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Nine months after the implementation of these changes, a recent employee performance appraisal revealed that employee performance and motivation levels had decreased. This article will utilize the theory of psychological contract and the attribution theory to evaluate why the employees are experiencing the above mentioned changes. These will be followed by recommendations that the firm could apply in order to improve on this situation.
A psychological contract could be defined as a set of promises and beliefs held by an individual employee about the terms of the exchange between the employee and his or her organization, or the agent of the organization (Wellin, 28). The psychological contract can be a complex concept since it is an unwritten rule that cannot be directly expressed in a tangible way. Nevertheless, there have been arguments to the effect that a breakdown of the psychological contract can result in poor performance of individual workers or of the organization as a whole (Anderson, 102).
This can be caused by a reduction in levels of organization commitment, lack of motivation, absence and attendance problems and high levels of staff turnover, some of which the financial company is already experiencing. Being a psychological rather than a legal contract, a psychological contract refers to beliefs about the deal as opposed to what is contained in writing within the formal employment contract about the deal (Conway & Briner, 23).
Breach is probably the most important idea in psychological contract theory since it is the main way of understanding how the psychological contact affects the feelings, attitudes and behaviours of employees. A breach of the psychological contract occurs when one party perceives that the other has failed to fulfil promised obligations.
In this case, the financial organization’s freeze on pay-rises and overtime payments combined with the freeze in almost all training could ...Show more


Due to the economic crisis that was felt across the globe, several firms have had to take several steps to cushion their operations so as to prevent their collapse. Among these companies is a financial services firm which froze payments on pay-rises and overtime for all of its…
Author : robeldeanna
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