Organisations and Transformations - Case Study Example

Organisations and Transformations The business world today is more dynamic than it has ever been in recent history. Companies must adapt to change, or they are forced to adapt by external influences. If they do not respond to the demand for change they can find themselves out of business. While change is often beneficial for the business it can impact the psychological contract which the company has with its employees in a negative manner and that can lead to certain problems. Company X is in that position and it is useful to study the implications of a negative turn on the psychological contract and how such impacts can avoided. Introduction Company X has recently been acquired by Company A and the cultures of the two organisations are vastly different. Company X was a traditional, bureaucratic and hierarchical company while Company A functions more like a modern, fast moving firm. While this fact alone is likely to lead to a culture clash, the owners of the new firm have decided to create a talent and leadership programme and are looking for employees who worked with Company X to join the programme and lead the business. While the takeover itself has certainly impacted the psychological contract, since as suggested by Garrow (2003), a mergers or an acquisition is one of the toughest storm a psychological contract has to go through. However, the process of identifying and selecting candidates for the new programme will have an even bigger impact. Even before the process begins there are four categories of employees, who can be expected to show an impact the eventual selection results, i.e.: Employees who wanted to and have been selected. Employees who expected and wished to join the programme but were not selected. Employees who were neutral about being in the programme but have been selected. Employees who neither wished nor wanted to join the programme but have been selected. The psychological contract in all these cases will be impacted differently. The term itself has been defined in different ways by many writers but the generally accepted meaning of the psychological contract is the implicit contract of understandings between the organisation and the workers as they relate to both the expectations of the employees and the obligations of the employer (Emott 2006). Guest (2004) takes an even wider view of the contract and says that the understanding of the psychological contract should incorporate fairness to both parties and mutual trust. Since the contract is implicit, it is difficult to judge how it will be impacted with changes in the company, but at the same time it is important to consider the psychological contract before any change is announced to the workers. Impact on the Psychological Contract The first case of employees who wanted to and have been selected is easy to explain in terms of the psychological contract. For whatever reasons, they considered themselves capable and deserving enough to be made a part of the talent and leadership programme and the company thought the same therefore there is no conflict between them. It does not come as a surprise to the employee; rather it comes as a reward or even as expected entitlement. This situation would validate the belief of the employee in his/her own abilities as well as improve the strength of the psychological contract (Rousseau 1995). Guest (2004) mentions issues of power, trust and fairness as the central forces in making the psychological contract and all these issues reflect positively in this situation. The company has shown its trust in the employee; the employee expected the trust to be shown and now is in turn expected to act at a higher performance level than before. The employee can be expected to show a greater amount of commitment to the company, be more satisfied with the new position and have a stronger intention of staying on with the same company despite all the changes which come through the door. However, there is one case in which the psychological contract might be affected negatively in this scenario. If the employee considers inclusion in the program to be only a reward for their previous performance and considers the trip to Italy for participation in the training programme to be a holiday. The demands of the talent and leadership programme and the training schedule must be clarified to all those who have been selected so they exactly what is involved in the process. Similarly, a sense of entitlement should be replaced with a sense of responsibility since these employees can be expected to take future leadership positions at the locations where Company X operates. The second set of employees, who expected and wished to join the programme but were not selected is the most difficult to deal with in terms of psychological contracts. Essentially they will look at their not being named as a breach of the contract and could also see the situation as being unfair. Fairness itself has been reported as an input, a result and an element of the psychological process involved and if this group of employees is not shown (either privately or publicly) why they were not selected while others in their place were, they may not view the process as being fair (Guest 2004). Of course the issue may even be connected with these employees seeing the company as making decisions which are based on preferential favouritism rather than performance feedback in which case this would certainly have heavily negative consequences (Guest 2004). It must be noted that such perceptions come with a strong emotional response which must be carefully handled by the managers. The emotional response and the feelings of the ‘rejected’ employee will probably have little to do with practicality, objective reality or their actual standing in the company (Barnett et. al. 2004). The employees’ measures for job satisfaction, commitment to the organization, perceived obligations to the company and their decision to remain with the firm will all suffer a negative impact (Guest 2004). In a worse case scenario, the impact of this could be so severe that an employee can lose their motivation enough to reduce their input and contributions to the company. In the past, there have been (avoidable) situations where employees placed in similar circumstances have voted with their feet and left the company altogether (Barnett et. al. 2004). The third batch can be considered as those employees who were neutral about being in the programme but have been selected for the programme. This is one of the easier groups to deal with because their perception of what the organisation demands from them might change, but it is unlikely that the contract will be affected negatively. In fact, if the managers of the company can have a nice word with this group of employees, enormous benefits from the implicit contract could be reaped. A lack of communication can lead to cynicism and that must be avoided or it will turn into apathy (Abraham 2000). Since this group had no expectations to be included in the talent and leadership programme, it would most likely come as a pleasant surprise and if the added responsibility is coupled with other benefits, this group could produce many stars for the company in the coming years. Going above and beyond the psychological contract is expected of nearly every good employee and the company which does the same will have plenty of rewards. The employees’ attitude in this case can be expected to show a higher level of commitment, improved motivation and they are likely to be more satisfied with their jobs (Garrow 2003). The final case concerns employees who neither wished nor wanted to join the programme but have been selected as a part of it. This again is a delicate situation since they might perceive the talent and leadership programme as a burden or as suggested in the coursework, may have family or other commitments which prevent them from going to Italy. In this case, the value of the employee to the company becomes important because if the employee is valuable enough, they should be given the opportunity to bow out of inclusion in the programme. If done correctly, the value of the psychological contract would improve and the employee could be expected to show higher performance levels. At no time should the company make joining this programme a compulsion since it would sit negatively with employees who do not wish to join it. For the employees that the company feels would provide immense value by joining this program it is up to the managers to make arrangements and provide suitable conditions which let them make the trip to Italy or elsewhere as required in the future. Recommendations In their search for employees who can join the talent and leadership programme as well as their mission to transform Company X, several recommendations can be made to the managers. The first of which is to ensure that the psychological contract is not breached or affected negatively. Company X had worked as a traditional company for a long time and it can be expected that the employees there liked the environment as it was. Since a change is coming to them very rapidly, they must take quick action and use effective communication techniques to ensure the employees that even though things have changed, the spirit of the company will continue. The company will have to be on the lookout for those employees who show signs of a perceived breach in the psychological contract. Employees who show a drop in performance both in terms of their core functions and their Organizational Citizenship Behaviour (OCB) are likely to be suffering from such a problem. It can not be stressed enough that communication with employees will be the key to getting over the rough period. It can also be recommended that fresh recruits are brought in to adjust the culture of the company as suggested by Farrel (2003) and to provide replacements for those who choose to leave. For all employees mentioned in the cases above, it is the legitimacy of the decision which matters. An employee who feels that the psychological contract has been broken can be mollified and accept the company’s decision if they are convinced that the decision was legitimate and for the benefit of all concerned parties (Hau & Tung 2003). In many situations such as the ones presented above, it is not what is said to the employees, but how it is presented to them that will save the day. With regard to employees who have been selected in the program it should be clarified what is expected of them as well as what they shall be provided in order to maintain and strengthen their future psychological contracts with the company. It can also be assumed that the impact of not being included in the talent and leadership programme will be felt most strongly by those who are looking for and consider this to be a way up in the hierarchy of the organisation. Since the culture change comes with a decrease in the influence of the hierarchy, this change can be used in a positive manner by telling this group of employees of the new ways and means by which they can rise in the company. Additionally, since job descriptions do not apply as strictly as they did in the past, the company can expand the roles of present employees to ensure that they do not feel left out in the cold. Conclusion Communication can be expected to save the day here for Company X as it often does in so many cases where the psychological contract is involved. The merger and the changes being brought about within the company are bound to have a negative effect on the psychological contract but a good manager with excellent communication skills can use this as an opportunity to fuse new life into the company which was looking at bankruptcy a few weeks ago. 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W. 2003, ‘The art of explaining organisational changes to employees: Reducing negative reactions through effective communication’, Australian Journal of Psychology, vol. 55 no.1. pp 128-129. Rousseau, D. 1995, Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements. Sage Publications Ltd., London. Read More