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The Psychological Contract

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Lots of peer pressure as well as pressure from the surrounding environment have begun playing a significant role in the lives of the workers. Hence there exists a contract called the psychological contract. The contract states the various expectations that the different employees have regarding the kind of roles that they play in the company and what the employers are ready to pay them in return for their services. In the contract for employment, you will see that certain terms as well as conditions have been laid out concerning employment of the people. There are also certain arrangements made for getting the salary, you will also find the presence of certain rules which are there to govern the relationship between the concerned parties. Through the aid of the psychological contract, different broader objectives are meant to be achieved, regarding what the employee or employer thinks about gaining from the relationship. The contract in itself is not strictly a document which has been penned down. It has its existence only in the head of the different people. The different researchers have however tried to pin point its features and know about the extent to which people would notice the changes that has been made to the contract over the years.

People are often found to be in disagreement regarding the extent to which the contract has changed over the years. However people definitely agree that the phenomenon of change has indeed occurred. There exists a thought that the older contract which the employees have been following over the years, have got exceeded by newer contracts which are more based upon the requirements of the environment existing in business of the present times. From the point of view of the different employees, the old contract can be defined as:

I will be working quite hard and would always remain loyal to the employer. In return of these services I would like to remain as an employee of the company, only if I have not indulged in acts which harmed the interests of the whole company. I should be provided with ample opportunities for my personal development and get the deserved promotions too.

In contrast to this statement, the new contract goes as:

I as an employee would be bringing in a lot of my own work as well as degree of creativity. In return for this service, I wish to get a remuneration which is fitting to the efforts given as well as my worth in the market. The relationship existing between the company and employees can be short term in nature. However I will stay on till the time I keep on getting different opportunities for developing myself, getting promotions and hence build a great career.

The change from the old view to the new one ensures that the different employers are not provided with ample amount of job security. Different employees are always provided with opportunity for developing themselves in return to this it is expected of them to give their employer some breathing space and flexibility. Hence the perception that people have regarding the relationship existing over the two sides is quite different from each other. The entire process of moving from the old contract to the new one is actually problem causing and the managers have to open breach those deals which had already been sealed. Hence this in turn is bound to cause some degree of dissatisfaction among the various employees. As a result of this, these people would collect together and form the unions.

The question which you need to keep asking, is that the amount of change that has occurred. You need to know whether the olden contract is slowly on the decline and is being swiftly replaced by the new one. There may also be some exaggeration regarding its end and hence cause some confusion in the market.

Lots of disagreements have occurred when it came to this particular issue. There have been many changes in different industries and it concerned with reduction in the loyalty of the different employees. As an example, you can see the case of Coyle-Shapiro and Kessler in the year 2002. Various surveys have also been conducted by order of the CIPD. Not too many changes can also be observed by the state of the contract. The perception that exists commonly is that more people are accustomed to the new release rather than being using the old one. However it is very far away from the truth. You cannot reach too many conclusions as to why the differences if at all existed. For most of the people the previous contract will always be deemed as important. However there are some people doing their jobs have to adapt to the changes in the new laws. There are also incidents when the company has thought of making a quick move from the old to the new and use it accordingly. The problem has arisen, when the employees did not choose to follow the footsteps of the company. Lots of methods have been developed for improving their competitive streak. It is a fact the condition proposed by Atkinson in the year 2003, is that the difference in opinion that people have on the same issue occurs due to the fact that they make use of different methods involving same principle used to get the job done. The companies which are really big in nature have always sent out questionnaires to the employees and asked to fill them up. This document has over the years reported almost null changes in the psychological contracts. In the small scale businesses, the data has been collected and is based on what the senior HRM managers had to say. There can be questions like how much


Large-scale studies which involve sending questionnaires to employees have tended to

Report little change in the state of the psychological contract, while smaller-scale

Studies are based on interviews with managers which the trade union officials tend to report

The opposite of you need to understand the way to characterize the psychological contract existing at a particular workplace of a man. You have to find out how much it differs from the one present in the preceding jobs of yours.

Best practice v. best fit

The existing debate between best practice and best fit is a rather interesting as well as significant one. The consequences of this can be seen all over the HRM sector. Other than being an issue that the managers have to deal with, it is something that the academics debate on too. At the basic level, people try to find out whether there exists a way to continue with various HR activities which can be accepted all over the world. This debate has actually grown out to be one happening between two different schools of thought process. During the course of practicing a particular chain of thoughts, you will see it is possible to take a stand and check out the validity in the most basic of positions.

The people who adhere to best practice, have an argument that there exists certain practices of the HR department where this kind of operation, will aid a company in achieving some sort of position of advantage for the company. As you can see, there exists a great link between the activities of the HR department and the performance of a business house. The effect of this relationship will become maximized if proper HRM policies are followed. In the present times, you will see the publication of lots of evidences using various methods which seem to hold up the case of best practice. Various people such as Huselid in 1995 as well as Guest and Conway in 2000 etc have provided these evidences. There exists some differences in opinion regarding detailing of the process; all the cases provide the opinion that there are some basic features of HRM practice that enhances the performance levels of businesses in different organizations irrespective of the marketing strategy being used by the company. This process can occur through different mechanisms as said by David Gates, such as:

  1. The process of making sure that the employees are all competent in nature.
  2. By instigating the passion and commitment that these people have towards work.
  3. By crafting different jobs which are best suited for the employees and hence ensuring full participation from them.

There exists a theory put forward by Vroom in 1964 and Lawler in 1971 known as the theory of expectancy. This theory states that all the three above mentioned elements are required to be present in order to ensure that you can get the best of results. If the employees have a positive behavior and attitude, then the outcome that the company is getting would also be positive and hence the rate of absence of employees as well as rate of people quitting jobs would decrease. In turn the rate of productivity and quality of products would improve.

The main points of the best practice method that the different authors present are those which have since time immemorial considered being good for HRM in general. The use of selection methods, need to be good enough. The different employees are required to be very much involved in the game. The company needs to invest some money for training of the employees so that they can enhance their skills to a great degree. The employees are required to be rewarded for their efforts, periodically. There must always exist some degree of harmony among the different employees.

The best fit model makes a link between the HRM and the way to achieve some competitive advantage over other companies. People following this model do not actually believe in any kind of model solution for all problems. Everything is dependent on what is happening in each separate organization. The people require the use of HR policies which are really fitting to the problems that individual employers are facing at a time. The solution which is good or one employer may not be good for another. The main variation which causes this is the difference in size between the two companies. The company also needs to compete with each other in terms of procuring stuffs in the market of labor as well as production. It can be put into perspective that different small organizations which is able to achieve some upper hand over its competitors by use of some kind of innovation, and which has stiff competition is getting the best labors should have a HRM policy quite different from a company which is large in size and produce goods which do not cost much and hence do not face much difficulty in getting labor force. Hence in order to ensure that a maximum degree of competitive advantage is achieved, some degree of informality is needed to be mixed up with practices of HRM. In the later part, a bureaucratic system is needed to be followed with HR practices having low costs as well as not many frills.

The model of best fit was derived from the works done by Joan Woodward and some of her colleagues present in the Imperial College in the decade of 1950. In the present times, this has been applied to existing conditions by various scholars such as Susan Jackson as well as Lawler and Purcell. In addition to the existing model, some other new models have also been developed which produced dependence on condition of organizations and provides evidence regarding what mixture of HR based practices are best for particular cases. You can find examples provided by Miles and Snow in 1978 as well as Sisson and Storey in the year 2000. These numbers will be dealt with in more details in the 2nd chapter. It can be said that the judges for determining which practice is best are still at work. The practitioners of both the models have empirical evidences to support their causes and hence the debate keeps going.


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