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Psychological Contract in Relationships between Company Executives and Employees

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18.12.2019
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Psychological Contract

The psychological contract is one of the important elements in the ideal relationships between company executives and their employees. Therefore, the awareness and overall understanding of the psychological contract is the best way to assist a hospitality manager in managing the personnel effectively. This essay discusses the theoretical perceptions and practical applications of the psychological contract. It also provides an example to illustrate the role of the psychological contract in the working process along with its influence on employees and various consequences that could take place in case of the breach in the psychological contract.

However, in order to achieve proficiency in applying the psychological contract, it makes sense to consider its definition. Hence, the psychological contract is the “partnership” between the top management and employees in relation to their duties towards one another. The psychological contract also implies the perceptions of “expectations” or “promises” that are traded between the involved parties of recruitment relationships. The member of such parties are employees, colleagues, managers of different levels and finally, employers who operate in the same working environment. It is important to acknowledge that there are tacit or implicit contracts of employment. The idea is to take advantage of the informal approach, invisibility, assumptions, understanding that is communicated orally among all stakeholders. Therefore, every party should strive to find the best possible practice and effective application of the psychological contract in the workplace (Mullins & Dossor, 2013).

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The current paper also addresses the unconfirmed perceptions and assumptions between the management and subordinate workforce in the business environment that establish psychological contracts as a whole. Besides, it is important to know that even though the companies do not take advantage of the formal signing of the psychological contract, its perceptions and assumptions play a great role in the motivation and overall performance of employees in the workplace. As a result, some employees have the opportunity to work and be promoted and others are striving to find another job opportunity every time they are fired (French, Rayner, Rees, & Rumbles, 2011).

In fact, the existence of contracts in the workplace is important since it provides both parties with the consequent actions in case any of them does not manage one’s obligations exactly as it was mentioned in the contract. At the same time, in case both parties are satisfied with the adhered duties, there should be no issues in the future. Consequently, the psychological contracts are made based on the assumptions and perceptions of employees about the relationships with one another in the workplace. It is important to make sure that the untested perceptions of employees and employers are acknowledged since they define their behaviors and lead to either positive or negative consequences for both. The most recognized contracts of employment are the relational and transactional contracts (Nickson, 2013).

The transactional contracts are the standard ones that are used in the vast majority of cases with all specific clauses of employment that are agreed by both parties. These transactional contracts consist of the general formal terms and conditions, comprising compensation, rewards, and penalties in the situations at which the contract is not completed adequately. These transactional contracts usually include expectations of employers as well as explain the mutual obligations and legal implications if they take place. These contracts can also include unique specifics of the employment-based on the job description (Banfield & Kay, 2008).

The relational contracts are acknowledged as the psychological ones. The major concern of such contracts is the preservation of duties and the overall quality of both interpersonal and emotional relationships between all stakeholders such as employees, peers, and employers. Consequently, after the combination of both relational and transactional elements of these contracts, the parties could consider their careers altogether. However, there is a need to acknowledge the old and new psychological contracts (Mullins, 2013).

In particular, the traditional or old-fashioned psychological contracts are usually more informal compared to conventional employment contracts. They also consist of other elements such as expectations of employees, not only employers. Such contracts are recognized as comparatively fixed since they carry on the overall perceptions and/or assumptions of the long-lasting employment. This is the time to consider the possible career in a particular company (Berger & Brownell, 2009).

On the contrary, the new psychological contracts are hypothetically more insecure for the reason that they cover the implications of temporary working relationships. Such contracts usually consider the so-called partnership between companies and personnel that are based on the expectation that carries one less enduring employment, including the implications of salaries. Today, there is a newly established trend in terms of the employment arrangements with the interim, contract, portfolio, and knowledge of low-level employees and managers. These parties usually work with companies for a fixed time or under special freelance conditions. In fact, the psychological contract of interim workers is rather difficult since it is discussed based on both conscious and unconscious relationships between employers and employees (Rollinson, 2008).

Nevertheless, the psychological contracts change over time due to the differences in the perceptions and/or assumptions of employees and executives that are usually not stable. Such changes also include the ideas of the work description, including the formation of teams and changes in the business environment. The same happens to the respective psychological contracts. The practice illustrates their complex nature for the reason for considering the psychological trends of all stakeholders that are fairly negotiated, though they could not have explicit considerations towards both executives and employees. As a result, there could be many issues in the workplace unless the parties operate with respect to the psychological contracts that serve as the mind map of the working process. In case the parties are not interested in the fulfillment of these mind maps, this always involves the so-called resistance to manage the change in the working process, which is often denoted as the breach in the psychological contracts. In other words, in case any of the parties are not interested in the completion of one’s duties and obligations, such breaches of the psychological contracts will take place and consequently will lead to the constant process of employment and dismissal (Huczynski & Buchanan, 2013).

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The example of the psychological contracts could be illustrated in the hospitality industry based on hotel management. Several years ago, in one department of Hotel X, the employees were allowed to leave the job thirty minutes earlier one day during the week. This was due to the football match that nobody could miss, including the executives. This was made in order to create the conditions under which both the top management and employees will be able to attend the match and not stay locked in the traffic jam altogether. Such a change in the working schedule was not written in the contract and was fairly understood and accepted by all the stakeholders (Pilbeam & Corbridge, 2010).

After a while, one global company engaged in the hospitality industry purchased the hotel and the new senior management knew anything about the so-called “thirty-minute rule”. The employees were afraid that the new executives of the hotel will cancel this conventional practice and asked the new management to consider this arrangement in the schedule within the terms of conditions of employment. The executives did not approve of this rule due to the constantly growing competition along with the decline in the economy. Another concern was that such changes would have a negative impact on the competitiveness of the hotel. Instead, the new executives asked their new managers to have a meeting with their teams and enlightening the reasons why such a rule could not be accepted by the company management (French et al., 2011).

Sometime later as the new executives were also big fans of this particular football match, they concluded that some in-house agreements could take place on an individual basis by considering the order booking every week. The consequent discussions between the executives, managers, and other employees finally approved such an arrangement in the working schedule for the whole company. In other words, by admitting the presence of the old psychological contract and by openly explaining why it should be continued with the new management of the hotel, the company was able to establish a new psychological contract. As a result, all the stakeholders created even a better working environment that managed to strengthen the newly established relationships. Subsequently, such application of the psychological contract finally increased the willingness of the employees to complete their work earlier without the loss of quality, which also had favorable consequences for the reputation of the hotel. Overall, all the stakeholders achieved the win-win solution simply by understanding and properly applying the psychological contract in the workplace (Huczynski & Buchanan, 2013).

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One of the most significant signs of the high productivity of employees in a company is their overall dedication to work. It is also important to consider that in spite of using different resources for the growth of the business, the human resource management is the most essential resource to use for the reason that the workforce is the greatest asset of any company. The examples of such importance include but are not limited to the following. Employees indeed manage all the major business processes. This includes the establishment of the working structure, improvement of products and/or services, management of the control quality, allocation of the financial resources, development, and control of sales and marketing processes, establishment of new business strategies, setting of new business objectives, etc. In other words, the proper human resource management system is the most essential aspect to consider in every business (Boella & Goss-Turner, 2013).

Overall, any business depends on its target customers, in which the human resources management process is of vital importance. This is especially so in the tourism and hospitality industry. Therefore, the human resources management processes comprise the number of cohesive decisions that help to create favorable relationships between executives, management, and employees. In more detail, the ability of employees in different departments to make the right decisions is rather important. It makes sense for the reason that the actions of employees should be both effective and consistent with each other. It could be explained with the direct impact of these actions on the overall capacity of the business and the consequent ability of employees to reach the objectives of a company. Hence, similar to the marketing mix, there is a mix of the human resources management processes that are as follows: staffing, compensation, work structure, employee relations, training, and development. As a result, all of such elements of the human resources management processes comprise a number of concepts (Nickson, 2013).

It is important to acknowledge that the human resources management processes in the hospitality business are rather different from a great variety of other businesses. For example, the hotel business is entirely based on the specific needs of every single target customer. Such needs are reflected in the number of products and services of the hotel that are aimed at the only purpose to satisfy the existing target customers based on their individual preferences, which will put them in the position to recommend a hotel further. The other example that differentiates the human resources management processes in the hotel business is that the hospitality services are mainly offered to the entrepreneurs, tourists, people who travel from distant countries, people who speak different languages, and are entirely diverse in terms of their religious perceptions, cultural implications, individual beliefs, and many other aspects of concern (French et al., 2011).

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For this reason, the human resources management processes should be constantly improved with the help of personal growth and professional development training. As practice shows, such additional in-house education on the hospitality implications leads to the enhancement of the personnel dedication and overall productivity of employees. Ultimately, such an approach to hospitality management in hotels increases their overall performance in the target hospitality industry. Therefore, only some of the general perceptions of the human resources management processes actually match with the hotel business practices in terms of both hospitality and tourism. In other words, every single hotel is interested in employing those human resources professionals who would be able to hire employees with the strongest skills in hospitality management. Besides, this is much easier to educate the existing personnel and thus improve the level of products or services compared to hiring new people over again. Consequently, hiring highly experienced and easy to educate employees could save hotels a bunch of money, lots of time and effort. However, such an approach to the human resources management processes should be considered with respect to the strategic implications. The idea is that the promotion or raise in the salaries does not work as the motivation of personnel, especially considering the constant flow of new employees with less established hospitality management skills (Mullins & Dossor, 2013).

Consequently, a human resources specialist could manage the overall motivation of the personnel in one or several of the ways presented below:

    • The ability to make employees happy in the workplace is the way to achieve their greatest performance. For example, in the hotel business, employees could have permission to work based on the flexible schedule, which also requires extra shifts to allow such arrangements. Thus, employees will be able to work during the hours that fit them in the best possible way (Huczynski & Buchanan, 2013).
    • The favorable internal communication established in hotels is another valuable way for human resources management to boost the motivation of employees. In fact, many hotels consider such communication as the key to success since it is so natural for people to interact with each other in the workplace. Therefore, the human resources management could also share such information by means of the newsletters, systematic team meetings, memos, and employee presentations over the Internet (Pilbeam & Corbridge, 2010).
    • The use of the so-called grievance boxes could also increase the motivation of employees. On the one hand, the hotel management will solve the problems of particular employees. On the other hand, a hotel will not allow any issues to repeat again. As a result, offended employees will be happy and will not leave the place of employment without explaining the reasons to their managers (French et al., 2011).
    • The use of material incentives could still be considered as an effective practice to increase employees’ motivation. In fact, everyone needs to be paid for one’s knowledge and experience shared with a company. For this reason, a hotel could motivate its employees by guaranteeing them a pay increase by up to 20% in case they manage to increase the annual revenue from 5% to 10% by the end of the financial year (Berger & Brownell, 2009).
    • The final way to boost employees’ motivation is to provide them with additional training in hospitality management insights free of charge. This will also include the career-building classes that will have a strong positive impact on the motivation of employees to work more effectively. It is necessary due to the fact that employees are deeply valued and involved in the overall business process (Huczynski & Buchanan, 2013).

To conclude, by taking advantage of the above training and development initiatives, human resources management could indeed improve the business strategies of hotels and at the same time, illustrate sincere gratitude to the personnel. Overall, by being a part of a company, employees consider themselves as the inseparable parts of the powerful business entity that greatly unites employees and help them achieve even greater business objectives.

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