Decoding staff, employees satisfaction through psychological contract

Dr Halah al Kathiri & Dr Shelly Mohanty –
Hiring and retaining employees have emerged as crucial jobs for every organisation these days. Companies always look for new and attractive alternatives to build their staff. When an employee decides to join a new organisation, they not only enter into a written contract but an unwritten ‘psychological contract’ also takes shape immediately. Thus, there are certain things that an employer may not have promised in the written contract, but the employee feels that it is part of the arrangement.
Psychological contract is not very well known or understood but it can have a strong effect in establishing a relationship between an employer and an employee.
The term psychological contract (PC) was originally introduced in the early 1960s by a number of scholars, where the subjective nature of employment relationship was grounded in social exchange. More specifically, they defined it as a set of beliefs about what each party is entitled to receive, and obligated to give, as an exchange for another party’s contributions.
During the last several years, psychological contract is in vogue among the human resource experts who are more interested in understanding the psychological contract between the employees and organisations.
Organisational behaviour expert Denise Rousseau has defined psychological contract as an employee’s beliefs regarding the reciprocal obligations that exist between the employee and the organisation. In simple words, it is about the perceptions employees emerge about certain (unwritten and informal) expectations their organisations has to provide in return for the contributions they make for their organisations.
This psychological contract plays most important role in boosting the motivation of employees. This evolves constantly holding mutual beliefs and common grounds between the employee and his/her organisation. A simple example here would be a manager’s promise to an employee to be promoted within two years.
The practice of psychological contract may be new for human resource practitioners, but conceptually it is very old. Cangemi and Miller call understanding of the basic needs of person and valuing it in the form of psychological contract.
“Understanding what the person needs to feel valued is usually hidden in the psychological contract. The management has to understand the needs of an employee by identifying the psychological expectations. This will create conducive environment within the workplace and also can result in better “fits” between employee aspirations and relevant long-term organisational commitment.” When these unwritten expectations of employees are not satisfied, it perceived as a breach of psychological contract.
This needs to be understood through Suazo and Stone-Romero, who explained that when employees receive less than what was promised by the organisation; it is considered as a breach of psychological contract.
“That is, when employees perceive his or her organisation failed to fulfil one or more of the obligations compromising the psychological contract. These breaches usually lead to negative emotional state, defined as PC violation, and can severely damage the relationship between the employer and employee. It may have variety of negative consequences on employee attitudes and behaviours such as reduce in-role performance, trust towards their employers, reduced job satisfaction, increased turnover and sense of obligation. This is attributed to employees’ tendency to decrease their contributions in their organisations, since they perceive that their organisations had not fulfilled the terms of the psychological contract. Back to the earlier example, if the promotion did not occur within two years, the employee may perceive it as a breach in the psychological contract.”
Thus management should pay attention to such negative outcomes that could occur from breaching a psychological contract. Enough research has been conducted showing that PC breach is likely to have a wide range of negative outcomes on organisations. Organisations/managers need to be careful about what they promise as they may not be able to fulfil these promises at a later point of time due to different conditions.
Setting with the employee to offer honest and adequate explanations for why he did not get the promotion as promised is likely to reduce the feelings of anger and disappointment.
An organisation can leverage the employee-manager relationship by equipping and encouraging managers to discuss and address psychological contract expectations with employees. Increasing the communication would probably reduce perceptions of PC breach. Managers can help employees explore and, if necessary, modify their expectations, offsetting negative reactions when unrealistic expectations are not met. Ultimately in the long run the psychological contract is the responsibility of both the employee and the employer.
(Dr Halah al Kathiri is Assistant Dean at Al Musanna College of Technology, while Dr Shelly Mohanty is a Lecturer at Salalah College of Technology)