How the Psychological Contract Can Be Integrated in Skyline International

A psychological contract is an essential element of the relationship between employees and employers. Some scholars define psychological contract as the unwritten working agreement that outlines the obligations of employees and employers towards each other. Although the psychological contract is not explicitly written in employee-employer relationships, it has been found to be a powerful determinant of organisational behavior (Coyle-Shapiro, 2001).Like in the written contracts, a breach of the psychological contract(by the employer or the employee) affects employment relations in many different ways. A 'breach' of the psychological contract can lead to low-level commitment among employees, reduction of job satisfaction and even an increase in the employees' propensity to leave the organisation (Mullins & Christy, 2013; Coyle-Shapiro, 2001). However, Mullins and Christy (2013) note that a breach of the psychological contract relates to the perceptions of employers and employees about the fulfillment of their obligations as spelt out in the written agreements. At Skyline International, there is an apparent breach of some aspects of the psychological contract between the employees and the organisation, resulting in the current situation.

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As technology advances and competition stiffens, managing organisations has become a challenging undertaking. Under these circumstances, the psychological contract has also become dynamic and ever-evolving. In other words, technology advances and increased competition place new obligations on employees and employers. For instance, these dynamics create an urgent need for employers to create a balance between the unwritten needs of the employees and that of the company to sustainably compete and prosper (Mullins & Christy, 2013; Dharmawardena, 2006). At the Skyline International, there is lack of balance between the expectations of the employees relating to job security and the company goals in the context of the changing business environment in which the organisation operates.

A study conducted by Turnely and Fieldman (1998) found that managers of restructuring organisations were significantly likely to perceive psychological contract breaches in the areas of job security. Employees of Skyline International have expressed their frustrations at the company's failure to guarantee their job security in the current environment of restructuring. On top of this, pay cuts have been implemented despite the lack of salary increases over a long period during which the company posted strong results in terms of profits. According to Mullins and Christy (2013) employers are expected to make deliberate efforts to provide security for their employees. This can be implemented at Skyline International through procedural layoffs because downsizing of the workforce appears an inevitable prospect for the organisation as it restructures. Although such step leads to some job losses, it makes the departing employees feel that justice has been done as well as increases positive perceptions among the remaining employees about the organisation's ability to prevent future violations of the psychological contract (Turnely and Fieldman, 1998).

A violation of psychological contract is considered to be caused by lack of understanding between the organisation and employees. Such relationship creates the notion that effective communication between the two parties can avoid or correct these violations (Guest & Conway, 2002). In the case scenario, employees are not receiving clear communication from the relevant departments on the way forward regarding their job security, training, and appraisals. As a result, the employees have been forced to rely on external sources for information on the firm's strategic decisions. According to the Dharmawardena (2006), lack of clear communication channels is seen as one of the primary causes of perceived breaches of the psychological contract in many business organisations. For effective implementation of the psychological contract in areas such as job security, it is critical that communication is done in such manner that information on the organisation's strategic policies is channeled through official platforms. If communication is effective, the employees may not understand the reasons that have motivated the company to lay off some of its workers. As Guest and Conway (2002) note, it is the process rather the content that matters in communication. Accordingly, employees at Skyline International need to be informed promptly and accurately about Skyline's plan of merging into a new company and the implication of such move on the job security of its current workforce. This way, they would embrace any changes needed to save the firm even if the implementation of such changes means losing their jobs.

Employee involvement is another strategy that can be used to integrate the psychological contract with the issues affecting the employees at Skyline International. Employee involvement allows workers to participate in genuine conversations with the leaders of the organization on how best certain issues could be handled without jeopardizing the interests of the organisation and those of the employees. Involvement motivates employees since they feel that management appreciates their skills and knowledge. It is a valuable technique in so far as effective communication is concerned (Mullins & Christy, 2013).In the case study, employees are kept in the dark regarding the various measures that are being undertaken to restructure the organisation. For this reason, it is critical that Skyline employees participate in decisions such as voluntary retirement, remuneration, and redeployment of staff to the Skyline Mini, among other issues affecting them directly. This approach would make them feel part of the restructuring process thereby minimizing cases of negative feedback regarding Skyline's new policies.

Conclusion

As a conclusion, a breach of the psychological contract can have a negative impact on organisational behaviour. Such violation may lead to departures and resignations, reduction of employee morale, and lack of commitment to organisational goals. Lack of job security and inadequate employee involvement in matters that affect them are some of the factors likely to make employees develop negative perceptions towards a psychological contract. For these reasons, it is crucial for Skyline to make every effort to provide job security to their workers. Although it is apparent that layoffs are inevitable at Skyline, it is critical that such step is taken after employees have been duly informed of the reasons and a clear roadmap is designed on how to compensate the exiting employees. Also, the package for the remaining employees must be clearly outlined to allay further fears of job loss and other uncertainties which may breach the psychological contract.

References

Coyle-Shapiro, J. A. (2002). A psychological contract perspective on organizational citizenship behavior. Journal of Organizational Behavior, 23(8), 927-946. doi:10.1002/job.173

Dharmawardena, K. (2006). The changing nature of the psychological contract and its impact on modern organizations. Monash University. Retrieved from http://users.monash.edu.au/~prowler/Documents/PsychContract.html

Guest, D. E., & Conway, N. (2002). Communicating the psychological contract: an employer perspective. Human Resource Management Journal, 12(2), 22-38. doi:10.1111/j.1748-8583.2002.tb00062.x

Mullins, L. J. with Christy, G (2013) Management and Organisational Behaviour. 10e. Harlow : FT Prentice Hall.

Turnley, W. H., & Feldman, D. C. (1998). Psychological contract violations during corporate restructuring. Human Resource Management, 37(1), 71-83. doi:10.1002/(sici)1099-050x(199821)37:13.3.co;2-5