Essay: Impact of Psychological Contract on Job Satisfaction in Banking Sector

ABSTRACT
The purpose of this study is to examine the relationship between the psychological contract and job satisfaction. Companies that invest more efforts in achieving higher level psychological contract between their employees, employer and organization have more satisfied employees in the organization. The research design is descriptive in nature. A convenient sampling has been used to collect the data. The participants in the survey are 100 employees of banking sector. The tool used for job satisfaction and psychological contract are two self-formulated questionnaires. After the analysis, we conclude that job satisfaction is affected by psychological contract. The study should be used and extended for more accurate results for the banking sector as there can be human errors and personal biasness.
Key words ‘ Psychological contract, job satisfaction, relationship
CHAPTER 1
INTRODUCTION
1.1 PSYCHOLOGICAL CONTRACT
A psychological contract exists at an individual level, in form of a person’s beliefs with regard to the terms of his/her exchange relationship with another. The individual beliefs comprising the contract involve sets of reciprocal obligations, not expectations alone, to which both the individual and other party are believed to commit themselves to. Though obligations are a form of expectation, not all expectations held by a person need to be promissory or entail a belief in mutuality or reciprocity. Going by definition, psychological contract should be based upon a belief that a reciprocal exchange exists that is mutually understood (Rousseau, 1998).
A psychological contract, concept developed by organizational scholar Denise Rousseau, represents the mutual beliefs, perceptions, and informal obligations between an employer and an employee. This sets the dynamics for the relationship and defines the detailed practicality of work to be done. It is distinguishable from the formal written contract of employment that, for the most part, only identifies mutual duties and responsibilities in a generalized form.
The reality of employment rights and duties emerges from the interpersonal relationships formed at the workplace. How employers, supervisors and managers behave on a day-to-day basis is not determined by a legal contract. Employees slowly negotiate what they should do to satisfy their side of the bargain, and what they can in turn expect in return. This negotiation is sometimes explicit, e.g. in the appraisal or performance review sessions, but it more often takes the form of behavioral action and reaction through which the parties explore and draw the boundaries of mutual expectation. Hence, the psychological contract determines what the parties will, or will not do and how it will be done. When both the parties’ expectation matches, performance is likely to be good and satisfaction levels are expected to be high. So long as the values and loyalty persist, trust and commitment shall be maintained. The map followed by the parties is the development of an individualized career path that makes only reasonable demands on the employee, with adequate support from managers and co-workers, for a level of remuneration that is reasonably fair for a person of the given age, educational background, and experience. Motivation and commitment shall be enhanced if transfers and promotions follow the agreed path in a timely manner.
If managed effectively, the relationship will foster mutual trust between the parties, matching the objectives and commitments of the organization to those of their employees. But a negative psychological contract can result in employees becoming demotivated and resentful of authoritarianism within the organization. This will result in an increasingly inefficient workforce whose objectives no longer correspond to the organization they work for. The main cause of disappointment tends to be that middle managers are protective of their status and security in the eyes of their superiors, and this can introduce conflicts of interest when they are required to fulfill their obligations to their subordinates.
Relationships and relational issues such as obligations play an increasingly important role in economics and organizational behavior (Williamson, 1979). Contracts are a mainstay in employment relations, establishing inducements and contributions basic to membership in an organization (Barnard, 1973). Whether written or oral, contracts are promises made in exchange for some compensation or return, and are enforced or at least recognized in law (Farnsworth, 1982; Murray, 1974).
Psychological contracts are an individual’s beliefs regarding reciprocal obligations. Beliefs become contractual when the individual believes that he or she owes the employer certain contributions (e.g. hard work, loyalty, sacrifices) in return for certain inducements (e.g. high pay, job security). As perceived obligations, psychological contracts differ from the more general concept of expectations in that contracts are promissory and reciprocal. Promises of future behavior (in this case on the part of the employer) typically are contingent on some reciprocal action by the employee. When individual employees believe they are obligated to behave or perform in a certain way and also believe that the employer has certain obligations toward them, these individuals hold a psychological contract (Rousseau, 1990).
Schein (1980) described the psychological contract as the depiction of the exchange relationship between the individual employee and the organization. The psychological contract is the employee’s perception of the reciprocal obligations existing with their employer; as such, the employee has beliefs regarding the organization’s obligations to them as well as their own obligations to the organization (Rousseau, 1989).
While the individual employee believes in the existence of a particular psychological contract, or reciprocal exchange agreement, this does not necessarily mean that the supervisor or other organizational members agree with or have the same understanding of the contract (Rousseau and Parks, 1993). The psychological contract is an inherently subjective phenomenon, in part due to individual cognitive and perceptual limits, but also because there are multiple sources of information which may influence the development and modification of contracts (Levinson, 1962).
The psychological contract is one type of promissory contract. The promissory contract consists of three components, including promise, payment and acceptance (Rousseau and Parks, 1993). A promise consists of a commitment to a future course of action. As an individual-level phenomenon, the psychological contract is based on perceived promisis by the organization to the employee. These promises can be communicated directly by organizational agents (e.g. recruiters, managers) (Eisenberger, Huntington, Hutchison and Sowa, 1986; Eisenberger, Fasolo and Davis-LaMastro, 1990).
Payment occurs when something is offered in exchange for the promise which the person values. When an organization rewards employees in a manner consistent with the perceived promises underlying the psychological contract, this constitutes fulfillment of organizational obligations.
The third component of promissory contracts is acceptance, reflecting voluntary agreement to engage in the contract terms (Rousseau, 1989; Rousseau and Parks, 1993). Acceptance implies that both parties (employee and organization) are accountable for the terms of the psychological contract, since they chose to engage in this particular agreement.
The psychological contract is not an isolated, detached concept. It is influenced by a whole range of factors, both individual and organizational. The psychological contract itself also has its effect on a range of attitudes and behaviors. Guest and Conway’s model of the causes and consequences of the psychological contracts is one of the more inclusive ones. It encompasses both individual and organizational background factors and policy influences as causes for the state of the psychological contracts and also includes attitudinal as well as behavioral consequences.
Source: Guest, D. & Conway, N. (2002)
Fig. 1.1 Guest and Conway model of causes and consequences of the psychological contract
Guest and Conway (2000) found that particularly human resource practices and direct participation have a significant influence on the state of the psychological contract. Direct participation can be described as the degree to which employees have decision-making power and autonomy in their job.
1.1.1 Venn Diagram:
Venn diagram represents the external influences, which are often overlooked in attempting to appreciate and apply Psychological Contracts theory. These are useful in representing all sorts of situations where two or more related areas interact or interrelate. The Venn diagram below provides a simple interpretation of the factors and influences operating in Psychological Contracts.
Fig. 1.2 Psychological contract venn diagram
vc = visible contract – the usual written employment contractual obligations on both sides to work safely and appropriately in return for basic benefits.
pc = psychological contract – which is hidden, unspoken, unwritten, and takes account of the relationship references (r) between employee and market (which includes other external factors), also the employer’s relationship with the market (also r), and the visible contract (vc). Only the visible contract (vc) element is written and transparent. All the other sections are subject to perceptions until/unless clarified.
1.1.2 ‘Iceberg’ Model:
The Psychological Contracts ‘iceberg’ diagram is a helpful way to illustrate some of the crucial aspects and influences within Psychological Contracts theory.
An iceberg is said to be 90% hidden beneath the water. This metaphor fits the Psychological Contract very well, in which most of the Contract perceptions are unwritten and hidden, consistent with its definition.
Fig. 1.3 ‘Iceberg’ Model
Left side of iceberg = employee inputs (and employer needs).
Right side of iceberg = rewards given by employer (and employee needs).
Above the water level: factors mostly visible and agreed by both sides.
Work | Pay = visible written employment contract.
Black arrows = mostly visible and clear market influences on the work and pay.
Red arrows = iceberg rises with success and maturity, experience, etc., (bringing invisible perceived factors into the visible agreed contract).
Below the water level: factors mostly perceived differently by both sides, or hidden, and not agreed.
Left side of iceberg = examples of employee inputs, which equate to employer expectations – informal, perceived and unwritten.
Right side of iceberg = rewards examples and employee’s expectations.
Blue arrows = influences on employee and employer affecting perceptions, mostly invisible or misunderstood by the other side.
1.1.3 Importance of study of psychological contract:
Guest and Conway (2000) put forward two advantages to the study of the psychological contract. Firstly, the psychological contract is valuable because it recognizes the individualization of the employment relationship. Both parties in the employment relationship ‘ employer and employee ‘ have their own views on the mutual obligations. The psychological contract is about subjective perceptions. Secondly, although the psychological contract contains the expectations and concerns of the individual employee, it also allows the contextual factors to shape individual attitudes and behaviour. These contextual factors include company policy, union role and organisational climate. On the other hand, the psychological contract framework also allows for an active individual, who can change the deal (i.e. his/her attitudes and behaviour) when his or her expectations are not being met.
In general, one can state that human resource practices influence employee attitudes and performance largely through the psychological contract (Guest & Conway, 2000). The psychological contract therefore provides a useful and interesting framework for understanding these attitudes and behaviors.
1.2 JOB SATISFACTION
Vroom in his definition on job satisfaction focuses on the role of the employee in the workplace. Thus he defines job satisfaction as affective orientations on the part of individuals toward work roles which they are presently occupying (Vroom, 1964).
Job satisfaction represents a combination of positive or negative feelings that workers have towards their work. Meanwhile, when a worker employed in a business organization, brings with it the needs, desires and experiences which determinates expectations that he has dismissed. Job satisfaction represents the extent to which expectations are and match the real awards. Job satisfaction is closely linked to that individual’s behavior in the work place (Davis and Nestrom, 1985).
Job satisfaction can be defined also as the extent to which a worker is content with the rewards he or she gets out of his or her job, particularly in terms of intrinsic motivation (Statt, 2004).
The term job satisfaction refers to the attitude and feelings people have about their work. Positive and favorable attitudes towards the job indicate job satisfaction. Negative and unfavorable attitudes towards the job indicate job dissatisfaction (Armstrong, 2006).
Job satisfaction is the collection of feeling and beliefs that people have about their current job. People’s levels of degrees of job satisfaction can range from extreme satisfaction to extreme dissatisfaction. In addition to having attitudes about their jobs as a whole, people also can have attitudes about various aspects of their jobs such as the kind of work they do, their coworkers, supervisors or subordinates and their pay (George and Jones, 2008).
Job satisfaction is a complex and multifaceted concept which can mean different things to different people. Job satisfaction is usually linked with motivation, but the nature of this relationship is not clear. Satisfaction is not the same as motivation. Job satisfaction is more of an attitude, an internal state. It could for example be associated with a personal feeling of achievement, either quantitative or qualitative (Mullins, 2005).
Spector (1997) lists three important features of job satisfaction. First, organizations should be guided by human values. Such organizations will be oriented towards treating workers fairly and with respect. In such cases the assessment of job satisfaction may serve as a good indicator of employee effectiveness. High levels of job satisfaction may be sign of a good emotional and mental state of employees. Second, the behavior of workers depending on their level of job satisfaction will affect the functioning and activities of the organization’s business. From this it can be concluded that job satisfaction will result in positive behavior and vice versa, dissatisfaction from the work will result in negative behavior of employees. Third, job satisfaction may serve as indicators of organizational activities. Through job satisfaction evaluation different levels of satisfaction in different organizational units can be defined, but in turn can serve as a good indication regarding in which organizational unit changes that would boost performance should be made.
Christen, Iyer and Soberman (2006) provide a model of job satisfaction presented in Figure 1.3 in which the following elements are included:
‘ Job related factors,
‘ Role perceptions,
‘ Job performance and
‘ Firm performance
Fig. 1.4 Christen, Lyer And Soberman Model Of Job Satisfaction (Christen Et, 2006)
Lawler and Porter (1967) give their model of job satisfaction which unlike the previous model places a special importance on the impact of rewards on job satisfaction, Figure 1.4.
Fig. 1.5 Lawler’s And Porter’s Model Of Job Satisfaction (Lawler And Porter, 1967)
According to this model the intrinsic and extrinsic rewards are not directly connected with job satisfaction, because of the employee’s perceptions regarding the deserved level of pay.
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CHAPTER 2:
REVIEW OF LITERATURE
A better understanding of the role of the career management process is important in organizational environments where, it is argued, employers increasingly expect individuals to take responsibility for managing their own careers (Bridges, 1995). Previous research has shown that a close and reciprocal relationship between both organizational and individual career management activities and organizational commitment exists, and it has been suggested in particular that provision of career management help by employers in some way supports the development of employee commitment (Sturges, Guest, Conway, & Mackenzie Davey, 2002).
Psychological contract is an exchange relationship between employee and employer (Schein, 1978). It is about the individual’s belief, potential opportunities and mutual commitment in exchange relationships (Rousseau, 1989). Psychological contracts are of two types, relational contract and transactional contract (Morrison and Robinson 1997; Rousseau, 1995). Relational contracts are associated with emotional interactional dimensions, with nonfinancial, socio- emotional, intrinsic focus between employees and employers (Rousseau, 1995). Transactional contract explain the economic exchange relations with extrinsic, financial and narrow focus. The construct of psychological contract was derived from social exchange theory (Blau, 1964; Organ, 1988).
A study tested a series of linked hypotheses which proposed that individual career management behavior is associated with the experience of organizational career management help, which is related to fulfillment of the psychological contract. Fulfillment of the psychological contract in turn is linked to organizational commitment and is associated with behaviors at work, including absenteeism, turnover, and independent ratings of job performance. This study by Sturges, Conway, Guest and Liefooghe (2005) made four contributions to the psychological contract and careers literature: first, it showed that both individual and organizational career management behaviors are linked to psychological contract fulfillment; second, organizational career management help is associated with affective commitment and job performance; third, psychological contract fulfillment plays a key role in mediating the relationship between career management help and such attitudes and behaviors; and fourth, organizational commitment may mediate between psychological contract fulfillment and individual career management behavior aimed at furthering the career outside the organization.
According to Rousseau (1990), psychological contracts are individual beliefs in reciprocal obligations between employees and employers. In a sample of 224 graduating MBA students who had recently accepted job offers, beliefs regarding employment obligations were investigated. Two types of obligation were demonstrated empirically: transactional obligations of high pay and career advancement in exchange for hard work and relational obligations exchanging job security for loyalty and a minimum length of stay. These types of obligations are connected with two forms of legal contracts: transactional and relational. Relational contract obligations for employers correlated with employee expected length of stay with the firm. Transactional contract obligations were associated with careerist motive on the part of new recruits. The relationship between these and other motives of new hires was also investigated.
The analysis by Janssens, Sels and Van den Brande (2002) indicated the existence of six types of psychological contracts, all having different patterns of mutual expectations: an instrumental psychological contract, a weak psychological contract, a loyal psychological contract, an unattached psychological contract, an investing psychological contract and a strong psychological contract. Based on the profiles of the six types and its number of respondents, they concluded that the so-called transformation from traditional employment relationships towards ‘new deals’ is restricted to a very small group of young and highly educated professionals and managers.
A cross sectional field survey conducted by Ul Haq, Ahmad Jam, Azeem, Ali and Fatima (2011) examined the relationship between psychological contracts, affective commitment and job outcomes (Job satisfaction and Intention to quit). They hypothesized that psychological contract types are related to job satisfaction and turnover intention, they further hypothesized that the link between psychological contract and outcomes is mediated by affective commitment. The data were collected from 302 employees of several public and private organizations of Pakistan. Results revealed that affective commitment mediates the relationship between relational contracts and job satisfaction and the relationship between relational contracts and turnover intention, whereas it does not mediates the relationship between transactional contract and job outcomes.
The aim of the study conducted by Patrick (2008) was developing a deeper understanding about psychological contract and employment relationship. Six psychological contract variables (relational contract, transactional contract, employer’s commitment/obligation to employee, employee’s commitment/obligation to employer, employer’s relationship with employee, and employee’s relationship with employer) were measured on 202 employees from 15 IT companies from randomly chosen for the study. A Psychological Contract Questionnaire was used for data collection. The study revealed that relational contract was dominant in the IT companies under study. Employee’s commitment/obligation to employers was higher than employer’s commitment/obligation to employees. Employee’s relationship with employers was also stronger than employer’s relationship with employees.
The study by Law and Crawford (2003) examined the effects of organizational culture and leadership styles on job satisfaction and organizational commitment in samples of Hong Kong and Australian managers. Statistically significant differences between the two samples were found for measures of innovative and supportive organizational cultures, job satisfaction and organizational commitment, with the Australian sample having higher mean scores on all these variables. However, differences between the two samples for job satisfaction and commitment were removed after statistically controlling for organizational culture, leadership and respondents’ demographic characteristics. For the combined samples, innovative and supportive cultures, and a consideration leadership style, had positive effects on both job satisfaction and commitment, with the effects of an innovative culture on satisfaction and commitment, and the effect of a consideration leadership style on commitment, being stronger in the Australian sample. Also, an ‘initiating Structure’ leadership style had a negative effect on job satisfaction for the combined sample. Participants’ level of education was found to have a slight negative effect on satisfaction, and a slight positive effect on commitment. National culture was found to moderate the effect of respondents’ age on satisfaction, with the effect being more positive amongst Hong Kong managers.
The research by Singh and Sinha (2013) aimed at examining the level of job satisfaction among the executives serving in various organizations. For the purpose of conducting this study, a sample comprising 69 executives was selected with a deliberate effort to ensure that the sample comprises executives serving at junior, middle and senior levels. All subjects were administered MAO-R (Motivational Analysis of Organization ‘ Roles), a questionnaire to assess level of job satisfaction. It was found that the job satisfaction level was high among executives. The need for achievement and the need for influence were more satisfied as compared to other needs.
The differential associations that job satisfactions and organizational commitment have with job performance and turnover intentions were studied by McFarlane Shore and Martin (1989) in a sample of bank tellers and hospital professionals. Results showed that organizational commitment was more strongly related than job satisfaction with turnover intentions for the tellers, but for the professionals. Job satisfaction was related more strongly than organization commitment with supervisory ratings of performance for both samples. The findings suggested that specific job attitudes are more closely associated with task-related outcomes such as performance ratings, whereas global organizational attitudes are more closely associated with organizational-related outcomes like turnover intentions.
The study by Judge, Heller and Mount (2002) reported results of a meta-analysis linking traits from the 5-factor model of personality to overall job satisfaction. Using the model as an organizing framework, 334 correlations from 163 independent samples were classified according to the model. The estimated true score correlations with job satisfaction were – .29 for Neuroticism, .25 for Extraversion, .02 for Openness to Experience, .17 for Agreeableness, and .26 for Conscientiousness. Results further indicated that only the relations of Neuroticism and Extraversion with job satisfaction generalized across studies. As a set, the Big Five traits had a multiple correlation of .41 with job satisfaction, indicating support for the validity of the dispositional source of job satisfaction when traits are organized according to the 5-factor model.
In a survey by Hunt and Saul (1975) of white collar workers, age and tenure had positive, linear relationships to overall job satisfaction. Age had a stronger relationship with satisfaction in males than tenure; the reverse held for females.
The article by Saari and Judge (2004) identifies three major gaps between HR practice and the scientific research in the area of employee attitudes in general and the most focal employee attitude in particular’job satisfaction: (1) the causes of employee attitudes, (2) the results of positive or negative job satisfaction, and (3) how to measure and influence employee attitudes. Suggestions for practitioners were provided on how to close the gaps in knowledge and for evaluating implemented practices.
The article by Rice, Near and Hunt (1980) reviewed empirical research that relates satisfaction with work to satisfaction with life. The review covered more than 350 job-satisfaction/life-satisfaction relationships reported in 23 studies that varied widely in terms of the sample, instrumentation, and date of survey. For more than 90% of the cases, the direction of this relationship was positive; and none of the scattered negative relationships was statistically reliable. The magnitude of the reported zero-order relationship between job satisfaction and overall life satisfaction was typically modest, with correlations mostly in the mid-.30’s for males and mid-.20’s for females. The typical job-satisfaction/life-satisfaction correlation dropped to the low teens when specific facets of life satisfaction, such as marital or leisure satisfaction, were used instead of overall life satisfaction.
Two studies were designed by Farrell and Rusbult (1981) to explore the ability of the investment model to predict job satisfaction, job commitment, and job turnover. The first study was a controlled laboratory analog of a work setting, and the second study was a cross-sectional survey of industrial workers. The results of the two studies were consistent. Job satisfaction was best predicted by the reward and cost values of the job, and job commitment was best predicted by a combination of reward and cost values, alternative value, and investment size. Both satisfaction and commitment were correlated with job turnover, but job commitment was more strongly related to turnover than was satisfaction. These results were in complete agreement with the investment model.
The article by Judge and Bono (2001) presented meta-analytic results of the relationship of 4 traits’self-esteem, generalized self-efficacy, locus of control, and emotional stability (low neuroticism)’with job satisfaction and job performance. With respect to job satisfaction, the estimated true score correlations were .26 for self-esteem, .45 for generalized self-efficacy, .32 for internal locus of control, and .24 for emotional stability. With respect to job performance, the correlations were .26 for self-esteem, .23 for generalized self-efficacy, .22 for internal locus of control, and .19 for emotional stability. In total, the results based on 274 correlations suggested that these traits are among the best dispositional predictors of job satisfaction and job performance.
It is widely believed that the employee participation may affect employee’s job satisfaction; employee productivity, employee commitment and they all can create comparative advantage for the organization. The main intention of the study by Bhatti and Qureshi (2007) was to find out relationship among employee participation, job satisfaction, employee productivity and employee commitment. The findings of this study were that employee participation is an important determinant of job satisfaction components. Increasing employee participation will have a positive effect on employee’s job satisfaction, employee commitment and employee productivity. Naturally increasing employee participation is a long-term process, which demands both attention from management side and initiative from the employee side.
CHAPTER 3:
RESEARCH METHODOLOGY
3.1 OBJECTIVES OF THE STUDY
‘ To evaluate and analyze psychological contract.
‘ To study job satisfaction.
‘ To study the relationship between psychological contract and job satisfaction.
3.2 HYPOTHESIS
H0: There is no significant relationship between psychological contract and job satisfaction.
H1: There is significant relationship between psychological contract and job satisfaction.
3.3 RESEARCH DESIGN
The research is descriptive and experimental in nature.
Descriptive research refers to the type of research question, design, and data analysis that will be applied to the research. Experimental research determines the relationship between two variables by keeping one variable dependent on the independent variable.
3.4 DATA COLLECTION
Primary data collected from 100 employees of banking sector using two self-formulated questionnaires.
Secondary data collected from journals, research papers, books and websites.
SAMPLING
3.5 SAMPLING TECHNIQUE
Sampling method used is Convenience sampling.
Convenience sampling attempts to obtain a sample of convenient elements. The selection of sampling units is left primarily to the interviewer. Often respondents are selected because they happen to be in the right place at the right time. It is the least expensive and least time consuming and is easy to measure.
3.6 SAMPLE SIZE
The sample size for the study is 100 collected from executive level of Yes Bank, ICICI Bank, HDFC Bank, Axis Bank.
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CHAPTER 4
DATA ANALYSIS AND FINDINGS
The research deals with studying the impact of psychological contract on job satisfaction. The reliability of psychological contract and job satisfaction was calculated. Also, mean and standard deviation of all the parameters was calculated and correlation has been applied. Finally, the correlation and regression of psychological contract and job satisfaction is calculated through SPSS and the results of it are as below.
4.1 RELIABILITY OF PSYCHOLOGICAL CONTRACT:
Reliability Statistics
Cronbach’s Alpha N of Items
.753 32
Table 4.1 Reliability of psychological contract
The Cronbach alpha is 0.753.
This indicates a high level of internal consistency for our scale with this specific sample.
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4.2 RELIABILITY OF JOB SATISFACTION:
Reliability Statistics
Cronbach’s Alpha N of Items
.906 18
Table 4.2 Reliability of job satisfaction
The Cronbach alpha is 0.906.
This indicates a high level of internal consistency for our scale with this specific sample.
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4.3 MEAN AND STANDARD DEVIATION FOR PSYCHOLOGICAL CONTRACT QUESTIONNAIRE:
Statistics
N Valid 100
Missing 0
Mean 2.5071
Std. Deviation .32807
Range 1.56
Table 4.3 Mean and Standard deviation of psychological contract
The mean for the psychological contract questionnaire is 2.5071 which display the average of the responses submitted by the respondents for this questionnaire.
Standard deviation 0.32807 indicates the degree to which the respondents differ from the mean value for the group.
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4.4 MEAN AND STANDARD DEVIATION FOR JOB SATISFACTION QUESTIONNAIRE:
Statistics
N Valid 100
Missing 0
Mean 2.3678
Std. Deviation .64306
Range 3.39
Table 4.4 Mean and Standard deviation of job satisfaction
The mean for the job satisfaction questionnaire is 2.3678 which display the average of the responses submitted by the respondents for this questionnaire.
Standard deviation 0.64306 indicates the degree to which the respondents differ from the mean value for the group which is more than the standard deviation of psychological contract responses.
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4.5 CORRELATION BETWEEN PSYCHOLOGICAL CONTRACT AND JOB SATISFACTION:
Correlations
PC_mean JS_mean
PC_mean Pearson Correlation 1 .637**
Sig. (2-tailed) .000
N 100 100
JS_mean Pearson Correlation .637** 1
Sig. (2-tailed) .000
N 100 100
**. Correlation is significant at the 0.01 level (2-tailed).
Table 4.5 Correlation between psychological contract and job satisfaction
The pearson correlation is .637 this means that there is a strong relationship between the two variables, psychological contract and job satisfaction. This means that changes in one variable are strongly correlated with changes in the second variable.
A positive pearson correlation means that as one variable increases in value, the second variable also increase in value. Similarly, as one variable decreases in value, the second variable also decreases in value. This is called a positive correlation.
The Sig (2-Tailed) value .000 indicates statistically significant correlations between the two variables. That means, increases or decreases in one variable do significantly relate to increases or decreases in the second variable.
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4.6 REGRESSION ANALYSIS:
Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .637a .406 .400 .49811
a. Predictors: (Constant), PC_mean
Table 4.6 Regression analysis
The coefficient of determination is 0.406; therefore, about 40.60% of the variation in the job satisfaction data is explained by psychological contract of respondents.
4.7 ANOVA:
ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 16.624 1 16.624 66.999 .000a
Residual 24.316 98 .248
Total 40.939 99
a. Predictors: (Constant), PC_mean
b. Dependent Variable: JS_mean
Table 4.7 ANOVA
Here, p < 0.000, which is less than 0.05, and indicates that, overall, the model applied can statistically significantly predict the outcome variable.
4.8 MAJOR FINDINGS:
‘ The reliability of psychological contract questionnaire is 0.753.
‘ The reliability of job satisfaction questionnaire is 0.906.
‘ The correlation between psychological contract and job satisfaction is 0.637.
‘ The coefficient of determination is 0.406.
‘ p < 0.000, which is less than 0.05, hence, H0 is rejected and H1 is accepted.
There is significant relationship between psychological contract and job satisfaction.’
CHAPTER 5:
CONCLUSION AND RECOMMENDATIONS
Psychological contract refers to the unspoken agreement between an employer and an employee that communicates their expectations from each other. There are no written promises between the two parties. The parameters used in the psychological contract questionnaire are divided into two parts, employee obligations and employer obligations. There are 8 same parameters each for employee and employer obligations, short-term obligation, loyalty, narrowness, performance support, development, external marketability, stability and psychological contract fulfillment.
Job satisfaction is the level of contentment an employee has for his job. When the expectations of an employee from employer and organization get fulfilled, the employee feels a part of the organization and more satisfied.
The parameters used for measuring job satisfaction with the help of questionnaires are, general working conditions, pay and promotion potential, work relationships, use of skills and abilities and work activities.
By this research it was found that psychological contract of an employee with his/her employer does affect the job satisfaction level of the employee. The stronger the contract between the employee and the employer more satisfied the employee feels in the organization. Psychological contracts serve an important purpose when honored by both parties:
When both parties honor the psychological contract, a bond of loyalty is formed between the two. When the employee shows that he is willing to put in as much work as he implied and the boss’ expectations prove fair, both parties will go out of their way to maintain this positive relationship.
The ability to perceive one another as human beings and being empathetic can make a big difference. A productive psychological contract depends on the employer’s ability to occasionally let an employee’s shortcomings slide, which will then result in the employee returning the favor.
When trust has been established through the psychological contract, it makes it easier for both parties to exhibit openness and honesty. When neither the employee nor the boss fear the possibility of betrayal, it is easier for each to open up about personal needs, frustrations or experiences. This allows each to respond in a healthy, productive manner.
When the terms of the psychological contract are honored, all aspects of the working relationship should run more smoothly. This greater degree of trust, respect and understanding can lead to a positive, healthy relationship, a workplace that is run in a more efficient manner and a greater degree of job satisfaction by both parties. Greater enthusiasm for the job and higher morale go hand in hand, and may feed positively into all other areas of the job.
5.1 LIMITATIONS:
‘ The research was confined to 100 participants of a region of banking sector and does not necessarily show a pattern that is applicable to all other organizations.
‘ Personal biasness of respondents cannot be ignored. There may be slight variations in the accuracy of the results.
‘ Human errors are possible.
5.2 RECOMMENDATIONS:
‘ This study can be used and further extended to more number of participants of different sectors for further study.
‘ There is a need for the organizations to build a stronger psychological contract with their employees by showing empathy and understanding the expectations of the employees from them.
‘ Organizations should focus on building trust in the manager-employee relationship. There should be open communication and transparency in the organization.
‘ Proper feedback and recognition to the employee keeps the employee satisfied.
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REFERENCES
RESEARCH PAPERS:
‘ Bhatti, K. K. & Qureshi, T. M. (2007). Impact of Employee Participation on Job Satisfaction, Employee Commitment And Employee Productivity. International Review of Business Research Papers, Vol.3 No.2, Pp. 54 ‘ 68.
‘ Christen, M., Iyer, G. and Soberman, D. (2006). Job Satisfaction, Job Performance, and Effort: A Reexamination Using Agency Theory. Journal of Marketing, Vol. 70, pp. 137-150.
‘ Eisenberger, R., Fasolo, P., & Davis-LaMastro, V. (1990). Perceived organizational support and employee diligence, commitment, and innovation. Journal of Applied Psychology, 75, 51-59.
‘ Eisenberger, R., Huntington, R., Hutchison, S., & Sowa, D. (1986). Perceived organizational support. Journal of Applied Psychology, 71, 500-507.
‘ Farrell, D. & Rusbult, C. E. (1981). Exchange Variables as Predictors of Job Satisfaction, Job Commitment, and Turnover: The Impact of Rewards, Costs, Alternatives, and Investments. Organizational Behavior and Human Performance, 27, 28, 78~95.
‘ Hunt, J. W. & Saul, P. N. (1975). The Relationship of Age, Tenure, and Job Satisfaction in Males and Females. Academy of Management Journal, Volume 18, Number 4, 690-702.
‘ Janssens, M., Sels, L. & Van den Brande, I. (2002). Multiple types of psychological contracts: A six-cluster solution. Human Relations, 56(11): 1349’1378.
‘ Judge, T. A. & Bono, J. E. (2001). Relationship of Core Self-Evaluations Traits’Self-Esteem, Generalized Self-Efficacy, Locus of Control, and Emotional Stability’With Job Satisfaction and Job Performance: A Meta-Analysis. Journal of Applied Psychology, Vol. 86, No. 1, 80-92.
‘ Judge, T. A., Heller, D. & Mount, M. K. (2002). Five-Factor Model of Personality and Job Satisfaction: A Meta-Analysis. Journal of Applied Psychology, Vol. 87, No. 3, 530’541.
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WEBSITES:
‘ http://www.cipd.co.uk/hr-resources/factsheets/psychological-contract.aspx
‘ http://www.businessballs.com/psychological-contracts-theory.htm
‘ http://en.wikipedia.org/wiki/Psychological_contract#The_formation_of_the_contract
‘ http://en.wikipedia.org/wiki/Job_satisfaction
‘ http://www.businessballs.com/psychological-contracts-theory.htm#psychological-contracts-diagrams
‘
ANNEXURE
A1. Psychological Contract questionnaire
PSYCHOLOGICAL CONTRACT QUESTIONNAIRE
1. You have no future obligations to this employer
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
2. You can quit whenever you want
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
3. You can make personal sacrifices for this organization
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
4. You will protect this organization’s image
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
5. You do only what you are paid to do
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
6. You only perform specific duties you agreed to when hired
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
7. You accept increasingly challenging performance standards
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
8. You adjust to changing performance demands due to business necessity
Strongly Agree
Agree
Neutral
Slightly Agree
Strongly Disagree
9. You build skills to increase your value to this organization
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
10. You actively seek internal opportunities for training and development
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
11. You build contacts outside this firm that enhance your career potential
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
12. You build skills to increase your future employment opportunities elsewhere
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
13. You seek out assignments that enhance your employability elsewhere
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
14. You want to remain with this organization indefinitely
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
15. You plan to stay here for a long time
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
16. Overall, how well have you fulfilled your commitment to your employer
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
17. Your employer makes no commitments to retain you in the future
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
18. You have this job only as long as this employer needs you
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
19. Your employer is concerned for your personal welfare
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
20. Your employer makes decisions with your interests in mind
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
21. You have limited involvement in the organization
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
22. The organization is training you only for your current job
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
23. The organization supports you to attain the highest possible levels of performance
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
24. Your employer helps you to respond to ever greater industry standards
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
25. There are opportunities for career development within this firm
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
26. There are opportunities for promotion
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
27. The organization helps you develop externally marketable skills
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
28. You are given job assignments that enhance your external marketability
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
29. You are given the opportunity to make contacts that create employment opportunities elsewhere
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
30. Secure employment
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
31. Wages and benefits I can count on
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
32. Overall, how well does your employer fulfill its commitments to you
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
‘
A2. Job Satisfaction Questionnaire
JOB SATISFACTION QUESTIONNAIRE
1. Hours worked each week
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
2. Flexibility in scheduling
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
3. Location of work
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
4. Amount of paid vacation time/sick leave offered
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
5. Salary
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
6. Opportunities for Promotion
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
7. Benefits (Health insurance, life insurance, etc.)
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
8. Job Security
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
9. Recognition for work accomplished
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
10. Relationships with your co-workers
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
11. Relationship(s) with your supervisor(s)
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatified
Extremely Dissatisfied
12. Relationships with your subordinates (if applicable)
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
13. Opportunity to utilize your skills and talents
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
14. Opportunity to learn new skills
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
15. Support for additional training and education
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
16. Variety of job responsibilities
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat DIssatisfied
Extremely Dissatisfied
17. Degree of independence associated with your work roles
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied
18. Adequate opportunity for periodic changes in duties
Extremely Satisfied
Somewhat Satisfied
Neutral
Somewhat Dissatisfied
Extremely Dissatisfied