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Towards Enhanced Labour Relations: Theorizing Psychological Contracts to Formal Work Designs.

Towards Enhanced Labour Relations: Theorizing Psychological Contracts to Formal work Designs

Moses Siruri Marwa1 Eric Morusoi Kibet2

1Human Resource Management Scholar

2Assistant Professor of Business Law, United States International University

DOI: https://doi.org/10.51244/IJRSI.2024.1109013

Received: 07 August 2024; Revised: 29 August 2024; Accepted: 03 September 2024; Published: 28 September 2024

ABSTRACT

Psychological contracts have experienced a resurgence of interest from researchers focusing on the ever-changing nature of employer-employee relationships in organizations. Whereas research on the construct has been robust, there has been little effort in abstracting psychological contracts to formal work designs. This article attempts to build from various multi-disciplinary streams of scholarly argument to advance debate on psychological contracts and formal job designs, the intention being ultimately progressing of a new work design model that ties psychological contracts to formal work designs.

Key Words: Psychological Contracts. Work Designs.  Labour Relations

BACKGROUND

Argyris (1960) is credited to have coined the word psychological contracts, where he viewed the psychological contract as an implicit relationship between employees and their employer, with the understanding between these two being that their relationship could develop in such a way that the employees would give higher productivity and lower grievances, in return for adequate compensation from employers (Taylor & Tekleab, 2004). Levinson et al. (1962) took the view that psychological contracts are hinged on obligatory expectations between employees and employers, each of the parties having a belief that the other party is duty bound to fulfill their expectations.

Rousseau (1989) reconceptualized psychological contracts and highlighted that the crux of psychological contracts is an individual’s perception of agreement, consequently leading to the general view of the psychological contract evolving from focus on two parties to an exchange, to an individual’s perception of obligations in an exchange. Rousseau (2001) additionally suggested that an individual’s perception of obligations in an exchange is affected by several factors such as how one is socialized as well as by some other organizational influences such as human and structural contract makers (Rousseau, 1995).

From the rudimentary conceptualizations of the concept, literature on psychological contracts has progressively flourished over the years and the concept is now firmly embedded within the lexicon of human resource management theory and practice, although it has been seen to be skewed towards a particular managerialist interpretation of work and employment (Cullinane & Dundon, 2006). It is therefore imperative for research scholars and practitioners alike to continually synthesize past evidence and track developing themes in psychological contract research to ensure that ideological currency and psychological needs continue being central in engagements (Jacqueline et al., 2019). This is especially important given that once formed, psychological contracts have been found to be stable and resistant to change (Coyle-Shapiro & Kessler, 2000; Rousseau, 2001).

Statement of the Problem

Proper job design is the cornerstone of cordial labour and industrial relations, especially for organizations in environments characterized by volatility, uncertainty, complexity and ambiguity. Regrettably, few studies have attempted to explore how psychological contracts can be examined as a continuum towards formal job design.

Objective

Given that there lacks a universally agreed theoretical model linking psychological contracts to formal job designs, this paper is a research agenda that aims to guide debate in the research community on the possibility of developing a continuum that links psychological contracts to formal job designs.

TYPES OF PSYCHOLOGICAL CONTRACTS

Savarimuthu and Jerena (2017) highlight various types of psychological contracts as argued for in the literature. In citing Miles and Snow (1980) the authors indicate that the first type of psychological contract is based on transactions that involve specific monetizable exchanges between parties over a specific period, and as such, the rational expectation of employees in such contracts is not based on building a relationship with the employer but on remuneration.

Savarimuthu and Jerena (2017) contrast the transactional psychological contracts with a second type of psychological contract viz the relational psychological contract which they argue goes beyond exchange of economic resources to include socio-emotional obligations that bind both the employer and employees. Conway and Briner (2005) posit that given that relational contracts are based on social exchange, the more transactional a contract becomes, the less relational it becomes.

The third type of psychological contract presented by Savarimuthu and Jerena (2017) based on the work of Rousseau (2004) is the balanced contract. Such a contract is one that has aspects of both the relational contract and the transactional contract and is seen to be a more mutually beneficial psychological contract as it is alive to dynamics of emerging change in economic and workers conditions on existing employment relationships (De Clercq, Azeem & Haq, 2020).

JOB DESIGN THEORIES

Theory is useful in qualitative research as it buttresses a research’s conceptual framework, paradigm, and epistemology, and helps provide logic behind methodological choices (Collins & Stockton, 2018). Researchers can create new theories from empirical research through use of grounded theory and abduction (Timmermans & Tavory, 2012). Saldaña (2015) argues that frameworks of noted theorists are best placed to guide research of qualitative nature. Accordingly, the Social Exchange Theory, the Effort-Reward Imbalance Model and the Job Demand-Resource Model have been used in the succeeding section to build a case on how psychological contracts can be progressed to formal work designs.

A. The Job Demand-Resource (JD-R) Model

The Job Demands Resources (JD-R) Model was first postulated by Demerouti, Bakker, Nachreiner and Schaufeli (2001) who viewed job demands as those physical, social, or organizational aspects of a job that require sustained physical or mental effort and therefore have associated physiological and psychological costs. Job resources on the other hand were defined by Demerouti et al (2001) as the physical, social, or organizational aspects of a job that are useful in achieving work goals, and that help reduce job demands and the associated physiological and psychological costs, and may include social support, feedback, and job control (Schaufeli & Taris, 2014).

Variations to the initial JD-R Model were later proposed by Schaufeli and Bakker (2004) to have work engagement as a mediator variable in the relationship between job demands and health problems, and job resources and turnover intention. The revised JD-R model primarily sought to explain a negative psychological state, that is, burnout, in the context of its positive counterpart, that is, work engagement (Schaufeli & Taris, 2014).

In both the initial model and the revised JD-R Model, the core argument is that when job demands are high, additional effort must be exerted to attain work goals which then leads to employee burnout (Schaufeli & Taris, 2014). Wood and McCarthy (2002) contend that excess workload is a key driver of employee burn out in organizations.

Studies such as those of Kubiat and Mfon (2016) have established that employees that suffer from burn out are more likely to resort to strike actions than those who do not suffer from burn out. This then infers that management of employee burn out can be a useful strategy in enhancing labour relations in organizations. Accordingly, the postulates of the Job Demand-Resource can be used to derive insights on furtherance of labour relations in the context of psychological contracts in formal work designs through its posits of the use of work engagement, social support, job control, and feedback (Schaufeli & Taris, 2014).

B. Effort–Reward Imbalance (ERI) model

The Effort–Reward Imbalance (ERI) model, first proposed by Johannes Siegrist, suggests that where there is an imbalance between work effort and reward, such that effort is greater than reward, work related stress is likely to occur (Siegrist, Starke & Chandola et al., 2004). The model also proposes that over-commitment by an individual from personal motivation can lead to negative health outcomes (Siegrist, Starke & Chandola et al., 2004). Three reward types depicted in the model are esteem, job security, and promotion (Siegrist, Li & Montano, 2014).

In its first use, the model was applied to investigate epidemiological outcomes, but has since been used in social and psychological studies touching on various employee variables such as burnout (e.g. in Bakker, Killmer, Siegrist & Schaufeli, 2000), work engagement (e.g. in Feldt et al., 2013) and job satisfaction (e.g. in Ge et al., 2021) premised on the view that work contract is  basically a norm of social reciprocity (Li, Kaltiainen & Hakanen,2023).

The model suggests that failed reciprocity resulting from the imbalance in investing more efforts than the rewards being received leads to an employee developing negative emotions such as anger, injustice, stress, and adverse health effects (Li, Kaltiainen & Hakanen,2023). Work efforts are typified by heavy workload, demanding work tasks, disruptions, and work disturbances. Rewards on the other hand are classified into three categories: esteem (recognition and respect), job security (continuity of current work), and promotion (salary, promotion, and career advancement).

C. Social Exchange Theory

The development of the Social Exchange Theory is attributed to the early works of John Thibaut, George Homans, Peter Blau and Harold Kelley who sought to study interpersonal relationships in among others, dyadic relationships (Davlembayeva, 2023). The theory has since been widely considered as useful in organizational studies and practice, especially in the analysis of micro-level processes of social exchange, and the social structures they constitute (Delamater & Ward, 2013). In principle, the theory seeks to explain four main constituents of individuals’ social behaviour. These constituents are a resource-reward relationship, the mechanisms of social exchange, the role of social structures and social capital factors in facilitating exchange relations, and the concept of reciprocity that creates obligations between parties in each social exchange set-up (Davlembayeva, 2023).

With reference to the resource-reward relationship, rewards can either be socioemotional or economic benefits (Davlembayeva, 2023). Shore, Tetrick, Lynch and Barksdale (2006) argue that socioemotional benefits are those that arise from situations where resources seek to address self-esteem and/or tackle social needs, while economic benefits are those that seek to tackle financial needs. With regards to the mechanisms of social exchange, the theory argues that resources are exchanged based on a cost-reward analysis, a largely subjective process (Blau, 2017). On its third constituent, social structures and social capital factors, the theory argues that these facilitate social exchanges but have a dependency on the outcome of the interactions of the initial relationship between the parties (Davlembayeva, 2023). The fourth constituent, reciprocity, is based on mutual and complementary arrangements, serving as a regulating mechanism, motivating the parties to pay back for the resource provided (Blau, 2017).

PSYCHOLOGICAL CONTRACTS AND LABOUR RELATIONS.

Psychological contracts are a major source of labour disputes in organizations, emanating from accusations of breaches of contracts by the contracting parties (Dabos & Rousseau, 2004). From an employee perspective, breach of psychological contracts occurs when an employee perceives that the organization has not fulfilled its part of the contract adequately, and the breach could be as simple as breaking one obligation or promise (Person, Kernen & Choi 2011).

Cregan, Kulik, Metz and Brown (2021) suggest that employees react to breaches of psychological contracts principally by reducing performance efforts and loyalty thereby hurting organizational performance. Other documented negative consequences to breach of psychological contracts include loss of trust, reduced job satisfaction and higher turnover intentions (Clinton & Guest, 2014; Person et al., 2011).

Sparrow and Cooper (2003) postulate that employee responses to breaches to psychological contracts may also have serious affective and emotional effects on employees resulting from feelings of injustice, betrayal, anger, resentment, a sense of wrongful harm and deep psychological distress. As important, concerns of neuroticism as a personality trait and its effect on the performance of work by employees have hence increasingly become an area of significant focus in discourses around psychological contracts (Walia, 2016).

Neuroticism is a personality trait disposition to experience negative effects such as anger, anxiety, irritability, emotional instability, and depression (Widiger, 2009). Persons with higher levels of neuroticism tend to interpret ordinary situations as threatening, respond poorly to environmental stress and construe minor frustrations as hopelessly overwhelming (Widiger & Oltmannsm, 2017). Effects of neuroticism on individuals include a diminished quality of life, feelings of ill‐will, excessive worry, occupational failure, and marital dissatisfaction (Ozer, 2006). To the organization, elevated levels of neuroticism contribute to poor work performance owing to emotional preoccupation, exhaustion, and distraction (Widiger & Oltmannsm, 2017).

In general, neuroticism affects employer-employee relationships and may aggravate feelings of breaches in employment contracts (Zhang & Dai, 2015). Bearing in mind that neurotic employees react to stressful situations with distress and convert ordinary situations into threatening situations, neurotic employees are also more likely to resort to industrial action than non-neurotic employees (Vachhrajani, Mishra, Rai & Paliwal, 2022). Regrettably, the bulk of the literature provides only anecdotal evidence on the relationship between neuroticism and industrial action, making the subject a rich ground for empirical investigations for job design theorists.

Theorizing Psychological Contracts to Formal Work Designs

The literature enables us to derive propositions that can theorize how psychological contracts can be linked to formal work designs and thereby enhance industrial relations: with two variables emerging as offering potential moderating effects in the perceived relationship between psychological contracts and formal job designs. These variables are individual differences (Rousseau, 1995) and social structures (Davlembayeva, 2023).

Individual differences, by hypothetical conjecture, connect psychological contracts and formal work designs through the moderating roles of an individual’s socialization (Rousseau, 1995) and personality differences (Widiger,2009). This is because these variables influence an individual’s reactance to instances of role creep (Siruri & Muthoni, 2022) and with susceptibility to neuroticism being a robust predictor of an employee’s ensuing actions to contract violations (Zhang & Dai, 2015). Empirical studies also show that there exists a statistically significant relationship between an individual’s socialization and work performance (Darius, 2023).

Being imperative in job designs, social structures conceivably also knot psychological contracts to formal job designs, as social structures are argued to have the ability of guiding human thoughts and behaviors, based on what is deemed appropriate in different situations (Vink, J., & Koskela-Huotari, 2021). Social structures moreover mirror the exigency of the outcome of interactions on the initial relationship between parties (Blau, 2017; Cropanzano & Mitchell, 2005). Furthermore, social structures also lead to attainment of optimum conditions in contractual engagements thereby mitigating likelihood of a state of disequilibrium in social exchanges (Trist, Higgin, Murray & Pollock, 2016).

DISCUSSIONS AND PROPOSED MODEL LINKING PSYCHOLOGICAL CONTRACTS TO FORMAL JOB DESIGNS.

Although psychological contracts and formal job designs have been studied at different levels of analysis, there exists limited research that organizes and synthesizes existing literature from multidisciplinary perspectives with a view of connecting psychological contracts to formal job designs. This article aims to address this gap by proposing a guiding framework to relate psychological contracts to formal work designs.

From the earliest work on psychological contracts, to the various streams of contemporary research on job designs, there seemingly is an alignment that three broad themes can help offer a framework for harnessing the relationship between psychological contracts and formal job designs. These three are job demands, reciprocity and socio-emotional obligations. Individual differences and social structures, as also argued in the foregoing section, can buttress the connection. Our proposition, based on this argument, is that progression from the psychological nature of a job to its formal design should be a continuum, the definitive-incongruity distance ultimately being as minimal as possible. Such a framework is as illustrated below:

Framework relating psycological contracts to formal job designs.

The framework suggests that in initial contracting, psychological contracts could significantly differ from formal job designs hence the incongruity-definitive position farthest. Reciprocity, of a transactional nature, accordingly, becomes a basic building block under such circumstances. Once reciprocity is established, socio-emotional obligations are to be accentuated, having social structures as a basis. Job demands are then to be progressively harmonized, to the point where the incongruity-definitive distance is least, but whilst having individual differences as the moderator of the progression.

Incongruity is where the psychological contract has its widest variation from a formal job design. The definitive is the point where the psychological contract is as close to a formal job design as possible. Social structures and individual differences are postulated to be bi-dimensional as they, being moderating variables, could either increase or reduce the incongruity-definitive distance.

The movement from incongruity to formal job designs is also hypothesized to be lateral; but that from incongruity to the definitive under formal jobs design assumed to be a vertical movement. This is from the fact that formal jobs can keep being refined through various job re-designs such as job enlargement and job enrichment, as opposed to psychological contracts that may not be very variable to reviews.

The framework can be applied to enhance labour relations in industrial relations where employers in psychological contracts are to seek to reduce the incongruity-definitive distance to as little as possible, as the greater the incongruity-definitive distance, the higher the prospects of strife, from unmet expectations of either of the contracting parties. If job demands would be the foundation of reducing the incongruity-definitive distance, burn out could be higher hence worsened employer-employee relations. Socio-emotional obligations are to counterbalance the transition from reciprocity to job demands, with social structures being carefully designed to be as accommodative as possible; and the moderating effect of individual differences as subdued as possible.

LIMITATIONS OF THE PROPOSED MODEL.

The vagueness of constructs can lead to variations in interpretations of their conceptual boundaries, which, in turn, can lead to variance in findings in actual empirical data-backed research undertakings (Cropanzano & Mitchell, 2005). Clear construct and variable description hence will become an important schema in further development of the framework, towards attainment of an evidentiary threshold that is supportive enough to wide generalizations in the practice of job designs and labour relations.

SUMMARY AND CONCLUSION

This paper attempts to theorize psychological contracts to formal work designs with a view of seeking to enhance labour relations in both formal and informal employer-employee engagement.  We first present a discourse on some traditional job design theories. We then subsequently provide a synopsis of the interconnected nature of these theories with psychological contracts by hypothesizing how some specific social variables viz individual differences and social structures can be a plausible moderator of the link between psychological contracts and formal job designs. We then propose a new model of job design in psychological contracts and discuss its potential applications for future research and managerial implication directions.

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