingdom economic recession is potentially damaging to the psychological contract. Consideration should be placed on whether there are any changes or if at all no impact on psychological contract at my work place and to also check if there was any fallout, if at all to employment relationship. Also, this document will be looking at the role played by psychological contract on employees’ motivation and whether organisations see the importance of the concept.

Finally, how can enabling good employee relations lead to increase workers effort thereby increasing overall organisational performance to achieve their strategic goals. “Psychological contract is the beliefs of each of the parties involved in the employment relationship about what the individual offers employee might be willing to offer. For example, an individual employee might be willing to offer loyalty to the organisation and in return experts to get security of employment.

Unlike the employment contract , the psychological contract is largely not written down and changes over time as new expectations emerges about what employees should offer and what they can expect to get back in return. Some commentators suggest that the psychological contract is undergoing a fundamental transformation because of the increasing need for flexibility and adaptability in conditions of intense competition. In particular, it is suggested that the employee should be willing to offer commitment and high performance to the organisation and expect to receive individual development in return.

” Heery E. and Noon M. (2001) Appraisal of the role of the psychological contract in individual motivation Psychological contract is divided into two elements of which include transactional and relational parts. Even though to most people psychological contact is seen largely to be an unwritten concept, but some part of it is written such as the transactional element demonstrate. The transactional element is mainly concern with economic factors; it is close ended, static, narrowly scoped and well defined formal written contract.

The relational element is concerned essentially with employee’s emotion wellbeing, it is open ended, dynamic, frequently changing, broad based, pervasive and highly subjective. The relational element is centre around a long term relationship based on trust, loyalty and mutual respect. Employees’ are expected to offers loyalty, conform to organisation requirements, trust in their employer not to abuse their goodwill and above all committed to their employer’s goals. In return, employers are generally expected to provide security of employment, promotion prospects, training and offer some form of flexibility for employees’ personal needs.

However, due to the encroachment of globalisation over the last decade, it has become increasingly difficult for employers to sustain some of the relational element mentioned above. Also, the multiple recessions that as taken place in united kingdom since the eighties has led to incessant restructuring by organisations, thus ensuring job security, training and general employee welfare issues more difficult to sustain, it is this aspect of the psychological contract which is proving difficult to manage.

Over the two years at my workplace (Waltham forest), there has been a lot of restructuring and reorganization due to the recession, but the rate of head count cut has been intensified over the last six months due the coalition government pronouncements about cutting local government budget. Employees within the council are now getting anxious and demoralise at the prospect of either their job being lost or downgraded. Adams equity theory, argues that employees will be not be demotivated if at all not motivated if they accept they are fairly treated in the workplace.

The theory is founded on the insight that perception and feelings of fairness are based on the principle of comparison. In a nutshell employees will evaluate their treatment in relation to a reference group. It differs slightly from other motivational theory, in that it not only looks at pay and conditions but also reward in comparison to colleagues rewards doing similar tasks. Beardwell, J. and Claydon, T. (2007) According to Maslow’s hierarchy of needs theory, he argues that individuals will function most effectively when their needs are met.

It is now fully understood by especially western organisations that having a robust working relationship with employees and applying high commitment approach to workforce is crucial for raising motivation levels and ensuring greater commitment of workforce to achieve organisational goals. Maslow’s theory argues that individuals crave five basic levels of needs, such as physiological, safety, social, esteem and self actualization. The lower order of deficiency needs 1 to 3 have to be met before the higher order growth needs 4 and 5 can be satisfied.

As each level of needs is satisfied, so the next level becomes even more important to individual. This means employers must seek to meet most needs of their employees if they want optimum performance. Whilst most organisations are able to satisfy the deficiency needs, it is far more difficult to satisfy the growth needs. The high performance work practices could well be put to good use especially to satisfy individuals’ growth needs.

Techniques such as team working, functional flexibility, empowerment, employee development, appraisal, counseling and performance-related pay would certainly go a long way to enhancing workers motivation, which in reality would generate a positive psychological contract. Thomson R. (2004) Herzberg’s two-factor theory proposes that there are two set of factors that impact upon employee feeling of satisfaction at work. The first set called the hygiene factors is concern with employees need for fair treatment in compensation, supervision and working condition.

If these issues are not met, employees would feel dissatisfied. Even if employers were able to attain the hygiene factor, it might not necessarily lead to job satisfaction. The second set of needs regarded to as motivating factor, such as personal growth and development in the job must be met for employees to experience job satisfaction. In a nutshell the theory states that the key to motivating employees lies in job design and enrichment. Employees are more satisfied if their job allows for high level of achievement, recognition, opportunities for advancement and clear responsibility (Autonomy).

Thomson R. (2004) According to Latham and Locke goal setting theory, managers would do well to set clear practical goals in order to effectively manage and motivate employees. It is observe that most managers are unable to change people’s personality and the most they could do is to use incentives to channel employees’ energies toward the goals of the organisation. There is empirical evidence to suggest that organisations that routinely set their workforce specific and challenging goals generally outperforms those that set vague or relatively easy goals to achieve.

Although monetary reward is a major part of workers incentive, it is stated that workers participation in decision making, job enrichment and employee learning development goes a long way to increasing workers effort thereby positively impacting on organisation’s performance. It is important that workers have both goal commitment and efficacy in order for exert effort required for goal attainment and thus responding positively toward organisational goals. Pinnington A. and Edwards T. (2000)

According to Rousseau and others, the psychological contract is based on the concept of an exchange of benefits and rewards. Rousseau defines the psychological contract as “an individual’s beliefs, shaped by the organisation regarding terms of an exchange agreement between …

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