Psychological Contract

Introduction

The main foundation of employee-management relationship is psychological contract, which is comprised of beliefs about reciprocal obligations between two parties (Rousseau, 1989). Nonetheless, in most of the cases employees believe the contact was breached in one way or another. Robinson and Rousseau (1994) found that 55 per cent of their sample of managers believed that their organizations failed to fulfill one or more obligations. These thoughts or beliefs, whether true or not will affect the employee trust, job satisfaction, intentions to stay within the organization, sense of obligation, and performance. Because of the negative effects of the Psychological contract if left un-attended make it important to study the impact of

The Physiological Contract is an important aspect of the Organization-Employee relationship. The concept of a “psychological contract” was introduced in 1960 by Argyris; however, it was not until the mid-1980s and 1990s with the advent of corporate downsizing, mergers, and takeovers that the concept of the “psychological contract” was explored as a theory to explain resulting employee turnover behavior (Van den Brande, 1999).

Psychological contract is the belief or expectations each employee has when he/she joins an organization. It might be more of the positive aspects which made the employee choose the organization or the job. Rousseau explains the definition of Psychological Contract from the employee perspective: “Psychological contracts are defined as the beliefs individuals hold regarding the terms and conditions of the exchange agreement between themselves and their organizations” (Rousseau, 1995 pp

When any new employee joins an organization not every aspects will be filled in the official contract. Those left over holes of any contract will be filled with the Psychological contract. In our case study the psychological contract for the employees were tied to the individual companies at first. So their trust of the relationship was bonded to the directors or management of their respective companies. When the company was run as individual units the demand was lesser and employees feel more secured with the management. When the management hierarchy were broken and re-build the psychological contract were breached for the first