1.

0 Introduction

According to Baruch (2004), the new psychological contract has changed the way employees and organisations are associated with each other. The principal purpose of this essay is to clarify the changes and analyse the implications for an individuals career choice and career management strategies. Thereby, this essay is significant. This essay will firstly briefly explain the concept of psychological contract in relation to how employee and employer are associated with each other. This is followed by a comparison between the old and the new employee-employer relationships. Thereafter, it will discuss the implications for an individuals career choice and career management strategies. Finally, the conclusion will be reached.

2.0 Discussion of psychological contract

2.1 Concept of psychological contract

The relationship between employers and employees is traditionally and legally based on the contract of employment (Rose, 2008). Besides, there is also psychological contract that is non-legal contract of relationship which is implicit, individual and tacit (Kew and Stredwick, 2005). Such contract is built upon mutual understanding and trust between employees and their employers, and associates certain expectations from each other (Lewis et al. 2003). Employees are expected to be loyal, accountable, and work hard for the employer, in return for a range of personal monetary and nonmonetary rewards such as job security, recognition, and so on (Lewis et al. 2003). Guest and Conway (2002) also defines psychological contract as the perceptions of the two partiesof their mutual obligations towards each other. From this definition, it can be seen that psychological contract depends on mutual trust between the employer and the employee.

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2.2 Comparison between the old and the new employee-employer relationships

Old psychological contract can be characterized by stability, predictability and growth. The workforces are viewed as permanent based on such psychological contract, and employee loyalty is built upon the organizations guarantee of job security as well as investment in training. Employee commitment is the norm and employees expect that they can develop their career within the organisation. (Sims, 1994) For example, this old psychological contract was very apparent in many Japanese enterprises before 1985, characterized by lifetime employment in other words, job security was very high and the relationship between employers and employees was stable, predictable (Matsuura, et al. 2003).

However, redundancy, restructuring and downsizing have become more common since the 1980s, which have likely changed the traditional employee-employer relationship as discussed above (Kew and Stredwick, 2005). According to some researchers such as Sorohan (1994), Cascio (1998), Jaffe and Scott (1998), the workplace today is of increased workload and stress, but less job security and commitment. Thereby they argue that the new psychological contract has appeared by shifting from employment security contract to employability contract which means that employers could no longer guarantee job security, while employees would still provide time and loyalty but in return for the work experience and training so that they would be able to find another job elsewhere or reduce the possible unemployment (Kew and Stredwick, 2005). This also reveals that organisations are shifting towards flexibility. For example, Chinas Haier Group (the worlds fourthlargest white goods manufacturer) strives to improve employees employability through a variety of forms of training which is greatly emphasized and practiced by the company (Xinhua Daily, 2009). In addition, even in Japanese organisations which were known as their lifetime employment policy as mentioned earlier in this essay, the

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situation has been changing and the new psychological contract has been forming in order to ensure organizations flexibility and effectiveness under the new global environment (Matsuura, et al. 2003). Therefore, in todays career times, the old psychological contract that employment security is based on employee loyalty has been gradually replaced by the new psychological contract that employability is based on performance. Table 1 summarizes this evolving relationship between employer and employee.

Table 1: Differences between old and new psychological contracts

(Source: Kissler, 1994)

In a further study conducted by Hiltrop (1996) by surveying a group of middle managers, changes have also been identified from the old psychological contract characterized by stability, permanence, predictability, fairness, tradition and mutual respect to the new psychological contract characterized by a short-term relationship with a stress on flexibility, self-reliance and achievement of immediate results.
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2.3 Implications for individuals career management

Based on the previous analysis, it can be seen that under the new psychological contract between the employer and employee, employees are viewed as adults rather than child, and thereby employees themselves must be concerned about their own long-term career planning and development. Employees personal ability is very important as pointed out by the new psychological contract, and hence a successful career begins with sufficient consideration to make appropriate decisions as to matching personal needs and capabilities (by making a personal assessment) with job opportunities over time (Kiechel, 1993). As long-term employment is no longer likely, employees need to select their career objectives, for example, long term (5-10 years), intermediate term (3-5 years), or short term (1-3 years) (Kiechel, 1993). Moreover, continuous learning will be required, and various forms of training sessions have become more and more important. This is because without continuous learning, employees cannot be adaptive to the changing, complex environment, and hence cannot improve their performance as desired by the organization. Finally, employees must foster themselves as to a strong sense of personal accomplishment as the primary growth through promotion has become less and less possible under the new psychological contract.

3.0 Conclusion

Through the analysis of this essay, it becomes clear that the old psychological contract between the employer and the employee has been gradually replaced by the new psychological contract which has actually changed the way employees and organisations are associated with each other. Under the new psychological contract where the future becomes less predictable and unstable, individuals must carefully

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manage their career and rely on themselves based on relevant strategies as mentioned in section 2.3.

Bibliography

Cascio, W. F. 1998. Learning from outcomes: Financial experiences of 311 firms that have downsized. Washington, DC: American Psychological Association.

Guest, D. & Conway, N. 2002. Pressure at work and the psychological contract. London: Chartered Institute of Personnel Development.

Hiltrop, J. M. 1996. Managing the changing psychological contract. Employee Relations, 18 (1), pp. 36-50.

Kew, J. & Stredwick, J. 2005. Busines environment: managing in a strategic context. London: Chartered Institute of Personnel Development.

Kiechel, W. 1993. How we will work in the year 2000. Fortune, 5(1), pp. 38-52.

Kissler, G. D. 1994. The new employment contract. Human Resource Management, 33(3), pp. 335-51.

Lewis, P., Thornhill, A. & Saunders, M. 2003. Employee relations: understanding the employment relationship. Harlow: Prentice Hall

Matsuura, K., Pollitt, M., Takada, R. & Tanaka, S. 2003. Institutional restructuring in the Japanese economy since 1985. Journal of Economic Issues, XXXVII(4), pp. 9991022.

Sorohan, E. G. 1994. Auld Lang Syne. Management-Auckland, 44(11), p.130.

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Xinhua Daily, 2009. Haier is the best company to work for in China. May 7, pp. 5-6.

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