Critically Discuss the Psychological Contract in the Contemporary Organisation

Organisational Behaviour 200

“Critically discuss the psychological contract in the contemporary organisation.” ________________________________________

There are a range of theories, models and constructs which are used to try to understand behaviour in the workplace. Some approaches look at the organisational context to explain behaviour; others look at the characteristics of individuals; and a third approach is to look at the combination of organisational context and individual characteristics to explain behaviour (Conway and Briner 2005). The psychological contract concept is an approach which looks at the exchange agreement between the employee and the employer. Although there has been no one agreed definition of the psychological contract, Rousseau’s article in 1989 marked a fundamental shift in the meaning and function of the theory. Rousseau defined the psychological contract as “an individual’s beliefs regarding the terms of conditions of a reciprocal exchange agreement between the focal person and another party” (Rousseau 1989,23). In the business context, the contract refers to the reciprocal exchange agreement between the employee and the employer. It is about what the employee believes they are entitled to receive and what they are obliged to offer to the employer in return (McShane and Travaglione 2003). Due to new economic and environmental circumstances such as: restructuring, downsizing, foreign competition, increased reliance on temporary employees and demographic diversity, there has been renewed interest in the concept of the psychological contract (Morrison and Robinson 1997). This is mainly due to the concept being described as a framework for understanding the changes occurring in the exchange relationship between employees and employers. Therefore, it is vital for managers, as representatives of the organisation (Coyle-Shapiro & Kessler 2000) to have a thorough understanding of the psychological contract concept in order to successfully...