Explain the psychological contract.
Possible Answer: A psychological contract is a person’s set of
expectations regarding what he or she will contribute to the organization and
what it will provide in return. An individual makes a variety of contributions
to the organization; contributions can include effort, skills, ability, time,
and loyalty. In return for these contributions, the organization provides inducements
to the individual; these inducements can include pay, career opportunities, job
security, status, etc. All organizations face the basic challenge of managing
psychological contracts: They want value from their employees and they need to
give employees the right inducements. Recent trends in downsizing and cutbacks
have complicated the process of managing psychological contracts. In addition,
globalization of business is also a challenge.
Source: Business
Essentials, 8e (Ebert/Griffin) – Global Edition
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