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HUMAN RESOURCE (HR) ASSIGNMENT SAMPLE
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TABLE OF CONTENTS

1. Introduction.....................................................................................2

2. Phases in Psychological contract......................................................3

3. Consequences of broken psychological contract...............................4

4. How the psychological contract came into existence?......................4

5. Measurement of psychological contract............................................5

6. Bridging the Employee-employer Relationship..................................5

7. Impact of psychological contract.......................................................7

8. Conclusion.........................................................................................8

9. References.........................................................................................9

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1. Introduction: Psychological contract and the organizations

“Psychological Contract” has become increasingly significant feature of workplace relations
and deeper human behaviour. It was first used in early 1960s but gained momentum after
the economic downturn which occurred in early 1990s. It is defined as the perceptions of
two parties, employee and employer and their mutual obligations towards each other. These
obligations can be informal and imprecise. They can be inferred from the actions and from
things that have happened in past, or from statements of the employer .Some of these
obligations can be taken as 'promises' and „expectations‟. The more significant thing is that
they are considered by an employee as a part of a employer- employee relationship.
Therefore, psychological contracts are defined as the philosophy which the individuals hold
about the terms & conditions of exchange contract between them and their business groups.
Primarily, Psychological Contract is the relationship involving an employer and employees,
and distinctively concern joint expectations of inputs and outputs. This mentions the
employees‟ views in relation to what they look forward to from the establishment and also
what they owe to the organization. (Cullinane, 2006)

Psychological contract is completely different from a legal contract .The latter in many
cases, offers only limited representation of an employment relationship. On the other hand,
psychological contract takes the reality of situation as it is perceived by the two parties.
Hence, psychological contract is far more influential than a formal contract. It is this
psychological contract which efficiently tells employees what they should do to meet their
bargain and also, what to expect from their respective jobs.

Simply, Psychological Contract balance between:

 In what way, the employee is being treated by employer, and
 What employee put into his job for the organization

At the core, Psychological Contract is a philosophy and not a method, tool or formula. This
reflects its significant and ever-changing dynamic nature. The method in which we define,
understand and manage Psychological Contract, and apply the underpinning philosophy in
our dealings - inside or outside the work - in essence defines our civilized outlook. Fairness,




Compassion, trust, respect, empathy, virtues like these exemplify the true meaning of
Psychological Contract. (Ven, 2009)

2. Phases in Psychological contract

Early phase

As the psychological contracts deals with the employee‟s beliefs about mutual obligations
amid themselves and employers, it can be viewed as the grounding of employee-employer
relationships . Basically, individuals generally shape their outlook from two major sources
which includes their communications with their organisational representatives and
perceptions of organisation‟s culture. In the “anticipatory socialisation,” at the time of
recruitment, organisational recruiters and human resource professionals make detailed
promises to workforce about what could be expected from a organisation Secondly,
employees‟ perceptions of organisation‟s culture and the standard functional procedures
shape the employees‟ viewpoint as regards to psychological contracts. Recruitment and
early years at the organizations shape the psychological contract of the employees.
(DelCampo, 2007)

Development

In first four to six months after becoming the part of organisation, the simple psychological
contract is brought to reality. According to a study, newcomers generally have an
exceedingly positive view about the labour- employee relationship. Their preliminary
perceptions could be characterised by tall expectations towards their employer and lesser
expectations from themselves. As new employees gain more and more experience with the
organisation, they try get used to the environment and they settle their expectations close
to reality.

Dimensions

Specific promises which are made by both the parties on commonly accepted promises
based on the common obligations of employees and employers formed the basis
psychological contract. Though, even if the organization has not made definite promises,
every member of staff will welcome fairness, clarity, and good communication. On the other




hand, every employer appreciates employees doing good work and dealing with confidential
data properly. In addition these common obligations, psychological contract are further
augmented with the written agreements which include employment contracts.

There are number of things which affect the psychological contract in an organization.
Firstly, the degree to which organization take on people management practices directly
impact the psychological contract. Secondly this contract is based on workforce/ employee
sense of trust and fairness and also on their conviction that the employer is honouring the
contract between them. Hence the business organizations where psychological contract is
positive, better employee commitment and satisfaction is there which have a positive
impact on business. (Anon, 2010)

3. Consequences of broken psychological contract

In all cases this psychological contract must be respected and if it gets broken then it could
impact:

 job satisfaction
 commitment of an employee
 Employee engagement.

Hence the manger should understand that employment relationships between employer and
employee may deteriorate in spite of the management‟s best efforts. Hence it is better to
prevent the breach than to repair the damage afterwards. In cases in which, breach can‟t be
avoided it is better to negotiate.

4. How the psychological contract came into existence?

Changes in workplace are majorly responsible for it. These include:

 More employees doing part-time work.
 Organisations downsizing coupled with delivering
 Technology, markets and products changing constantly.
 Finance and technology becoming less worth-while than human resources
 More fluid organizational structures




The outcome of all these changes is that employees are widely recognized as main business
drivers. The ability of businesses to add value lies on front-line employees or 'human
capital'. Organizations who wish to be successful have to get most out of this resource. In
order to achieve this, organizations have to know what employees expect from the
organization and their work. The psychological contract presents a framework for monitoring
employee priorities on these dimensions which tends to influence the performance.
(Coyle,2007)

The traditional meaning of the psychological contract is described as commitment by the
employee in lieu of job security offered by the employer. The continuing and increasing
impact of globalization have destroyed the basis of traditional deal as the job security is no
more there. The new deal is set on an offer of its fair pay and also on treatment by the
organization plus the opportunities based on training and development.

5. Measurement of psychological contract

A psychological contract could be measured by one of the following methods:

1. Psychological Contract Inventory – these are the scales for the measurement of
Short term psychological contract. (This is basically a type of the transactional contract),
Security (type of the Balanced contract), performance requirements contract (this is a type
of balanced contract), Loyalty contract (this is a type of relational contract), Career
Development (internal and external) (This also is a part of the balanced contract),
(Rousseau, 2000; vers.3).

2. M_DOQ 10 i.e. MAJER_D'AMATO ORGANIZATIONALQUESTIONNAIRE 10 – This is
a test which takes into account 10 factors to get an idea about the employee‟s perception of
the organization. These 10 factors include satisfaction. Development, Team, Autonomy, Job
description, Communication, Job involvement, Reward, Fairness, Leadership, Innovation;

3. Quality System (ISO9000:2001) provides a scale to quantify the satisfaction of the
employees in a particular organization. The satisfaction level is calculated by a scale which
has 6 dimensions that includes relation with others, general satisfaction, organisational and
environmental features, training satisfaction, equipments available, professional role). After




this survey the coordinator also interview the employees on perception. After the analysis,
all the data is given to a group and ultimately conclusions are validated by employees
themselves as well by the coordinators.

6. Bridging the Employee-employer Relationship

Every organization has some responsibilities towards its employees. If the organization fulfil
these promises then it could lead to huge amount of employee satisfaction .Below are the
some of the promises made by the contemporary organization to its employees:

1) Development of Career - Organizations should give all the possible opportunities to
the employees for their development within the organizations. Their efforts should be
recognized and there should be ample opportunities for the promotion.

2) Good Job Profile - The job offered by the organization should be challenging and
interesting. Job should not be monotonous and employee should be given continuous
challenges to preserve their interest in the job.

3) Good work Culture – The organization should offer an environment with the good
working environment. There should be good communication and cooperation within a group

4) Good Compensation – employees of the organization should be offered an appropriate
compensation according the jobs they do. Incentives should be given for high
achievements.

5) Work and private life Balance- there should be proper understanding of the personal
situation of an employee and in some situations flexibility in working hours could be
provided. (Lars, 1996)

Psychological contract in contemporary organization is a two –way role. Following are the
kind of commitments which could help in bridging the employee- employer psychological
contract:




Employees Employer
Hard Work Compensation in accordance with
performance
Upholding the company reputation good training and development
Punctuality Opportunities and promotion
Loyal Recognition
Flexible An attractive package
Honest job security
Innovative safe environment

According to a research while organizations have de-layered and reduced the number of the
middle management posts many still continue to offer good careers and therefore most
employees have adjusted the expectations o downwards. Many of them will be increasingly
satisfied if they believe and know that their organizations are handling issues about their
promotion fairly.

The recession had increasingly negative impact on the employee attitudes, especially with
regard to job satisfaction and security. This suggests, managers will have to face great
challenge to restore and maintain employee‟s commitment as corporate emerge from the
recession. A positive psychological contract can greatly help as it supports a high level of
employee involvement. However this concept of involvement goes beyond the employees‟
attitudes and assets the need for managers to draw out the employees' behaviour.

Managers should manage expectations, through the fair systems of performance
management which accounts for regular employee appraisals. Good HR practices
communicate important messages about what the organisation seeks to offer .Employee
attitude surveys are effective tool for exploring what employees think and feel about the
organization on a range of issues affecting them at the workplace. In times of rapid changes
senior executives and employees hold different opinions. Two-way communication, formal
or informal, is important to form a reality check and act as a basis for building the mutual
trust. (Guerrero, 2005)




7. Impact of psychological contract

The psychological contract may have the following implications

 Fairness of Process: employees want to identify and understand that their welfare
will be taken care when vital decisions are made. They would like respect and
consequently they are more contented with their jobs.
 Communications: an efficient two-way conversation between employer and
employees is a compulsory means of giving importance to employee‟s „voice‟.
 Management style: organisations managers can no longer manage business 'top
down' - they actually have to take up „bottom up' approach. Critical information is
known by employees from their communications with customers and suppliers.
 Expectations managing: organizations need to make apparent to what the
employees can expect from their job. Managing expectations is particularly
necessary when bad news is probable.
 Measuring attitudes: organizations should monitor employee attitudes on regular
basis as it is a means to identifying where action is needed to improve the
performance.

Therefore, Breach of this psychological contract can critically spoil the employee-employer
relationship. It is not always possible to avoid a breach but damage is contained if
managers and senior executives are open with the employees about the issues which need
to be addressed.(Mao, 2008)

8. Conclusion

Public attention to psychological contract has been infused by uncertainties about job
security. Organization should make certain that trust and faith remains with the workforce
i.e. clarifying what is on the offer, honouring commitments, or if required explaining what
has gone wrong, and monitoring the employee attitudes on a habitual basis. Employee
engagement strategy can make available a useful structure for this point. (Feldman, 1999)




The psychological contract does not provide a comprehensive model of employee/ workforce
associations but it offer key clues about how to uphold employee commitment. Amid the
decline in collective bargaining more attention is focused on dealings between the
organisation and the employee. The psychological contract reinforces the need for the
managers to turn out to be more efficient in communication and the consultation, which
helps in adjusting potential and if required renegotiating the contract.

The psychological contract offers a realistic foundation for 'soft HRM' or behaving as a
superior employer. It offer a viewpoint based on insight from the psychology and also from
the organisational behaviour rather than economics. It emphasises that the employment is
a association in which the joint obligations of the employer and employees may be vague
but have nonetheless to be respected. The cost of failing to fulfil or handle expectations may
cause serious damage to the relations and to the organisation. (Thomas, 2001)

9. References

1. Coyle, S. (2007). The employee-organization relationship: where do we go from
here? Human Resource Management Review. Vol 17, No 2, June. pp166-179.

2. Cullinane, N. (2006). The psychological contract: a critical review. International
Journal of Management Reviews. Vol 8, No 2, June. pp113-129.

3. Ven, C. (2009). The Psychological Contract; a big deal? Accessed on 14th August
2010 from: http://www.internationalmta.org/Documents/2004/2004024P.pdf

4. DelCampo, R. (2007) "Understanding the psychological contract: a direction for the
future", Management Research News, Vol. 30 Iss: 6, pp.432 – 440.

5. Anon, (2010). The psychological contract. Accessed on 12th August 2010 from:

http://www.cipd.co.uk/subjects/empreltns/psycntrct/psycontr.htm

6. Lars, K. (1996). Organizational employment versus self-employment. Accessed on
11th August 2010 from : http://www.allbusiness.com/human-resources/594122-1.html




7. Guerrero, S. (2005). Measurement of the Psychological Contract in a French Work
Context. Accessed on 14th August 2010 from:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1635325

8. Mao, H. (2008). Evading Tactics of Psychological Contract Violations. Accessed on
12th August 2010 from:
http://www.ccsenet.org/journal/index.php/ass/article/viewFile/784/758

9. Feldman, D. (1999). The impact of psychological contract violations on exit, voice,
loyalty, and neglect. Accessed on 11th August 2010 from:
http://www.accessmylibrary.com/article-1G1-55438376/impact-psychological-contract-
violations.html

10. Thomas, B. (2001). An Investigation Of The Relational Component Of The
Psychological Contract Across Time, Generation, And Employment Status. Accessed on 11th
August 2010 from : http://www.accessmylibrary.com/article-1G1-74942455/investigation-
relational-component-psychological.html


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