Why is the Psychological Contract Important to the Organization?

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Human resource management plays an important role in the organisation. It not only helps the employer evaluate employee accurately but also contribute to the firm’s development. Hence, the appearance of psychological contract is one of the most effective tools to help the organisation improve their HRM issues. However, it also has some challenges for the manager to overcome. Therefore, the main aim of this essay is to analyse the importance of the psychological contract in many aspects and support more evidences and experiences to support employers’ view in managing people. Psychological contract is the unwritten contract that illustrates a set of expectations exists between the individual and the organisation (Sonnenberg et al, 2011). Svensson & Wolven (2010) point out that it can be a relationship between the members of a group, the people who work in the same company, department or organisation, several groups or parties in an organization, etc. It includes the work performance requirement, job security, training, potential development, compensation and subside. Psychological contracts are the mental representation based on belief or perception, so it may help the employees and employers get rid of a complicated employment relationship. For instance, the employees and employers may understand very clearly about the terms and conditions and what they have been agreed upon. The perception of each individual is very important and essential (Ekelund et al, 2010, 1438). Thus, when they work in a high competitive group, it could motivate them to implement their work consciously. Combined with a few exceptions, some researches cite that psychological contract is only regarding to the employee–manager relation and the term that mostly... ... middle of paper ... ...Review, 37(5), 473-489 Smissen, S.; Schalk, R.; Freese, C. (2013) Organizational change and the psychological contract – How change influences the perceived fulfillment of obligations, Journal of Organizational Change Management, 26(6), 1071-1090 Sonnenberg, M.; Koene, B.; Paauwe, J. (2011) Balancing HRM: the psychological contract of employees - A multi-level study, Personnel Review, 40(6), 664-683 Svensson, S. & Wolven, L-E. (2010) Temporary agency workers and their psychological contracts, Employee Relations, 32(2), 184-199 Vantilborgh, T.; Bidee, J.; Pepermans, R.; Willems, J.; Huybrechts, G.; Jegers, M. (2012) Volunteers’ Psychological Contracts: Extending Traditional Views, Nonprofit and Voluntary Sector Quarterly, 41(6), 1072–1091 Other: Reber, A. S.; Allen, R.; Reber, E. S. (2009) Psychological contract, The Penguin Dictionary of Psychology, Penguin, London
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