management 1 - Chapter Comprehension 1 A. Define the...

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Comprehension Chapter 1 A. Define the psychological contract and discuss the obligations of the contract currently in place. Psychological contracts are defined as an individual’s beliefs, shaped by the organization, regarding the terms and conditions of a reciprocal exchange agreement between individuals and their organization. Social exchange theory , which argues that people enter into relationships in which not only economic but also social obligations play a role and that people are most comfortable when the exchange is balanced. The current employment contract has changed from long-term employment relationships and paternalism to employment based on business needs. Employees are rewarded for skills and performance (with higher pay in some cases), rather than tenure, and they are responsible for maintaining their own employability via personal reskilling and retraining. Since employers cannot offer long-term employment, they provide valuable employees with interesting and challenging work and training or risk losing them to their competitors. In return for high pay and stock options (which represent shared risk exposure), many employers expect long hours of hard work, flexibility, and commitment from highly skilled professionals, but they have less expectation of employee loyalty. For employees, there has been a simultaneous loss of job security accompanied by increasing demands for performance, flexibility, and innovation. This has led to greater job-related stress and the dawning realization that, whether they wanted to or not, many employees have become “free agents” who have to look out for their own interests. B. Explain the importance of the psychological contract and what happens when it is violated. Broken psychological contracts occur when someone fails to fill an obligation, either by reneging on a promise or due to incongruence in how the employee and employer interpret the contract. Contract breaches change their relationship 6 and also affect employee attitudes and behavior. The trust and good faith of the employer–employee relationship is destroyed and cannot easily be rebuilt. Violations cause less damage to the relationship if employees believe that employers were unable, rather than simply unwilling, to keep a promise. When a psychological contract is broken, intense emotional reactions such as moral outrage, shock, indignation, betrayal, resentment, and anger result. The disillusionment over broken psychological contracts can lead to decreased employee job satisfaction, performance, commitment, attendance, discretionary effort, and desire to continue with the organization, and increased organizational cynicism.
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Effective managers understand that the psychological contract is important because it links the individual to the organization, reflects the trust that is a fundamental feature of the employment relationship, and motivates individuals to fulfill their obligations if they believe the other party will do the same. C. Explain the benefits of committed employees and what employers can do to foster
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This note was uploaded on 10/17/2009 for the course ALL 0001 taught by Professor All during the Spring '09 term at University of Central Oklahoma.

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management 1 - Chapter Comprehension 1 A. Define the...

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