Maslow’s theory argues that individuals crave five basic levels of needs, such as physiological, safety, social, esteem and self actualization. The lower order of deficiency needs 1 to 3 have to be met before the higher order growth needs 4 and 5 can be satisfied. As each level of needs is satisfied, so the next level becomes even more important to individual. This means employers must seek to meet most needs of their employees if they want optimum performance. Whilst most organisations are able to satisfy the deficiency needs, it is far more difficult to satisfy the growth needs. The high performance work practices could well be put to good use especially to satisfy individuals’ growth needs. Techniques such as team working, functional flexibility, empowerment, employee development, appraisal, counseling and performance–related pay would certainly go a long way to enhancing workers motivation, which in reality would generate a positive psychological contract. Thomson R. (2004)
Herzberg’s two-factor theory proposes that there are two set of factors that impact upon employee feeling of satisfaction at work. The first set called the hygiene factors is concern with employees need for fair treatment in compensation, supervision and working condition. If these issues are not met, employees would feel dissatisfied. Even if employers were able to attain the hygiene factor, it might not necessarily lead to job satisfaction. The second set of needs regarded to as motivating factor, such as personal growth and development in the job must be met for employees to experience job satisfaction. In a nutshell the theory states that the key to motivating employees lies in job design and enrichment. Employees are more satisfied if their job allows for high level of achievement, recognition, opportunities for advancement and clear responsibility (Autonomy). Thomson R. (2004)
According to Latham and Locke goal setting theory, managers would do well to set clear practical goals in order to effectively manage and motivate employees. It is observe that most managers are unable to change people’s personality and the most they could do is to use incentives to channel employees’ energies toward the goals of the organisation. There is empirical evidence to suggest that organisations that routinely set their workforce specific and challenging goals generally outperforms those that set vague or relatively easy goals to achieve. Although monetary reward is a major part of workers incentive, it is stated that workers participation in decision making, job enrichment and employee learning development goes a long way to increasing workers effort thereby positively impacting on organisation’s performance. It is important that workers have both goal commitment and efficacy in order for exert effort required for goal attainment and thus responding positively toward organisational goals. Pinnington A. and Edwards T. (2000)
Appraisal of the psychological contract from the organisations perspective
Employment relationship describes dynamic interlocking relations that exist between individuals and their work organisations. At its most basic, the relationship embraces an economic relationship, the exchange of service for monetary rewards. The second component of this relationship involves a legal contract; where by a contract of employment is agreed. The third aspect involves social relationship; this part of the relationship is increasingly becoming significant given the increase utilisation of work teams. The forth component of this relationship revolves around psychological contract. This is essentially a dynamic two way exchange of perceived promises and obligations between employees and their employers. Bratton J. (2003)
Effective people management is not only critical to organisation performance; it is very possible to state that its effect on the bottom line easily outstrips emphasis on, technology, quality, research and development. It is generally the case that in organisations where there are high levels of job satisfaction and job commitment among employees shows improving financial performance. In order for organisations to attain set business strategy, alongside human resource strategy, their HR practices would have to embrace effective recruitment and selection, strategic training and appraisal, jobs (re)design to promote autonomy, flexibility, reward system and involvement climate for their employees. Mullins L. J. (2005)
Recruitment and selection have always been critical processes for organisations. In recent years, there has been growing evidence that the formulation of a positive psychological contract with employees would provide the basis for a positive outcome in terms of organisational commitment and motivation. It has been known for some time now that recruitment and eventual selection are crucial stages in the formation of the expectations that form the basis of a two way contract and communication between employer and employee. It is generally the view of employers especially in the knowledge industries that employees select the organisation and the work on offer as much as employers select employees. Bratton J. (2003)
Nowadays employers are routinely seeking not just to attract, but also emphasize the need to retain employees as part of their evolving employment relationship. Much value is ascribed to mutual and reciprocal understanding of expectations, as well as attempting to predict future behavior of their employees, with the use various psychometric testing, this is due to the high cost recruitment, retraining and the potential adverse impact on organisational goals.
Organizations need to capitalise on surpluses in capabilities within their workforce, as well as developing their core workforce to meet the challenges of the ever changing business environments. Human resource planning is crucial within any learning organisation to deliver the right kind of conditions of employment (psychological contract) their employees would appreciate.
A critical appraisal of changes to the psychological contract
Where over the last few decades personnel management is mainly built on a legally constructed exchange, employees are generally expecting to stay for life in return for their commitment, but the new HRM is keen to build a more dynamic construct concerned with developing a reciprocal commitment and obligation between each of the parties. Bratton J. and Gold J. (2003)
Contemporary managers are increasingly using the high commitment management approach to manage their workforce, which unlike the traditional approach of control, put emphasis to the development of organisational commitment amongst the employees, on the assumption that this will lead to overall increase in productivity, lower staff turnover and better motivated employees.
On balance it considered that the new HRM approach with regards to psychological contract is different from old approach because it represents a different mindset and approach to managing people in the work. It sees employees, both managerial and non-managerial as part of the solution rather than the problem. In essence empowered and continuously learning employees are central to organisational success.
It has also been noted that the rise in prominence of the new HRM has coincided with a period of decline in trade union membership; this is ultimately due to the heavy focus on the individuals’ needs and the ways in which to motivate them to attain individual and organisational goals.
An analysis the psychological contract and changes to it in the chosen organization
I have worked for London borough of Waltham forest in variety of roles for the last seven years, but in the last two years we have been subjected to rolling restructuring. But in the last six months, I have seen a lot of upheaval in the context of jobs cuts and teams being strip or merge, which is having a detrimental effect on staff morale. It has been announced that Waltham forest and Haringey council will be merging some of their services, which is leading to further job cuts. Due to the social demographic factor within my current workplace and the growing shortfall in the local government pension budget, the government has made it clear to us that with the coming pension reform, we would have to work longer and as well as significantly increase our contribution in order to remedy the expected future shortfall. In my discussion with the HR section, I was able to obtain the council’s HR Scorecard record over two years. The statistic indicates staff absences and grievances have increase, but not significantly enough to suggest any breakdown in trust. The training budget has definite been cut off now.
Legal: many of the performance driven targets of the last decade are now been done away with gradually by the new local government minister. Public sector pension reform will be coming into existence within next few years due to the perceived high cost of present system to general taxpayers at large. The coalition government has also, proposed a reform of the social housing sector, thus reducing the scope of local government liabilities to future homeless families. The implication of this reform potentially would lead to job losses, because our jobs depend on attending to homeless families and new social tenants. The government is also looking at the possibility of bringing in legislation to eventually free council from rendering social housing services altogether and handing it to housing associations solely. This is now making most of my colleagues to start considering prospect of remaining in their present employment.
Economic: the cut to central government grant to local council has led to twenty percent head count cut since the chancellor spending review announcement. We are currently going through a consultation period leading eventually to redundancy within the next six month. Also, because the government has curtailed local council ability to raise council tax, this policy has stopped the council from plugging any shortfall from central government spending cut. Training and development funds for staff training have now been dramatically cut over the last one year especially in the last six months.
Political: the new government has stated its intention to rebalance the United Kingdom economy within the next five years, as it perceives public sector segment of the economy has grown too big over the past decade. The recent spending review has made it clear that the government is trying to encourage private sector by cutting red tape so that they can take on former public sector made redundant by their cuts.
Technological: the council is now adopting a new computer based technology to deliver more of the services we do manually at the moment. By the middle of 2011 council is expected to launch an online based application processing system, linking it up with the present system. The implication of this is that at least two teams from housing services have virtually been sacrificed. Also, it has become apparent to staff that those left in their job after implementation would have a reduced job description and possibly be downgraded due to information technology system taking on some of their present task.
A critical appraisal of the psychological contract and how it might be used to assist an organization in the management of people
Effective human resource planning should assist organisations to anticipate potential future difficulties while there is still a choice of action. Forward planning should enable the organisation to develop effective strategies related to such as: recruitment, management development, career progression, training, redeployment and redundancies. It provides the trigger for a personnel management action programme aimed at reconciling differences between supply and demand. Mullins L. J. (2005)
Focused training is one of the ways, an employer could use to motivate and retain their workforce. “Typically the focus of training is to benefit the individual rather than the organisation. Hussey (1985) argues that it may be better to design training to implement the business strategy, thus indirectly benefiting the individual through the organisation’s growth. In this manner, training creates promises that are more likely to be kept. Training viewed as an investment signals a desire to retain and deploy the individual skills overtime. Training does convey future promises, especially when the training focuses explicitly on strategic organisational concerns.” Rousseau D. M (1995)
Tangible benefits packages are generally useful tools for organisations to attract skillful individuals and as well as in retaining current employees as long as the overall cost is sustainable to the organisation in the long run. Better pension provision due to growing aging workforce, relocation package for professionals’ workers wanting to relocate.
Flexible working is now practice practically by most organisations in the United Kingdom. Flexibility in working hours is generally attractive to employees and can contribute significantly to job satisfaction. Organisation can generally benefit from reduced staff turnover, lower absenteeism and more committed employees, because they appreciate the work life balance it gives them especially in the case of working mothers. Compressed working week arrangement is increasingly been used at my workplace by staff for variety of reasons. There is also, the practice of job sharing which is encouraged from the very moment applicants fill in their application form. Career-break scheme and especially working from home scheme should be widely encouraged for employees when suitable.
The introduction of quality circle by Waltham forest over the last five years has been very helpful for employment relationship within the council. Selected employees were meeting at regular interval to map out any change to procedures and also trying to tackle any problem situation arisen within the council. The maintenance of ISO 9000 is a good example of employees taking part in programme of continuous quality improvement within Waltham forest.
Well designed job should arguably be one of the most important challenges of human resource management team within most organisations, so therefore it should pay particular attention to it when undertaking job evaluation for employees. As most organisational theorist would argue for organisation for fully maximise the output of their employees, their jobs ought to fulfill all the characteristics of a well designed job, such skill variety, task identity, task significance, autonomy and feedback.
Communication is the fundamental process of organizing and leading in the workplace, due to the ever changing group of employees that is getting more diverse by the day. The growth of diversity in the workforce over the past few decades has produce new developments in managing employee relations, making it one of the biggest challenges facing managers. Employers must flexible to meet this challenge by improving skills such as active listening, adaptability and decision-making. These core skills can assist managers in tackling difficult issues that may arise within their workforce. However, while the skills mentioned already are important, greater emphasis should be applied interpersonal communication skill for managing employee relations.
The first skill for managers to understand and practice is interpersonal communications, because it is the foundation for all actions in the workplace and it allows the manager an opportunity to build relationships with the overall workgroup without alienating anyone in the work environment. Working with diverse groups of people requires a tremendous amount of interaction. If these interactions are positive, they can help create the right workplace climate, attitudes, beliefs and behaviors. Roper G. (2005)
Conclusion
There is the undeniable recognition that employees form the lifeblood of any organisation. It is essential for organisations to put effective employment relationship at the forefront of their organisation strategy. For organisations to gain a competitive edge in this globalise, there ought to be a synergy between the corporate strategy and human resource strategy. Direct correlation between effective people’s management and business performance could not be overstated.
Facilitating positive psychological contract in the workplace should be a paramount task of any good manager. Positive psychological contract should be nurtured from the very outset of an employee joining the any organisation. Reciprocal communication between the parties is so crucial to understanding unwritten obligations as well as managing conflicts whenever they arise.
The economic recession is definitely having some negative effects on psychological contract at my workplace, but it has not deteriorated to the extent of no return.
References
Rousseau D. M (1995) Psychological Contracts in Organisations; Understanding written and unwritten agreements.
Thomson R. (2004) Managing People. Elsevier Butterworth-Heinemann, Oxford.
Heery E. and Noon M. (2001) A dictionary of Human Resource Management. Oxford University Press, New York.
Pinnington A. and Edwards T. (2000) Introduction to Human Resource management. Oxford University Press, New York.
Mullins L. J. (2005) Management and Organisational Behaviour. FT Prentice Hall, Harlow.
Bratton J. and Gold j. (2003) Human Resource management; Theory and Practice. New York: Palgrave Macmillan.
Beardwell I. and Claydon T. (2007) Human Resource Management, A Contemporary Approach. FT Prentice-Hall, London.
Roper G. (2005) Managing employee relations; develop interpersonal communications and conflict-management skills to better manage employee relations. HR Magazine