Psychological Contract at workplace – An Indian employee perspective

Agenda Definition of Psychological Contract

Difference between Psychological contract and Employment Contract

Literature review

Scope and Methodology

Research Hypotheses

Discussion and Findings: Hypothesis Testing

Implications and Recommendations

Psychological Contract

Psychological contract is defined as

─ Historically, in India PC is affected due to the Attitudes of respect for authorities and subservience Existence of Bureaucratic processes Limited growth of women in corporate world due to male dominance

─ Deregulation of Economy has brought about many positive changes

─ Work environment has undergone significant transformations

─ Employee has started to believe that he/she is an equal to the bosses

Mutual expectations, perceptions and obligations between an employer and its employees, setting the dynamics of the relationship and detailing the responsibilities needed to be carried out.

Psychological vs. Employment Contract

PSYCHOLOGICAL CONTRACT• Represents the mutual beliefs, perceptions, and

informal obligations between an employer and an employee

• Invisible, assumed, unspoken, informal or at best only partially vocalized

• Also known as RELATIONAL contract• Equal importance is given to both employee and

employer

EMPLOYMENT CONTRACT• Represents mutual duties and responsibilities• Formal, written, explicit, codified, well-stated• Also known as TRANSACTIONAL contract• Dominated by employer expectations

Research work so far… According to Rousseau (1990),

Psychological Contract

Employee Obligations Employer Obligations

LoyaltyMinimum Stay

OvertimeExtra-role Behaviors

Acceptance of Transfers

Job SecurityTraining & Development

High PayAdvancement

Support

Contain both Transactional & Relational Elements

Principle of Reciprocity

Psychological Contract Breach/ Fulfilment

Psychological ContractFulfilment

Delivered Employee Obligations

Employer Obligations

Satisfied Employee Need to Rebalance Employment Relationship

Employee’s Perception

Psychological Contract Breach

Intentional Failure

Fulfilled Obligations

In-Role Performance Organisational Citizenship Behaviour

As a result of Equity Theory

Guest & Conway’s Psychological Contract

IndividualAge

GenderLevel in Org.Type of workHours workedMarital Status

ChildrenOrganisational

SectorOrg. sizeLocation

Background

HR Policy & PracticesDirect Participation

Job AlternativesOrganisational Support

Work CentralitySurveillanceOrg. Change

Promises made

PolicyInfluences

Fairness

Trust

Delivery of the Deal Behavioural

Consequences:Intention to stay or quit

Knowledge Sharing

Attitudinal Consequences:

Org. commitEmployee Engagement

Job SecurityMotivation

Content of PsychologicalContract

The Outcomes

Scope and MethodologyPsychological Contract

Expectation from

Employee

Perception of

Employee

Perception of

Employer

Expectation from

Employer

Employer Employee

Mismatch Mismatch

Positive or Negative Impact on Employee Behaviour

Positive or Negative Impact on Employer Behaviour

Influ

ence

s

Influences

Perception of

Employer Expectations

Perception of

Employee Expectations

HR PoliciesHR

Policies

• Field an online survey to collect employee perception data on expectations and behaviour

• Conduct Primary Interviews with HR personnel to understand currently existing policies to fulfil psychological contract

Methodology

Research Objectives

Develop a model of Psychological Contract of an Indian Employee

Identify the relationship between Psychological Contract and Employees’ Behavior in the organization

Suggest suitable HR policies considering the insights from the study

Research HypothesisH1

• The content of Psychological contract differs across employees performing different roles in the organization

H2

• Demographic factors do not have a significant bearing on employees’ perception of Psychological Contract fulfilment

H3

• As work experience increases, the expectations and perceptions change which alters the content of psychological contract

H4

• There is a positive relationship between Organizational Commitment and Psychological Contract fulfilment

H5

• Fulfilment of Psychological Contract has an impact on the employees’ intention to quit the organization

H6

• Existing HR policies are in line with the prevalent employee expectations

Questionnaire & Discussion Guide design

1) Questionnaire Design – Employee Study (Closed-ended)• Importance of expectations – Psychological contract content (Rank) • Expectations from your organizations (Rating)• Organization’s expectation from you (Rating)• Association/ relationship with Organization – Behavioral Impact (Rating)

2) Discussion Guide – HR personnel (Open-ended)• Understand various touch points with employee and its intended purpose• Discuss reasons of attrition and check if Psychological contract unfulfillment plays any role in attrition• Current HR policies to address employee dissatisfaction/ expectation gap

68%

32%

Sample – By Work Expe-rience

Below 4 years

Above 4 years

Role0%

50%

100%

9%8%2%

55%

8%

19%

Sample – By Work Profile Roles

Other

Manufacturing

Technical/Research

General Man-agement

Sales/Marketing

Financial/Clerical

% o

f Res

pond

ents

68%

32%

Sample – By Gender

MalesFemales

Sample Distribution – Employee Study (N=53)

Findings from Primary Research – Online Study with Employees of Different

Organizations N=53

H1: The content of Psychological contract differs across employees performing different roles in the organization

0%

20%

40%

60%

80%

100%

120%

140%

160%

57%

53%0.43

59% 60%33%

0.8

0.33

Top 2 Attributes in Psychological Contract

- By Work Profile/ Role

Work life balance

Adequate fi-nancial rewards

Job Content

Career De-velopment%

of

Re

spo

nd

en

ts

ran

kin

g 1

or

2

• Career development rated as one of the top 2 important parameters of psychological contract by 3 of 4 job categories (Technical/ Research, S&M, Manufacturing)

• Job content one of the important expectations that employees from Financial/ Clerical & Technical/ Research roles had from their psychological contract

VERDICT: Hypothesis accepted

H2: Demographic factors do not have a significant bearing on employees’ perception of Psychological Contract fulfilment

• Decision making Authority: Males prone to greater dissatisfaction

• Performance based financial Rewards: Males feel lesser compensated for the amount of effort that they put in

• Challenging Work: Males more dissatisfied by the amount of challenges that they face while at work

• Thus, Need for Power higher amongst males. However, Females and males equally need Affiliation and Recognition

VERDICT: Hypothesis rejectedChallenging Work Environment

Decision making authority

Lucrative pay and Benefits package

Performance based financial rewards

Growth Opportunities

-1.8 -1.6 -1.4 -1.2 -1 -0.8 -0.6 -0.4 -0.2 0

-0.06

-0.53

-0.94

-0.88

-1.35

-0.92

-1.08

-1.17

-1.42

-1.69

Dissatisfaction Index Across At-tributes - By Gender

(Top 5 attributes)Male (n=36)

Dissatisfaction Rating

H3: With work experience, the changes in expectations and perceptions of employees alter the content of their psychological contract

Decision making authority

Lucrative pay and Benefits package

Performance based financial rewards

Growth Opportunities

-2.5 -2 -1.5 -1 -0.5 0

-0.78

-0.75

-0.97

-1.36

-1.18

-1.82

-1.82

-2.06

Dissatisfaction Index Across Attributes - By Work Experience

>=4 yrs Work Ex (n=18) < 4 yrs Work Ex (n=35)

Dissatisfaction Rating

• Employees with <4 years work-ex directionally less satisfied compared to ones with >4 years work-ex

• Greater the work-ex, more is the dissatisfaction with growth opportunities

• Also (not shown in chart but can be found in report), for >4 years work-ex, content wise, positive social atmosphere and adequate financial rewards hold more importance

• Perceptions change, but content of psychological contract is intact

VERDICT: Hypothesis partially true

H4: The fulfilment of psychological contract results in greater organizational commitment than in the event of its violation

Low Sa

tisfacti

on (n=15)

Modera

te Satisfa

ction (n

=22)

High Satisfa

ction (n

=16)0

1

2

3

4 3.23.81 4.03

Organization Commitment Index- By Satisfaction Ratings

Mea

n Co

mm

ittm

ent I

ndex • With increased satisfaction, commitment

towards the organization also increases.• Fulfilment of psychological contract results in

greater organizational commitment.

VERDICT: Hypothesis accepted

H5: Fulfilment of Psychological Contract has an impact on the employees’ intention to quit the organization

0

1.5

32.87 3.1 3.53

Intention to stick to the organi-zation

- By Satisfaction Ratings

Me

an

Ra

tin

g

• Positive correlation between employee dissatisfaction and his/ her intention to quit

• Higher loyalty index for people having higher satisfaction index in their organization

VERDICT: Hypothesis Accepted

Fulfilment of psychological contract results in improved intentions to stick

to the organization

Findings from Primary Research – Telephonic Interviews with HR personnel of

few organizations N=4

To validate H6: Existing HR policies are in line with the prevalent employee expectations

H6: Existing HR policies are in line with the prevalent employee expectations

There is always a gap between the expectations of the employee and the organization. Those gaps give rise to various policy initiatives by the HR team

Career & Growth

• Development Cell

• Training Center

Job Satisfaction

• Role Clarity• Team Fit• Psychometric

Analysis

Working Environment

• Social Interactions

• Celebrations• Team

Building

Financial Rewards

• Industry Based

• Performance Based

• Growth Based

Work-Life Balance

• Flexible working hours

• Work From Home

H6: Existing HR policies are in line with the prevalent employee expectations

Crèche FacilityInternal Job Posting

Friendly SportsFun Competitions

Fee Waiver to Staff’s wards

Interest Free Personal LoansHousing Loans

Women’s Safety in ShiftsRegulations on Overtime

Flexible Leave PolicyMedical Loan for Dependents

Implications and Recommendations

• The content of psychological contract does differ across roles• Findings suggest that employees in financial services are

primarily concerned with financial rewards while those in marketing and sales give more importance to growth and work life balance

• The HR needs to understand particular motivations of each case in address them accordingly

Demographic factors don’t affect

fulfilment of PC

• Findings suggest that males are in general more dissatisfied than females

• Males look forwards to more challenging work and expect performance based financial rewards

• HR should make employees realize the importance of their jobs and ensure that in the long run they are rewarded for performance

H2

The content of psychological

contract differs across roles

H1

Understand Motivations

Across Diverse Work Profiles

Emphasize the linking of

rewards to performance (especially for

males)

Reject

Accept

Implications and Recommendations

Organizational Commitment, Low

Attrition and Satisfaction are

positively correlated

• Findings suggest that all three factors are positively correlated• HR should lay special stress on satisfaction management of the

employees which in the long run according to findings leads to lower attrition and higher organizational commitment

H4, H5

Existing HR policies are in line with

employee expectations

• Several programmes are implemented in each organization to ensure employee satisfaction

• HR should exercise constant vigilance to judge effectiveness of the programs in place

H6

With work experience, the content of PC

changes

• Employees with over 4 years of work experience are relatively more dissatisfied with their growth opportunities and pay

• HR should set realistic growth expectations and manage expectations of their employees

H3

Set realistic growth expectations from

early years in organization

Control overall commitment and attrition through

satisfaction management

Dynamics needs require constant vigilance of HR programmes

Partially Accept

Accept

Accept