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The purpose of the report is to discuss the theory of psychological contracts in organizational employment and to see its evolution by discussing various theories of different authors, its present form, issues related to it and its importance in training and apprenticeship programs. This report basically discusses both the theoretical and practical aspects of psychological contract. This report shows how that how the concept of psychological contract has evolved and what different authors have said about this. And sees through what changes psychological contract has gone through and what shape it has adopted now finally.

Psychological contracts are becoming complex day by day. Its complexity and implications are discussed. The new psychological and the old psychological contracts are discussed. How the role of communication effects this is also seen. The role of psychological contract in training and apprenticeships programs are also explained in this report. The issues related to the psychological contracts and how these can be minimized so that both the employees and employers may be satisfied is also emphasized in this report. Finally the analysis of the report is given and conclusions are made.

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The Psychological Contract INTODUCTION: ‘The Psychological Contract’ is an increasingly relevant aspect of workplace relationships and wider human behavior that’s why I have selected this topic for the assignment. Simply, in an employment context, the Psychological Contract is the fairness or balance (typically as perceived by the employee) between: •How the employee is treated by the employer, and •What the employee puts into the job. At a deeper level the concept becomes increasingly complex and significant in work and management – especially in change management and in large organizations.

Interestingly the theory and principles of the Psychological Contract can also be applied beyond the employment situation to human relationships and wider society. At the heart of the Psychological Contract is a philosophy – not a process or a tool or a formula. This reflects its deeply significant, changing and dynamic nature. The way we define and manage the Psychological Contract, and how we understand and apply its underpinning principles in our relationships – inside and outside of work – essentially defines our humanity.

Respect, compassion, trust, empathy, fairness, objectivity – qualities like these characterize the Psychological Contract, just as they characterize a civilized outlook to life as a whole. Primarily, the Psychological Contract refers to the relationship between an employer and its employees, and specifically concerns mutual expectations of inputs and outcomes. In management, economics and HR (human resources) the term ‘the Psychological Contract’ commonly and somewhat loosely refers to the actual – but unwritten – expectations of an employee or workforce towards the employer.

The Psychological Contract represents, in a basic sense, the obligations, rights, rewards, etc. , that an employee believes he/she is ‘owed’ by his/her employer, in return for the employee’s work and loyalty. The concept of the Psychological Contract within business, work and employment is extremely flexible and very difficult (if not practically impossible) to measure in usual ways, as we might for example benchmark salaries and pay against market rates, or responsibilities with qualifications, etc.

The Psychological Contract is quite different to a physical contract or document – it represents the notion of ‘relationship’ or ‘trust’ or ‘understanding’ which can exist for one or a number of employees, instead of a tangible piece of paper or legal document which might be different from one employee to another. Although its origins can be traced to 1960, the concept attracted minimal academic and practitioner interest until the last decade or so. LITERATURE REVIEW/SURVEY: Now we will see what the H. R practitioners, psychologists, managers said about Psychological Contracts.

Psychological contract in view of ARGYRIS: One of the first writers to use the term psychological contract was ARGYRIS in 1960 who defined it as the implicit understanding between a group of employees and their foreman. He described it as: A relationship may be hypothesized to evolve between the employees and the foremen which might be called the ‘psychological work contract’. The employee will maintain high production, low grievances etc. if the foreman guarantees and respects the norms of the employee informal culture (i. e. et the employees alone, make certain they make adequate wages and have secure jobs). In other words, he was proposing that a relationship existed that potentially, had a stronger influence on employees’ performance and attitudes than the formal contract of employment. However, Argyris referred to the psychological contract only in passing, and Levinson et al (1962) claim to have been the ‘father’ of the concept. They defined it as ‘the unwritten contract, the sum of the mutual expectations between the organization and employee’.

Psychological contract in view of SCHEIN: The early view of the psychological contract, like the social contract before clearly refers to mutual expectations and obligations. It differs from the social contract as it specifically relates to the workplace and what the foreman expects of their team and what team members, in turn, expect from the foreman. The psychological contract was refined by SCHEIN in 1965 in his seminal work on Organizational psychology in the form it is used today by many human resource practitioners.

He describes it as: The unwritten expectations operating at all times between every member of an organization and the various managers and others in that organization…Each employee has expectations about such things as salary or pay rate, working hours, benefits and privileges that go with a job… the organization also has more implicit, subtle expectations that the employee will enhance the image of the organization, will be loyal, will keep organizational secrets and will do his or her best.

The notion that the psychological contract can influence behavior was proposed by Schein. He said: Though it remains unwritten the psychological contract is a powerful determiner of behavior in organizations. One of the fundamental issues raised by Schein in his writing about the psychological contract was that it inevitably changes over time. As Schein put it: … The psychological contract changes over time as the organization’s needs and the employees’ needs change…

What the employee is looking for in a job at age 25 may be completely different from what the same employee is looking for at age 50. Similarly what the organization expects of a person during a period of rapid growth may be completely different from what that same organization expects when it has leveled off or is experiencing economic decline… As needs and the external forces change, so do these expectations making the psychological contract a dynamic one which must be constantly renegotiated………

Argyris refers to a specific understanding between the workgroup and the individual foreman or team leader, Schein’s definition focuses on the high-level collective relationship, between the individual employee on the one hand, and management of the company on the other hand – in other words the organization. Psychological contract in view of LEVINSON: LEVINSON (1966) pointed out that unlike legal contracts in which the expectations are defined, in psychological contracts the (1) Expectations are unspoken and 2) Antedate the formation of the contract. A boss and subordinate expect behaviors and attitudes of persons in those two roles before they meet each other. Expectations are only part of the relevant qualities of the psychological contract; however, the other components make it a more powerful tool. The parties in a psychological contract expect they will need each other, or more technically that they will be (3) Interdependent. Being interdependent is the way of managing dependency in a mature relationship.

It answers the question of “Who needs who? ” The only tolerable long term answer is that we need each other. Everyone needs to know upon what and upon whom they can depend. Thus, this part of the psychological contract profoundly affects loyalty. (4) Psychological distance deals with the human need and challenge of intimacy. We need to feel close enough to others so we can effectively manage stress, share necessary information, and gain some personal sustenance from our work.

At the same time there needs to be enough distance that we don’t become distracted because we feel invaded. How close we get to others depends upon what society defines as legitimate, the tasks to be performed, and our own personal requirements. Psychological contracts are (5) Dynamic because they change without formal acknowledgment. People at work expect different things of themselves and others over their careers, (when they are sick, during times of stress, etc. ). The psychological contract does not just change over time; change itself modifies the contract.

Change profoundly affects relationships; it may completely disrupt them. Furthermore, during times of change, new expectations are built and reinforced. The way change is handled creates new or reinforces expectations for future change. Is it, for instance, a stimulating and interesting opportunity or is it an affliction? Change affects people’s expectations about stability and security. Change with its instability can leave people feeling insecure and in danger. Psychological contract in view of JOHN VENN:

Venn diagrams (devised by British logician and philosopher JOHN VENN, 1834-1923) proposed a model for the understanding of psychological contract which is useful in representing all sorts of situations where two or more related areas interact or interrelate. The Venn diagram below provides a simple interpretation of the factors and influences operating in Psychological Contracts. Here is a Venn diagram representing quite a complex view of the Psychological Contract, significantly including external influences, which are often overlooked in attempting to appreciate and apply Psychological Contracts theory.

In the Psychological Contract Venn diagram left – vc = visible contract – the usual written employment contractual obligations on both sides to work safely and appropriately in return for a rate of pay or salary, usually holidays also, plus other employee rights of notice and duty of care. pc = psychological contract – which is hidden, unspoken, unwritten, and takes account of the relationship references (r) between employee and market (which includes other external factors), also the employer’s relationship with the market (also r), and the visible contract (vc). Note that only the visible contract (vc) element is written and transparent.

All the other sections are subject to perceptions until/unless clarified. This model told about the contracts that were visible and that were psychological and how the relationships between market and employer and between employee and market are maintained. Psychological contract in view of JOHN PAUL KOTTER In 1973 a noted author, speaker, and authority on business leadership JOHN PAUL KOTTER said that a Psychological contract is: “An implicit exchange between an individual and his organisation which specifies what each expects to give and receive from each other in their relationship. Together, these expectations constitute the psychological contract. Kotter (1973) also strongly relates the psychological contract to expectations. In order to reduce the negative effects of unmet expectations, he suggests a strategy for ‘managing the joining-up process’ of newcomers, by developing a psychological contract between the newcomer and the supervisor in which each one’s expectations are clarified and exchanged, with the aim of matching both parties’ expectations’. There are four sets of expectations in this hidden contract between the Dealership and the prospective employee.

For example, when a new hire expects to receive a promotion after one year on the job, but the employer is not prepared to give a promotion that quickly, there is a mismatch or initial misunderstanding of their individual expectations. Consequently when the employer can and does promote the new employee after a year, there is match. Kotter’s research confirmed that most of us would expect that the greater the matching of mutual expectations, the greater the probability of job satisfaction, productivity, and reduced turnover.

In the psychological contract there are two parties and four sets of expectations 1. What the Employee Expects to Receive 2. What the Organization Expects to Give 3. What the Employee Expects to Give 4. What the Organization Expects to Receive 5. The bottom-line is that if each of these expectations can be met at the time of hiring in your Dealership, your “hiring batting” average will increase significantly! THE PSYCHOLOGICAL CONTRACT – BASIC CONTEXT AND IMPLICATIONS

In management and organizational theory many employee attitudes such as trust, faith, commitment, enthusiasm, and satisfaction depend heavily on a fair and balanced Psychological Contract. Where the Contract is regarded by employees to be broken or unfair, these vital yet largely intangible ingredients of good organizational performance can evaporate very quickly. Where the Psychological Contract is regarded by employees to be right and fair, these positive attitudes can thrive.

The traditionally dominant and advantageous position of an employer compared to its workforce (or indeed of any other authority in relation to its followers, ‘customers’, or members, etc) means that the quality of the Psychological Contract is determined by the organizational leadership rather than its followers. An individual worker, or perhaps a rebellious work-group could conceivably ‘break’ or abuse the Psychological Contract, but workers and followers under normal circumstances are almost always dependent on the organization’s leadership for the quality of the Contract itself.

This last point is intriguing, because in organizations such as employee ownership corporations and cooperatives, a different constitutional business model applies, in which workers and potentially customers own the organization and can therefore to a major extent – via suitable representational and management mechanisms – determine the nature and quality of the Psychological Contract, and a lot more besides. We see a glimpse here possibly as to how organizations (and other relationships involving leadership authority or governance) might be run more fairly and sustainably in future times.

We live in hope. Intriguingly also, several factors within the Psychological Contract – for example employee satisfaction, tolerance, flexibility and well-being – are both causes and effects. Feelings and attitudes of employees are at the same time expectations (or outcomes or rewards), and also potential investments (or inputs or sacrifices). This reflects the fact that employee’s feelings and attitudes act on two levels: 1. Employee feelings and attitudes are strongly influenced by their treatment at work (an aspect of the Psychological Contract), while at the same time, 2.

Employee feelings and attitudes strongly influence how they see themselves and their relationship with the employer, and their behavior towards the employer. The simple message to employers from this – and a simple rule for managing this part of the Psychological Contract – is therefore to focus on helping employees to feel good and be happy, because this produces a healthier view of the Contract and other positive consequences.

Less sensible employers who ignore the relevance of employee happiness – or the relevance of the Contract itself – invariably find that the Psychological Contract is viewed more negatively, and staff is generally less inclined to support and cooperate with the leadership. THE INCREASING COMPLEXITY OF THE PSYCHOLOGICAL CONTRACT The nature, extent and complexity of the Psychological Contract are determined by the nature, extent and complexity of people’s needs at work. Work needs are increasingly impacted by factors outside of work as well as those we naturally imagine arising inside work.

People’s lives today are richer, more varied, and far better informed and connected than ever. Work itself has become far more richly diverse and complicated too. The working world is very different to a generation ago. The employer/employee relationship – reflected in the Psychological Contract – has progressively grown in complexity, especially since workers have become more mobile and enabled by modern technology, and markets globalized. These changes began seriously in the 1980s. Prior to this many modern dimensions of work – such as mobile working, globalization, speed of change – were unusual, when now they are common.

Below the grid gives examples of how work has changed. The watershed might have been the 1980s, or maybe the 90s, it depends on your interpretation; but the point is that sometime around the last two decades of the 20th century the world of work changed more than it had changed since the Industrial Revolution, which incidentally was from about the late-1700s to mid-1800s. Globalization and technology in the late 20th century shifted everything we knew about organized work onto an entirely different level – especially in terms of complexity, rate of change, connectivity and the mobility of people and activities.

The significance and complexity of Psychological Contract have grown in response to all of these effects, and given that the world of work will continue change in very big ways, so the significance and complexity of the Contract will grow even more. CHANGES IN THE PSYCHOLOGICAL CONTRACT Old contractNew contract Change environmentStable, short term focusContinuous change CulturePaternalism, time served, exchange security for commitmentThose who perform get rewarded Motivational CurrencyPromotionJob enrichment, competency development Promotion basisExpected, based on time erved and technical competenceLess opportunity, new criteria, for those who deserve it Redundancy/tenure GuaranteeJob for life if performLucky to have a job, no guarantee StatusVery importantTo be earned by competence and credibility TrustHigh trust possibleDesirable, but expect employees to be more committed to project or profession Personal DevelopmentThe organization’s responsibilityIndividual’s responsibility to improve ’employability’ OPENNESS OF COMMUNICATIONS IN PSYCHOLOGICAL CONTRACT Openness of communications is crucial to within the Psychological Contract and to ‘virtuous and vicious circles’.

Open communications in an organization become ‘virtuous circles’. Closed communications become ‘vicious circles’. Leadership generally determines and controls the level of organizational transparency, whereas openness of communications, or lack of, depends on wider issues of culture, processes, management methods and attitudes, etc. Organizational/leadership transparency is quite simple to achieve where the leadership has a will to do so. Achieving openness of communications is usually a much bigger and more complex challenge. Significantly within the Psychological Contract openness is the preparedness f employees to be open and honest about their feelings to their employer, which usually depends on the employer (and its management) being open and honest with the employees. Openness of communications produces lots of other organizational benefits, but in terms of the Psychological Contract openness crucially influences trust and mutual awareness (between organization and employees, i. e. , both sides of the Contract), and through the ‘virtual/vicious circle’ effect openness hugely influences the quality of the Psychological Contract.

Secretive distrustful employees are extremely difficult to manage. The organization has no real idea of what they want, nor what their priorities and concerns are. The employer may not even realize that a problem exists until it blows up into a major crisis. So emphasis should be given to openness by the employer and the overall culture of the organization should be helpful in promoting open communication. COMPLEXITY, DIVERSITY AND FRAGILITY OF THE PSYCHOLOGICAL CONTRACT The content or the state of the psychological contract can be managed in the way that some researchers suggest.

Its idiosyncratic nature was first acknowledged in some of the early writings and researchers (Rousseau, 1996 for example) have continued to discuss it in terms of it being a subjective phenomenon. Most authors agree that an employee’s psychological contract develops and evolves through their interactions and experiences with their current organization. As such, each individual’s psychological contract is unique. Nevertheless, many researchers continue seeking ways of measuring its content and state and some discuss the ways in which it is changing as though these changes are consistent across the workforce.

Whilst it was clear that the majority of participants in the study were less likely to perceive certain elements, such as job security and promotion prospects as part of their psychological contract, it was less clear what its elements and state currently are. It was demonstrated how a host of individual, organizational, experiential and External influences have differing effects on the ways in which participants: Perceived their psychological contract; Organization change was perceived to affect it They responded to psychological contract changes.

It was also shown how their perceptions might alter significantly within a relatively short time. First, evidence revealed how different types of industries have been affected by external changes in different ways. Some organizations in the manufacturing and engineering industries have been affected by factors such as economic downturns; slowdown in demand for goods or services and overseas competition. Pressures to compete have frequently resulted in a reduction in the workforce, sometimes repeatedly.

This has had a somewhat dramatic effect on what might be regarded as the typical ‘old’ psychological contract. Many participants from these types of organizations found insecurity and uncertainty difficult to accept and organization change was perceived as representing further threats. Conversely, as a result of rapid technological advances, organizations in the IT, Dotcom and telecommunications industries, continued to grow and demand for labour was (until as recently as the middle of 2001), greater than the supply.

Many participants from these organizations expected to make several career moves. Thus, external pressures can affect different types of industries in different ways and within a relatively short space of time, with subsequent effects on the psychological contract. Second, the ways in which organizations respond to external pressures inevitably impacts on the workforce and their perception of their psychological contract. For example, demands to increase flexibility have resulted in organization changes such as outsourcing, contracting out and the introduction of annualized hours.

An increasing number of employees, from the unskilled to those with specialist skills, are now employed on short term, temporary or flexible contracts. The number of part time workers has also increased significantly. It is suggested that changes in the psychological contracts of these employees might be far greater than the changes experienced by those who have retained a full time permanent contract. Third, it was shown that the career expectations of younger employees entering the job market differ from those that have been in employment for many years.

Younger employees had little or no experience of the ‘old’ psychological contract. They did not attach the same importance to job security as some of their older, more experienced colleagues, especially those with long service records. Therefore, there was no sense of loss in the decline of job security. Generally, organization change especially that which involved job losses, did not affect their psychological contracts in the same way that it affected long serving employees. Finally, and consistent with claims made by Rousseau (1996) it as found that individual differences, such as personal predisposition and previous experience appeared to have an influence on the importance individuals attached to work, their perception of the psychological contract, how it was perceived to be affected by organization change and their subsequent behavioral and attitudinal responses. The main point is that, whilst we might have been able to describe the psychological contract in the past, when organizations remained relatively stable and unchanged for longer periods, in today’s rapidly changing environment we are no longer able to do so.

Furthermore, the research evidence indicates that the psychological contract is more complex and fragile than some researchers would suggest and that a host of individual, experiential, organizational and external factors influence employees’ perception of the psychological contract and their experience of change. CONCEPTUALIZED DIFFERENTLY, THE PSYCHOLOGICAL CONTRACT IS WORTH TAKING SERIOUSLY The previous sections of this report appear to suggest that in both research and practice the psychological contract is of limited value.

However, it is argued that it is a concept that is worth taking seriously, from both a theoretical and a practical managerial perspective, if it is thought of in terms of the foundations underpinning it. For example, the psychological contract was described earlier as a mental model or schema that develops through an individual’s interactions and experiences. In a relatively stable work environment, employees develop an understanding of what they can expect from the organization and what is expected of them in return. Over time, they come to rely on schemas to interpret and predict the complexities of organization life.

The psychological contract also gives them a feeling that they have a degree of influence and control over their employment and how their work is managed. This cognitive conceptualization illustrates the function it serves in reducing uncertainty and providing a greater sense of security, order, continuity and control’. Whilst predictability, security and control might be thought of in terms of job security, it encompasses more than that. It also relates to: • Clarity of objectives; • Knowing what to expect and what is expected in return; Understanding and having confidence in one’s own position; • Having influence and control over events that affect one’s job; • Feeling certain about the level authority; • Being able to prevent negative things from affecting one’s work. Thus, when the psychological contract is considered in these terms, it becomes relevant to all employees, regardless of the job they do, and it is not necessary to specify the contract’s content. It also becomes clear why the concept provides a useful means of understanding employees’ experience of organization change.

PSYCHOLOGICAL CONTRACT ISSUES Predictability Predictability is probably the most important issue for human relationships. It is a part of the human need for structure (i. e. , organization). Predictability is necessary for trust. When people and events are predictable enough, you can rely on them. Reliability in individuals and organizations makes them credible. Credibility generates loyalty. Predictability, reliability, credibility, loyalty, and trust all reinforce each other. The expectations of the psychological contract are not visible when things run smoothly.

Most of the time they operate in the background. Unspoken expectations are part of the definition. In other words, those expectations are often unconscious. If you ask people can’t tell you what many of them are, but it is because everyone takes them for granted that they can be relied upon. Expectations are discovered as people work with each other and something goes amiss. We realize we have them when mutual expectations aren’t mutual any more. Interdependence Organizations depend upon people negotiating how their legitimate dependency needs will be appropriately met.

Organizational leaders need to appreciate the balance between dependency and power. This balance requires sensitivity to feelings about being dependent and about how people are dependent. One of the ways we are dependent is in how close we can get to another person, which is the next issue in the psychological contract. Psychological Distance Psychological distance refers to how close people can get to one another on a psychological level, so it relates to intimacy and loneliness. People have different needs for intimacy and privacy.

The challenge of managing the psychological distance in a group dealing with increased competition was exposed in team building work. The members of this team grew up in a company that had been successful for decades before they joined. Even when there are no personal agendas and ambitions, a group can’t be cozy and no confrontational if the members have their customer’s best interest at heart for there will be significant controversy about how best to respond to customers. Customers pull in different directions because they have different needs.

Only out of such conflict can new solutions be created. When conflict and aggression are seen as bad, the work of finding solutions takes a back seat to proper form. A significant part of building trust, therefore, is for the members to trust themselves to be competent enough interpersonally to take others’ aggression and to skillfully use their own to solve problems. Change The psychological contract relates to change in three ways: 1. The contract is dynamic, which means it changes depending upon the needs of the parties. 2.

Change alters the contract. 3. There are unspoken expectations about change. The way change is managed will determine the shared attitudes which come to define a group. Behavior of significant people is vital for building new expectations. Unspoken expectations develop from what people see. Various expectations about change can include that change is something: •we do well; •we all do together; • done to the weak by the strong; •which starts with a great deal of activity, to be dropped when the novelty wears off and it becomes work; •that takes forever; done only for the business so personal repercussions are simply petty details to be shamed and ignored; •for which, you go through the motions, but don’t become involved personally; People only learn if leaders are committed to change, and communicate this commitment by their actions. Often they find the leader doesn’t mind if others change, just so long as it doesn’t mean any real changes for him/her. How much money h/she spends on the process is not an indication of how much h/she wants things to change. USING THE CONCEPTS IN TODAY’S ENVIRONMENT

Since the mid 80s there have been multiple changes in most organizations which have altered expectations and made organizational life less predictable. There were good reasons for the changes. “Putting the customer first” has focused employees on what is needed to survive in a more competitive economy. Focusing on quality and, therefore, treating those people you need like customers contributes to morale, innovation, and realistic attitudes about working together. Re-engineering work processes not only cuts out waste; it gives more meaning to work that is done.

Empowering individuals and groups who are closest to problems saves time, develops people, and diminishes needless communication. But problems have risen in the execution of those ideas. How those good ideas are implemented is critical because it is in the execution that new psychological contracts are created. More often than not, the way changes were managed, created undesirable attitudes about change. For many, the expectation about change has become: It is just used in the short term self interest of the leaders.

The current change is a project to give the appearance of working on the most recently defined problem. People get training, slogans, and methodology, but no help with the personal consequences of changing. The only support many have received has been platitudes about the necessity for change. Their leaders seem intimidated by the need for personal support required by the changes the initiate. Their avoidance of the personal aspects (whether they are scared or not) suggests that real change is mysterious and troublesome. That expectation is reinforced even more when leaders avoid making the changes themselves.

When leaders are intimidated by personal change their behaviors communicate far more than their verbalizations of what the new psychological contracts are supposed to be. Those who don’t put down roots to keep from becoming dependent upon an organization will not be invested in solving the organization’s problems, nor will they commit to the organization’s goals and vision, no matter how enticing a leader makes them. As a matter of fact, it would be even more painful to be excluded if you found the organization’s vision exciting.

Furthermore, if you are always ready to leave, you don’t let others know you very well for then you will also get to know them, and that is too much work for just temporary relationships. Psychological distance is thus increased which has consequences for loyalty. While you do find loyalty to organizations, it is stronger to people. When loyalty is betrayed, people don’t blame the organization as often as they blame individuals or groups in it. Trust is an element in all of the difficult issues addressed by the psychological contract. For that reason the concept of the psychological contract helps answer the question, “How do we build trust? You don’t do it with trust building exercises. You do it as you manage the components of the psychological contract — and the changes that affect that contract. Trust develops from a combination of predictability and appropriate management of dependency, distance, change, and danger. Trust is required for mature dependency. What will you do when you have power over me? Will you also make yourself vulnerable so we can be interdependent? Can I trust you to be sensitive to the issues of shame inherent in someone being dependent when s/he is more than 18 months old?

The last question is also related to the requirement for trust when negotiating psychological distance. Are members of management sensitive to the emotional vulnerabilities of those with whom they interact? How sensitive are they to inappropriate intrusion? Sensitive interdependence increases trust. UNDERSTANDING THE PSYCHOLOGICAL CONTRACT IN APPRENTICESHIPS AND TRAINEESHIPS Psychological contract is always there when two parties are involved rather it is explicit or implicit. In the same way during training and apprenticeship programs psychological contract is there.

Some issues during these training programs are: ? Expectations in apprentice and trainee employment arrangements are similar in most respects to that of other employment relationships. ? Mismatched perceptions of the other parties’ obligations are not a major issue, but there are differences in the perceptions of the extent to which obligations are being met. ?Both parties consider the provision of training as the employers’ most important obligation, but apprentices and trainees perceive that employers do not always deliver on their training obligations.

Specific discrepancies were noted in relation to apprentices and trainees wanting a specific time for training and a wider range of training methods. ? Apprentices who have completed pre-apprenticeships and apprentices and trainees employed by group training organizations have lower expectations and are relatively more satisfied. ? While a mismatch of expectations is not a key factor behind high attrition; the study suggests employers should ensure they have appropriate systems for managing apprentices and trainees across all age ranges and for communicating mutual expectations to all parties.

These issues are because of higher expectations from each other and they can be solved by ? managing expectations, for example, making the mutual obligations known early in the recruitment process and constantly reiterating them ? meeting expectations, for example, setting up systems to handle ‘hard promises’ such as fair performance appraisals and having a designated person or department to manage apprentices and trainees, as well as performance management systems, which are important for both ‘hard’ and ‘soft’ obligations ? mproving satisfaction with training, by paying particular attention to the perceived deficient areas of ‘specific time for training’ and ‘a range of training methods’ ? paying more attention to mature apprentices and trainees ? acknowledging the psychological contract explicitly; it then becomes much more straightforward for people to make decisions based on realistic expectations and less likely that any party will be disappointed in the outcome. SELF ANALYSIS OF DATA: Psychological contract concept was there in even 1950’s but its concept was developed a lot in last decade.

Many authors have written about this and have given model, theories to understand this. Psychological contract concept has changed a lot as the workings environment and expectations of both parties about each other has changed a lot. In my view the Psychological Contract is basically the expectations of employees from organization and in return the expectations of organization from its employees. It is fascinating for many reasons because it offers so many different perspectives. It’s not a tool or a process.

The Psychological Contract is a model and a philosophy which can guide us in the way we structure and manage organizations, and deal with employees within them. At a basic level it helps us understand more about the ‘give and take’ that characterizes working for an organization, and particularly leading an organization. It is very useful in understanding why employees are ‘difficult to motivate’, or ‘difficult to manage’ – especially when this is an ongoing or widespread challenge. The Psychological Contract helps leaders understand better how to align their people’s needs with those of the rganization, which is a very elusive notion. At a deeper level the Psychological Contract questions the significance of fairness in the way organizations are run and established. The world changes, and as it does, work and business changes too. The Psychological contract of employees may change with the changing situation for example if the inflation rate increases and there is overall bad economic conditions the employees will want an increase in their salaries and the organization may think to downsize 0r may expect that the employees may work more.

This example shows that the psychological contract may change with the changing external or internal environment. Most people still live for the weekends and their annual holidays; many hate their work and are not truly connected to or aligned with their employer, which often is a bigger problem for the employer than it is to the staff. Meanwhile many big businesses are making a mess of the world in all sorts of ways, because profits come first.

Every organization can improve its relationship with its people, if its leadership has the will to do so, because so much of the relationship depends on simple trust, honesty and humanity, which by any normal reckoning cost absolutely nothing. More progressive organizational structures, in which the responsibilities and rewards of ownership and leadership are shared with employees, potentially customers too, face much easier and simpler challenges in developing and keeping a healthy Psychological Contract.

The constitution of any enterprise or activity (its rules of formation, ownership and purpose, etc) is conceivably the major influence upon fairness of the organization, and since fairness is at the heart of the Psychological Contract, addressing the constitution is for some situations the surest way to develop a Psychological Contract that is naturally balanced and healthy, and also likely to sustain itself with minimal intervention. It was also suggested that the psychological contract constitutes a reciprocal (although implicit) agreement between employer and employee.

An employee’s decision to fulfill their (perceived) obligations to the organization will be based upon the degree to which they perceive the exchange relationship between themselves and their employers as equitable. Inadequate communications, psychological distance, change, and predictability they all contributed to excessive psychological distance in an indirect way. With incomplete information about important aspects of the work, people felt and were, vulnerable. They became guarded.

Attempting to understand what the new expectations were, they talked more and more to those who had the same old psychological contracts they had. The need is that the employees and the managers should talk about the coming situations and each other’s expectation in those situations. All the indications seem to be that the employees who perceive the organization as not fulfilling its obligations might respond to the lack of balance by seeking an alternative means of restoring balance; they might reduce their obligations by withdrawing effort.

Perceptions of a lack of balance might lead to negative consequences: disappointment and distrust may develop. The issues related to psychological contract has also been discussed the need is to minimize these issues and modify them that they may help in the present situation.

CONCLUSION: REFERENCES: Argyris, C. (1960), Understanding Organisational Behaviour (Homewood, Illinois: The Dorsey Press Inc) Schein, E. 1965), Organisational Psychology (Engelwood Cliffs, NJ: Prentice-Hall) Menninger, K, M. D. , The Vital Balance, The Viking Press, New York, 1963 Levinson, H, et al. Management and Mental Health, Harvard University Press, Cambridge, Ma, 1966 Kotter, J. P. and Schlesinger, L. A. (1979), ‘Choosing strategies for change’, Harvard Business Review, Vol. 57, no. 2, 106-114. Schein, E. H. 1980. Organizational Psychology. Englewood Cliffs, NJ: Prentice- Hall

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