Chapter 8 analysis and key concepts

Psychological contracts are a good way of thinking when it comes to the exchange or relationship between an organization and employees. Psychological contracts refer to the perception an employee has when it comes to his or her exchange relationship with the organization; the outcomes promised by the organization and the contribution an employee is obliged to make (Pp 4)

Organizations can play an active and important role in shaping their members' Psychological Contracts. This is because there are outcomes that are part and parcel of employees' psychological contracts and thus central when it comes to the exchange of relationships with their employees.one such outcome is career opportunities not only to the job an individual holds currently but the job one expects to advance into over the course of their career. Career opportunities include getting promotions, having the opportunity of working in the kind of work one wants to do, receiving experience that is relevant to ones career and being exposed to people who can help one in the advancement of their career. When managers want to use career opportunities as a tool for motivating employees they should understand that careers are how people progress through them thus they can be managed by both employees and organizations. Therefore through providing career opportunities for employees' organizations play an important role in shaping psychological contracts of employees (Pp 21)

An area that has a great influence in the motivation of employees is the distribution of the outcomes such as their pay, benefits, and promotions. Pay is a useful tool when it comes to the motivation of employees to perform highly and at the same time give them motivation to continue working in the organization in line with the Maslow's hierarchy of needs motivation theory since each person is striving to get to the higher level of life hence changing the needs through acquiring or being able to acquire some needs previously thought not possible, a fact that can only be actualized through having money (College of the Redwoods, 2013). Therefore, pay is a very crucial aspect of psychological contracts. And thus forms a key component of the exchange of relationships between the employees and the organization. Pay in an organization can be based on different terms. This includes a merit pay plan. This is a pay plan that is based on the performance of employees. This plan is now increasingly being used to motivate, attract and retain employees in organizations (Pp 17).Pay is therefore an extrinsic contract that can be used to shape transactional contracts between employees and organizations. These are short-term contracts and are quite specific. They are normally narrow in focus and flexible since they are short in nature. These contracts can be terminated by either party and a replacement found. From this we can say that organizations can shape employee psychological contracts since they are determinates of the pay employees will get (Pp 5)

On the other hand it can also be said that organizations are not a force to reckon with when it comes to the development of psychological contracts. This is because psychological contracts are perceptions held by specific individuals therefore there is not much that an organization can do to influence them. For instance an individual knows what they want and their worth when they are seeking for employment in an organization. There is no way that a person can settle for less than what they want. This means that before a person decides to work in an organization they will have weighed their options. Psychological contracts are build on personal level and therefore there is no way an organization can shape this in an individual. An example is when a transactional contract is formed between an employee and an organization. This contract is formed on the basis of outcomes like pay. This means that a person will only decide on whether tor not they will form that contract or not depending on what is in store for them. Therefore the decision by employees to get into this contract is entirely based on their own personal perceptions and is no way influenced by the organization (Pp 5).