Psychological Contract Exployee Performance

Introduction

This chapter presents the review of literature on the relationship between psychological contract violation and its effects on employee performance in a public service organization. In reviewing the relevant literature and documentation on the subject of psychological contract, the researcher seeks to acknowledge the ideas of other researchers which relates to the effect of a psychological contract violation on the performance of employees. Definition of psychological contract

Levinson (1962), the father of Psychological contract defined Psychological contract as an “unwritten contract”, being the sum of the mutual expectations between the organization and employees”.

The Social Psychologist Edgar Schein (1965) also defined

Transactional contracts contain terms of exchange that can be given a monetary value, are specific and exist for a limited duration. The essence of the transactional components of the psychological contract can be expressed as ‘a fair day’s work for a fair pay’ (Rousseau & Wade-Benzoni 1994) or as the ‘effort exchange or effort bargain’, that is, the reciprocal process of exchanging effort for reward (Marks et al. 1997). By contrast, relational contracts contain terms that may not be easily monetisable and broadly concern the relationship between the individual employee and the organization (Guzzo & Noonan 1994). This type of contract can be characterized by a focus on open-ended relationships involving considerable investments by employees and employers. For example, loyalty, commitment and trust in management on behalf of the employee, and job security and training on behalf of the employer (Rousseau & Wade- Benzoni

The objective of this process was to make employees more productive with pay increases as an incentive. Performance management worked when financial reward was the driving force behind employees’ performance but failed as workers grew less motivated by money and more inspired by career development and advancement opportunities. Performance management has increasingly become important in this respect and is perhaps the aspect of human resource management that has attracted the most research from both academic and business community. Performance management tends to look at how organizations ensure that departmental, procedural, workforce, systems or financial performance supports and contributes to their strategic aims through some integrated approach (Dessler,