The Psychological Contract

Objectives Define and understand the importance of the psychological contract Examine the influences that affect workplace expectations Examine generational work expectations Work on a psychological contract with your professor

PSYCHOLOGICAL CONTRACT The psychological contract is individual beliefs or perceptions regarding the terms of exchange between the individual and organization.

PSYCHOLOGICAL CONTRACT The perceptual and dynamic nature of the contract makes it common that a violation will occur

Types of Violations Inadvertent –divergent interpretations Disruption –impossible to fulfill the contract, despite willingness to do so Breach of Contract – One side refuses to fulfill the contract

Contract Makers Violations

Broken Contracts Outrage, shock, resentment, anger Decreased trust and good faith Decreased job satisfaction Decreased productivity Decreased attendance Decreased commitment Turnover Consequence

RESPONSES TO VIOLATIONS Personality Characteristics – Equity Sensitives – monitor exchange relationships carefully and are more likely to perceive an imbalance in the relationship – Beneficients – are more willing to let others come out ahead in the exchange relationship

RESPONSES TO VIOLATIONS ConstructiveDestructive ActiveVoiceExit/Destruction PassiveLoyalty/SilenceNeglect/Silence

Exit When attempts to fix the situation have failed When the relationship is transactional When another job is available When the relationship has been brief When other people are also exiting

Voice When a positive relationship and trust exists When there are methods for voice When other people use voice When people believe they can influence the other party.

Others Silence: When there is strong loyalty to the company Neglect or Destruction: When there are no other options available to express dissatisfaction

Managing the Psychological Contract Provide realistic job expectations Have frequent discussions of expectations Check employee understanding Give feedback Be sensitive to individual differences Check for changes in expectations

Psychological Contract Reading Arent there two parties in an employment relationship? Antecedents and consequences of organization – employee agreement on contract obligations and violations By A Tekleab & S. Taylor Journal of Organizational Behavior, 2003

Purpose Assessed employee tenure in determining the level of agreement of reciprocal obligations between parties Evaluated the consequences of perceived violations of the psychological contract on employee-related outcomes

Comparison of manager/employee responses Responses to violations – Employees reported significantly lower levels of their own violations than did the manager – Both parties tended to agree on organizational violations – Both parties react negatively to violations

Comparison of manager/employee responses Perceptions of obligations: – Early in the manager/employee relationship employees had high expectations of their obligations to the organization while managers had low expectations of employee obligations – As tenure of the employee increases perceptions of the employee obligations converge. Employee perceptions decreased and mangers perceptions increased – Perceptions of the organizations obligations are not significantly different at any point in time. Parties agree on organizations obligations

Employee/Manager perceptions of Employee Obligations Employee perceptions Manager perceptions Time

Employee/Manager perceptions of Organizations Obligations Employee perceptions Manager perceptions Time

Responses to violations Found the driving force for employee job satisfaction and their intent to leave was organizational contract violations Found that managers judgment of employee performance was negatively impacted by perceptions of employee violations

The Generations who they are; how they think Each generation is a product of historical events that shape their values and views of the world Emotional memories shape feelings about institutions, authority, materialism, family and careers

The Silent Generation ( ) The depression, WWII, Holocaust The most traditional – working fathers, at home mothers, traditional work ethic Highly disciplined, hard working, much sacrifice, loyal to their employer (employer loyal to them). A source of much tacit information

Baby Boomers ( ) Product of the end of war baby boom and a consistent increase in birth rates until 1964 A time of affluence, opportunity Self-absorbed, free love, social issues, civil rights Educated, competitive, focused on personal accomplishment – 1. lots of jobs, able to drop out and come back; 2. less jobs; 3. disadvantaged, high competition, going no-where fast (boiled frogs) Want pensions, health care and to be left alone

Generation X ( ) Both parents working (latchkey kids), saw parents laid off, high divorce rate Not loyal to a company, pessimistic Independent and resilient Want immediate feedback and work to be fun Want transferable skills, most stressed out group

The Echo Generation/Generation Y ( ) Babies of the Boomers who gave their children everything and rewarded them for anything Sense of entitlement, mostly interested in what will be given to them Self confident, multitaskers, want to be guided (have goals set for them), hard workers, technologically savvy want money, challenging work that matters, learning opportunities, harder to please, require more direction

Observations about Gen Y Offer choices: expect state-of-the-art, cooperative scheduling, many choices with freedom to pursue them – Want work-life balance Offer training opportunities (all generations): expect coaching and rewarding Offer an evolving workplace: expect new motivational techniques; relationship-intensive environment; to be part of the decision making process

Concerns about Gen Y Every performance is excellent. Input (effort) is confused with output (achievement) Passion is replaced by standard of living (pay) Short-term time management is the priority. Getting to the next event has replaced getting the most out of the experience – Short-term career outlooks

How are the generations affecting work Numbers!! Lack of employees to fill current jobs

I. As a manager… 1. Can you ensure that the psychological contract is not broken? Why? 2. What do employees do that you would consider a breach of the contract? 3. What is most important to you to have in the contract? 4. How would you ensure that a contract with an employee remains ?

II. As an employee… 1. Can you ensure that the psychological contract is not broken? Why? 2. What do employers do that you would consider a breach of the contract? 3. What is most important to you to have in the contract? 4. How would you ensure that the contract with an employer remains?