Importance of Psychological Contract

The psychological contract is a term used to describe the unspoken promises and commitments made by an employer to an employee. The two parties shared knowledge of what they will each bring to the relationship and what they can anticipate in return. The psychological contract is crucial in determining how both the employer and the employee behave, and it has a big impact on how well the working relationship goes. (Akbarabadi, 2018)

One of the psychological contract's most important advantages is that it can support the development of a supportive and effective workplace. Understanding one another's obligations and expectations will increase the likelihood that the employer and employee will collaborate to achieve their shared objectives. The two parties may begin to appreciate and trust one another as a result of their shared knowledge, creating a more favourable work atmosphere. Increased job satisfaction can result from this supportive workplace, and increased productivity and lower turnover rates can follow. (Globalconstruction, 2021)

The psychological contract also has the potential to lessen conflict in the workplace. Both parties are less likely to act in a way that could lead to misunderstandings or conflict when they are aware of each other's expectations. As both parties are aware of one another's needs and concerns, this mutual understanding can also aid in the quicker and more efficient resolution of disputes. (Al-Natour, 2020)

The psychological contract is also very important for luring and keeping top people. They are more likely to be drawn to an organisation when they believe that it has a powerful and effective psychological contract in place. They are more inclined to believe that the company values its workers and is dedicated to fostering a helpful and encouraging work environment. Similarly, to this, workers are more likely to be satisfied with their jobs and stay with an organisation for a longer period of time if they believe that it has a strong psychological contract in place. (Arsić, 2018)

A crucial element that contributes to the psychological contract's efficacy is efficient communication. A psychological contract is more likely to be robust and effective when both parties are open and honest about their expectations and obligations. This communication can occur in a variety of ways, such as team meetings, feedback sessions, and routine performance reviews. The employer and employee can both benefit from open communication by better understanding each other's needs and concerns as well as the organization's objectives and expectations. (Dimitrovski, 2015)

Fairness is a vital component that boosts the psychological contract's effectiveness. They are more likely to be happy with the employment connection when both parties believe the other is treating them properly and equitably. Fairness can be attained in a variety of ways, such as by paying employees fairly, honoring and rewarding employee achievements, and offering opportunities for professional advancement. A more favourable and fruitful working relationship can be achieved between the employer and the employee by fostering a fair and equal work environment. (Zhang, 2016)

Last but not least, trust is essential to the psychological contract's success. They are more likely to cooperate to achieve shared objectives when both parties have faith in one another to uphold their obligations. Through effective communication, fairness, and consistent behaviour, trust can be developed over time. The employer may establish a more positive and effective work environment that will boost job satisfaction, productivity, and lower turnover rates by developing a trusting relationship with the employee. (Wang, 2016)

The psychological contract is a crucial idea in the job relationship, to sum up. It is essential for fostering a supportive and effective work environment, minimizing conflict, luring and keeping top talent, and fostering a relationship of mutual respect and trust between the employer and the employee. The psychological contract works best when there is clear communication between the parties, fairness, and trust. Organizations may foster a more positive and encouraging work environment that will improve employee satisfaction, productivity, and organisational success by placing a higher priority on the psychological contract. (Wang, 2015)

Conclusion

In the end, both the employee and the employer are accountable for the psychological contract.  Both have individual duties to prevent potential breaches.  It is important for the employer to ensure that commitments are kept and to avoid giving the wrong impression to an employee.  For the employee, it's about controlling expectations so that challenging conditions or unfavorable personal circumstances are not perceived as having a negative influence on productivity or as an employee "acting out".

By taking this information into consideration, a breach can be avoided and a fair contract can be reached between the two parties. 

References

Akbarabadi, M. H. M., 2018. Predicting the helpfulness of online customer reviews: The role of title features. International Journal of Market Research, 62(3), pp. 1-16.

Al-Natour, S. T. O., 2020. A comparative assessment of sentiment analysis and star ratings for consumer reviews. International Journal of Information Management, Volume 54, pp. 102-132.

Arsić, S. B. K. N. A. R. D. &. A. M., 2018. Family business owner as a central figure in customer relationship management. Sustainability, 11(1), p. 1–19.

Dimitrovski, D. T. A., 2015. Clustering wellness tourists in spa environment. Tourism Management Perspectives, 16(1), pp. 259-265.

Globalconstruction, 2021. Global Construction Perspectives and Oxford Economics. [Online]
Available at: www. globalconstruction2030.com
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Wang, H.-J., 2015. A new approach to network analysis for brand positioning. International Journal of Market Research, 57(5), pp. 727-742.

Wang, H.-J., 2016. Green brand positioning in the online environment. International Journal of Communication, Volume 10, pp. 1405-1427.

Zhang, Z. Z. Z. Y. Y., 2016. The power of expert identity: How website-recognized expert reviews influence travelers’ online rating behavior. Tourism Management, Volume 55, pp. 15-24.

Available at:https://www.hrexchangenetwork.com/employee-engagement/articles/the-importance-of-the-psychological-contract[Accessed on 04-05-2023].