Academic journal article International Journal of Education and Management Studies

Psychological Contract and Its Relation to Perceived Organisational Climate among Employees in Service Sector

Academic journal article International Journal of Education and Management Studies

Psychological Contract and Its Relation to Perceived Organisational Climate among Employees in Service Sector

Article excerpt

India is known as the "service hub" of the world. Service sector includes banking, insurance, hotels and restaurants, transport, storage and communication, real estate and other business services including social and personal services. Post to the new economic policy of 1991, the sharp incline of the growth rate was registered in the services sector from 6.7% in 1983-93 to 10% in 2004-05. The share of services in India's GDP increased to 56.3% in 2011-12 as per advance estimates (Economic Survey of India, 2010-12). Though service sector had booming influence on the job market and had contributed to a significant improvement in the lifestyle of middle class Indians, it also faces serious issues with respect to their employees' state of mental health. It has been a common perception that BPOs and other IT industries have high turnover ratios, high absenteeism rates, and feelings of job dissatisfaction, higher rates of depression and burnout and higher rates of divorce. Major reasons for such problems could be attributed to timings of work, shift working, an emphasis on achievement, distribution of rewards, or perhaps when expectations held by employees towards the organisation remain unmet.

Nature of psychological contract

Psychological contracts are those implicit, mutual and reciprocal expectations held by an individual regarding obligations between that individual and another (employer and employee).These obligations generally originate from either of two sources interactions with people within the organisational context and their perceptions of the culture of the organisation (Turnley & Feldman, 1999). The formation of a psychological contract begins when an individual rehearses for future positions or occupations. Promises are made by recruiters or other organisational agents leading employees to form expectations of the organisation. After joining the organisation, within the first three to six months, the employee develops knowledge of the standard working procedure and the values of the organisation (Thomas & Anderson, 2004). During the first two years of entry to an organisation, employees perceived that they owed less to their employers as opposed to what their employers owed (Robinson & Kraatz, 1994).

Psychological Contracts are classified into four types. Transactional contracts are material exchanges between two parties over a brief period of time. A high turnover rate is typical of this. Relational contracts, on the other hand, are those exchanges that establish a relationship. Opportunities for growth and development in one's career are the results of such a contract. Transitional contract reflects the cognitive state of the individual wherein the uncertainty and lack of trust prevail. A balanced contract entails the employee and the organisation contributing to each other's growth and development. The nature of obligations can change due to changes in the employer-employee relationship which is usually caused by changing perceptions held by either party. Perpetual receipt and meeting of obligations would create an increasingly diverse set of expectations between the parties (Blau, 1964).

Psychological contract fulfilment was strongly related with organisational citizenship behaviour and in-role performance (Tumley, Bolino, Lester & Bloodgood, 2002); perception of organisational support (Coyle-Shapiro & Kessler, 2000; Aselage & Eisenberger, 2003). Also, both perceived organisational support and the leader-member exchanges fully mediated the relationship between psychological contract fulfilment and performance on tasks (Cheung & Chiu, 2005).Breaches lead to violations which are emotional responses and comprise of a vast array of negative emotions and can lead to decreased levels of performance, productivity, job involvement, absence of organisational citizenship behaviours and organisational identification, leading to withdrawal and if these feelings persist then quitting the organisation. …

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