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
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.

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

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
Principle of Reciprocity

Employee Obligations Loyalty Minimum Stay Overtime Extra-role Behaviors Acceptance of Transfers

Employer Obligations Job Security Training & Development High Pay Advancement Support

Contain both Transactional & Relational Elements

Psychological Contract Breach/ Fulfilment

Delivered Employee Obligations Employees Perception

Employer Obligations Fulfilled Obligations Psychological Contract Fulfilment Satisfied Employee

Intentional Failure Psychological Contract Breach

Need to Rebalance Employment Relationship In-Role Performance

As a result of Equity Theory

Organisational Citizenship Behaviour

Guest & Conways Psychological Contract

Background

Individual Age Gender Level in Org. Type of work Hours worked Marital Status Children Organisational Sector Org. size Location

Policy Influences

Content of Psychological Contract

The Outcomes

HR Policy & Practices Direct Participation Job Alternatives Organisational Support Work Centrality Surveillance Org. Change Promises made

Fairness Trust Delivery of the Deal

Attitudinal Consequences: Org. commit Employee Engagement Job Security Motivation Behavioural Consequences: Intention to stay or quit Knowledge Sharing

Scope and Methodology

Employer Expectation from Employee Perception of Employee

Mismatch HR Policies

P s y c h o l o g ic al C o n tr a c t

Employee

Methodology
Expectation from Employer

Perception of Employer

Mismatch HR 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

Positive or Negative Impact on Employer Behaviour

Positive or Negative Impact on Employee Behaviour

Perception of Employee Expectations

Perception of Employer Expectations

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 Hypothesis
H1 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) Organizations 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

Sample Distribution Employee Study (N=53)

Sample By Work Profile Roles
100%

Sample By Work Experience

19% 32% 8%
% of Respondents

Other Manufacturing

68%

Below 4 years Above 4 years

50%

55%

Technical/Research General Management Sales/Marketing

Sample By Gender
32% 68%

0%

2% 8% 9%

Males Females

Role

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
Top 2 Attributes in Psychological Contract - By Work Profile/ Role
160% 140%

Work life balance

120% 100% 80% 60%

80%
43% 53%

Adequate financial rewards Job Content 33%

40% 20% 0%

57%

59%

60% 33%

Career Development

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

% of Respondents ranking 1 or 2

VERDICT: Hypothesis accepted

H2: Demographic factors do not have a significant bearing on employees perception of Psychological Contract fulfilment
Dissatisfaction Index Across Attributes - By Gender (Top 5 attributes) Male (n=36) Female (n=17)
-1.69 -1.35 -1.42 -0.88 -1.17 -0.94 -1.08 -0.53 -0.92 -0.06 -1.8 -1.6 -1.4 -1.2 -1 -0.8 -0.6 -0.4 -0.2
Dissatisfaction Rating

Growth Opportunities

Performance based financial rewards

Lucrative pay and Benefits package

Decision making authority

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

Challenging Work Environment 0

VERDICT: Hypothesis rejected

H3: With work experience, the changes in expectations and perceptions of employees alter the content of their psychological contract
Dissatisfaction Index Across Attributes By Work Experience
>=4 yrs Work Ex (n=18) -2.06 -1.36 -1.82 -0.97 -1.82 -0.75 -1.18 -0.78 -2.5 -2 -1.5 -1 -0.5 Dissatisfaction Rating 0 < 4 yrs Work Ex (n=35) Growth Opportunities

Performance based financial rewards

Lucrative pay and Benefits package

Decision making authority

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
Organization Commitment Index - By Satisfaction Ratings
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

Mean Committment Index

3.81 3.2

4.03

With increased satisfaction, commitment towards the organization also increases. Fulfilment of psychological contract results in greater organizational commitment.

VERDICT: Hypothesis accepted

Low Satisfaction (n=15) Moderate Satisfaction High Satisfaction (n=16) (n=22)

H5: Fulfilment of Psychological Contract has an impact on the employees intention to quit the organization
Intention to stick to the organization - By Satisfaction Ratings
4 3.5 3.53 2.87 3.1

Mean Rating

3 2.5

2
1.5 1 0.5 0

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

Low Satisfaction Moderate High Satisfaction (n=15) Satisfaction (n=22) (n=16)

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
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

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

H6: Existing HR policies are in line with the prevalent employee expectations
Crche Facility Internal Job Posting Friendly Sports Fun Competitions Fee Waiver to Staffs wards

Flexible Leave Policy Medical Loan for Dependents

Interest Free Personal Loans Housing Loans

Womens Safety in Shifts Regulations on Overtime

Implications and Recommendations

Accept

H1

The content of psychological contract differs across roles

Understand Motivations Across Diverse Work Profiles

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

Reject
Demographic factors dont affect fulfilment of PC

H2

Emphasize the linking of rewards to performance (especially for males)

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

Implications and Recommendations

Partially Accept

H3

With work experience, the content of PC changes Accept Organizational Commitment, Low Attrition and Satisfaction are positively correlated

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

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

H4, H5

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

H6

Accept 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