HRM202: Performance Management Assessment- Individual Critical Review

Performance ManagementAssessment

Case Scenario/ Task

Performance management is a continuous future orientated and participative system that requires an understanding of the factors that help to shape work behaviour. Employee work attitudes and employee understanding of their obligations in relation to the ‘psychological contract’ can impact on successful performance outcomes. This can lead to employees misperceiving the balance between their own fulfilment of obligations against the expectations of the organisation.

Review:

In your review you need to:

• Explain what do we understand as the psychological contract

• Analyse the difference between ‘relational’ and ‘transactional’ psychological contracts

• How does violation happen and the impact it has on individual behaviour

The major aim of this essay is to focus on the aspects of Psychological contract. It will undertake the transitional and relational psychological contract and will demonstrate on the relevance of these two terms. The essay also intends to understand how violation of psychological contracts takes place and its effects on the behavior of individuals.

A psychological contract is defined as the informal obligation, mutual beliefs and perceptions between employee and an employer. It tends to set the dynamics of a relationship between both of them and also defines the descriptive practicality of the work required to be done. It is distinct from the written employment contract in many terms. A written contract only defines the mutual responsibilities and duties in general forms but a psychological contract is beyond that (Ulrich, 2013) .A psychological contract comprises of all those elements that are not present in written contract and can never be mentioned in a written contract. A psychological contract is mostly seen from the point of view of employees but a complete appreciation will definitely require an understanding from the point of view of both the parties. It is majorly perceived by the employees and they make their opinions on the aspects such as how they will be treated by the employers and what is put by the employees in the jobs, etc. When taken this concept in deeper level it becomes very complex but significant in management. It is very important when it comes to change management in an organization and it is most significant in large organizations (Adeyemo & Sehoole, 2014) .The most interesting fact is that the principles and theories of psychological contract can be applied in the situations of human relationships and wider societies. The concept of Psychological contract is not fully explored as of now and it needs to be defined fully to make a positive understanding of it in the organizations. Psychological contract is not a formula or a tool rather it is a philosophy. It is every changing, dynamic and significant.

The term ‘psychological contract’ in Human resource is commonly associated with unwritten expectations of the employees towards the employer. It represents basic obligations, rewards, rights, duties, etc. that an employee thinks that he owes all these from his employer in return for his (employee’s) loyalty and work. In this way psychological contracts are not written but are implied and they have a huge impact over the performances of the employees in a workplace. The psychological contracts if broken may lead to fatal conditions in the workplace (Louw- Potgieter, 2012) . Thus it’s all about how employees perceive things at workplace.

Relational and transactional psychological contracts are the tow most significant terms that are used to define a psychological contract. It is based on the fact that there is a string relational between a transactional contract and mechanistic organization (it is the organization that focuses on short-term competitiveness) and between relational contracts and organic firm (it is the firm that has a focus on long-term adaptability). A transactional contract is the one that does not involve all the parties (Alvesson, 2013) . It does not involve low level workers and employees because they focus on short term efficiency. The major aim of transactional contracts is on coping up with financial obligations. Under this type of contract the identity of workforce does not play a vital role. It only aims to save on the resources and capital somehow. This is the reason why transactional contract does not emphasize on appreciation of human factors and rewarding them so that they can work better. This type of psychological contract works on the production philosophy and in this work processes are standardized. Due to the production philosophy identity of employees or workforce is not considered to be vital. It is based on performance-ratio reward system (Louw, 2013) .In this psychological contract only a few working rules are tailored as success drivers. It is simply defined as the psychological contract that is based on performance. Its base is monetary or economic constraints with the expectations that the employees will be paid for the good performance shown by them. On the other hand it also suggests that the employees will be punished for their under-performance or inappropriate acts (Chovancová, 2013) . Relational psychological contracts are the contracts that are based on long-term adaptability. Due to this reason the major emphasis of this type of contract is on building the trust of the employees and employees are treated as an important element of the organization. It is majorly based on the aspect that socio-emotional obligations are very vital and that further makes collective interest, loyalty and consistency an integral part of the lives of employees at workplace. It also focuses on striking a balance in personal life of employees as well as their work life (Beddoe, 2012) .It appreciates the efforts of workforce and rewards them suitably so that they remain motivated. It simply suggests that values and ideals are shared in this and it is based on interpersonal relationships. In this way transactional contract and relational contracts are exactly opposite to each other. The focus of earlier is on production whereas the focus of later is on people. The relational psychological contract is considered better than transactional contract.

Violations in psychological contracts may occur in certain cases. Violation simply means that a situation that is unacceptable to any of the parties to the psychological contract. It occurs when an employee perceives that his employer has failed to deliver something that has been promised by them. It can be vice versa as well (Chovancová, 2013) . The psychological contract violets when an employer perceives that their employee has failed to deliver whatever he promised. In this case when either of the party perceives that a breach or violation has occurred then they respond negatively to it (Gobind, 2014) .For an instance if employee perceives that the new job he joined will fulfill his security needs but after joining he thinks that it will not happen then it will be violation of psychological contract. Similarly if employer perceives that the new employee will perform well and help in achieving organizational objectives but he could not do so then it will gain be a violation of psychological contract. There will be change in the behavior of individual in certain forms (Budworth, Latham, & Manroop, 2015) . In response to that the loyalty will get reduced from the part of both the parties. The violation will also affect the level of commitment of both the parties. Employees will start taking their work very lightly and shrug- off their responsibilities and duties and employers will also do the same. This reduced level of commitment from the part of both the parties will be fatal for the organization. The behavior of individuals will get negative to everything. The violation in psychological contract may arise at any point of time in employees or employers during the tenure of the work (El Badawy & Hannalla, 2014) . Furthermore, if organization’s activities are being perceived as immoral or unjust it may affect the brand and image of the company. In this manner the mismatch between manager and subordinate may also result in the violation of psychological contract. Thus, it is very necessary for both the parties to take care of each other’s expectations to avoid any violation and maintain the performance.