The Psychological Contract

1. Executive Summary

This report was commissioned to discuss and analyse a personal Human Resource Management problem through introducing relevant concepts from 'An introduction to human-resource management in business' study book. The analysis is based on the psychological contract and employee expectations session of the book and is utilizing relevant concepts tied in with the personal HRM problem whereas career progression and larger financial compensation were expected on the part of the employee.

It is identifiable that both employees and employer have expectations from one and other and the psychological contract in question can be observed, analysed both from an employee and employer point of view.

The employee point of view:

This section of the report explains some of the expectations the employee might have and explores what consequences it might have for the employee if the employer does not honour the psychological contract.

The employer point of view:

In contrast to the employee point of view on the psychological contract and its effects, this section points out some of the employer expectations and explains why it is vital of importance to the employer to maintain a healthy psychological contract with the employee.

The recommendation for the problem presents that some of the key elements in preserving a healthy psychological contract are as follows but not limited to:

Articulate expectations

Mutual understanding

Periodical review

Implementation and review of formal HRM policies

The report is concluded with an information search, on the psychological contract and the websites provided lets us gain a more in-depth understanding of this ever-elusive subject.

2. Problem Description and analysis

2.1 Problem Description

I am experiencing an HRM-related problem because in my current position as an assistant manager I want to progress and would like to secure a pay rise. The company provides excellent working conditions, flexible working hours, and when they recruited me, they promoted recognition and progression of employees for exceptional performance. I feel that I honoured my company's expectations towards me to deliver all set targets, and go beyond expectations. As when I was interviewed, for my current role, I thought that there was a mutual understanding between my employer and me that if I work hard, acquire new skills, show loyalty, achieve all company set targets than more money, and career progression would follow. During one of the recent appraisals, the subject of career progression and the exciting prospect of making more money were brought up again by my employer, which I thought more of as a promise, but never materialized. This unfortunate situation made me looking for new employment, and I have not been working as hard as I could have ever since.

2.2 Concept Description

Consequently, considering the problem presented, I decided to use study session 'Why do people go to work?' and more notably I will be analysing the problem through 'The psychological contract' session.

Preston (2006,p.16-17) states "The psychological contract between employer and employee differs from written employment contract in that it is concerned with implicit expectations, obligations and promises that both parties believe have been made with regard to what each owes and expects to receive from the other. [...]"

This concept is very useful as it points out that there are unwritten expectations between employee and employer at all times. It is the combination of beliefs and understanding of probable expectations between the employee and employer, which will shape or affect the psychological contract between the two. I can use this concept to analyze my HR-related problem by contrasting the expectations of the employee against the employer's expectation, as well as explain it through the effects of such a concept it has on an employee.

Preston (2006, p.17) states that "On the other hand, those who have a weak psychological contract with their employer will be less motivated and more likely to leave the business"

This concept shows us why it is paramount of importance to have a healthy psychological contract as if this ceases to exist the company might face serious consequences. Some of the consequences I will point out in the next section when analysing the psychological contract (based on my HRM-related problem) from the employer point of view.

2.2.1 The Employee Point of view

An employee will promise things to the business to prove that he or she is committed and wants the best for both parties. Such things can include, work hard, achieve targets, and be flexible. The employee needs to know what it actually is that is going to be exchanged and for what. As my case proves in exchange for such commitments, I always assumed that these would yield rewards for me, in the form of career development and greater financial compensation. These were never put in writing in the formal contract but rather based on mutual beliefs and expectations. When the company was recruiting me, they were priding themselves on outstanding employee development and excellent chances for career progression, which led me to believe that