MGT 674 Employee Relations Management

MGT 674 Employee Relations Management Ajaya Mishra

Nature of employee relations & current trends in Nepalese context • Contract: Legal & Practical Relationship • Psychological Contract • Rights & Discipline

Contract: Legal & Practical Relationship

contract • A voluntary, deliberate, and legally bindingagreementbetween two or more competent parties. Contracts are usually written but may be spoken or implied. • A contract, whether verbal or in writing, is a legally binding agreement enforceable in a court of law. However, not all agreements between two parties are legally binding contracts. For it to be considered a valid contract, certain elements must exist. • A contractual relationship is evidenced by (1) an offer, (2) acceptanceof the offer, and a (3) valid (legal and valuable) consideration. Each party to a contract acquires rights and duties relative to the rights and duties of the other parties.

Offer • An offer is a proposal to make a deal. An offer must be communicated to another person, and it remains open until it is accepted, rejected, retracted or has expired. A counter-offer closes the original offer. • The offer will contain terms, which are elements that help define the scope of an agreement. The terms of the rental offer would include the price (rent), description of the property (such as its address) and the length of the contract. • Terms for other contracts must be specific and definite because the offer has to identify the basic obligation of the contract.

Acceptance is an acknowledgment by the person to whom the offer was made that the offer is accepted. The acceptance must comply with the terms of the offer and must be communicated to the person who proposed the deal. • Consideration is the bargained-for exchange. It is the legal benefit received by one person and the legal detriment imposed on the other person. Usually consideration takes the form of money, property or services.

Other Requirements • Beside the fundamental elements of a contract (offer, acceptance, and consideration), there are other requirements: • Competence: to make a contract means each party has the legal capacity to make a contract • Consent: Consent means that each party to the contract must agree to the terms of the contract • Legality: For a contract to be enforceable, it must involve a legal activity. The law does not enforce contracts based on illegal activity

PSYCHOLOGICAL CONTRACT

Psychological Contract • 'The Psychological Contract' is an increasingly relevant aspect of workplace relationships and wider human behavior. • Descriptions and definitions of the Psychological Contract first emerged in the 1960s, notably in the work of organizational and behavioral theorists Chris Argyris and Edgar Schein. • The Psychological Contract is a deep and varied concept and is open to a wide range of interpretations and theoretical studies.

Primarily, the Psychological Contract refers to the relationship between an employer and its employees, and specifically concerns mutual expectations of inputs and outcomes. • The Psychological Contract represents, in a basic sense, the obligations, rights, rewards, etc., that an employee believes he/she is 'owed' by his/her employer, in return for the employee's work and loyalty.

The Psychological Contract is usually seen from the standpoint or feelings of employees, although a full appreciation requires it to be understood from both sides. This notion applies to a group of employees or a workforce, just as it may be seen applying to a single employee. • The concept of the Psychological Contract within business, work and employment is extremely flexible and very difficult to measure in usual ways, as we might for example benchmark salaries and pay against market rates, or responsibilities with qualifications, etc.

Psychological Contract is quite different to a physical contract or document - it represents the notion of 'relationship' or 'trust' or 'understanding' which can exist for one or a number of employees, instead of a tangible piece of paper or legal document which might be different from one employee to another. • Simply, in an employment context, the Psychological Contract is the fairness or balance between: • how the employee is treated by the employer, and • what the employee puts into the job. • Respect, compassion, trust, empathy, fairness, objectivity – are the foundation of Psychological Contract.

Definitions … • "...the employment relationship consists of a unique combination of beliefs held by an individual and his employer about what they expect of one another..." Michael Armstrong (2006) • "...there is an unwritten set of expectations operating at all times between every member of an organization and the various managers and others in that organization..." Edgar Schein (1965)

"A psychological contract represents the mutual beliefs, perceptions, and informal obligations between an employer and an employee. It sets the dynamics for the relationship and defines the detailed practicality of the work to be done. It is distinguishable from the formal written contract of employment which, for the most part, only identifies mutual duties and responsibilities in a generalized form." Wikipedia (April 2010) • “……the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other'. These obligations will often be informal and imprecise: they may be inferred from actions or from what has happened in the past, as well as from statements made by the employer, for example during the recruitment process or in performance appraisals. Some obligations may be seen as 'promises' and others as 'expectations'. The UK Chartered Institute of Personal Development (2010)

Within these referenced definitions, Psychological Contract has a number of complex dimensions, notably: • There are a series of mutual obligations on both sides. • It is a relationship between an employer on one side, and on the other side an employee and/or employees • The obligations are partly or wholly subject to the perceptions of the two sides. • Overall the Contract itself has a very changeable nature. • The Psychological Contract is almost never written or formalised, which makes it inherently difficult to manage.

Venn Diagram vc = visible contract - the usual written employment contractual obligations on both sides to work safely and appropriately in return for a rate of pay or salary, plus other employee rights of notice and duty of care. pc = psychological contract - which is hidden, unspoken, unwritten. r = relationship references between employee and market and employee and employer.

The 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.

Leadership and Psychological Contract • This reflects the fact that employee's feelings and attitudes act on two levels: • Employee feelings and attitudes are strongly influenced by their treatment at work (an aspect of the Psychological Contract), while at the same time, • Employee feelings and attitudes strongly influence how they see themselves and their relationship with the employer, and their behavior towards the employer (also an aspect of the Psychological Contract). • Leadership transparency has a huge influence on two major factors within the Psychological Contract and its effective management: • employee trust and openness towards the employer • employee awareness of facts - enabling employee objectivity in judging the Psychological Contract

Empathy and Psychological Contract • Empathy is the ability or process used in understanding the other person's situation and feelings. • Empathy is characterized as the behavior of a single person, but in the Psychological Contract empathy must be an organizational capability - a cultural norm and expectation of leaders and managers in their dealings with people. • Empathy is crucial to trust, cooperation and openness, and it's also crucial to mutual understanding. • The nature of empathy is that people can see if it exists or not. Where it does not, building trust and cooperation is very difficult. • Where an employer lacks empathy, employees naturally are less inclined to trust and cooperate.

Communication and Psychological Contract • Openness of communications is crucial to within the Psychological Contract. • openness crucially influences trust and mutual awareness (between organization and employees) and hugely influences the quality of the Psychological Contract.

The Psychological Contract combines the effects of at least two highly complicated systems: • an individual person's thoughts, and • an organization's behavior towards that person. • Beyond this other complex systems are almost always involved: • the thoughts of fellow employees; • the thoughts and attitudes of leaders • the positions and needs of the organization's ownership; • the organization's behavior towards fellow employees; • the organization's performance and strength (especially the employee perceptions of this); • the market in which the employer operates (again employee perceptions of this); • the wider economy and world in which the employee sees him/herself (again employee perceptions of these factors);

Employee Right and Discipline …

Employee Rights Employee rights arise from the state laws that, over time, have established various rules that govern the employer-employee relationship.

Employee rights fall under seven categories: • union activity, i.e., the right to organize and to bargain collectively; • working hours and minimum pay; • equal compensation for men and women doing the same or similar work for the same employer; • safety and health protection in the work environment and related workers' compensation; • nondiscriminatory hiring and promotion practices; • privacy related to professional or personal life; and, • family and medical leave

Laws Governing Rights … Employment at Will is a common law doctrine stating that employers have the right to hire, fire, demote, or promote whomever they choose, unless there is a law or contract to the contrary and Employees have the right to quit and got another job under the same constraints

Disciplining Employees

Employee discipline is a tool that managers use to communicate a need to change behavior. Traditionally, such discipline is performed by supervisors. But, when teams are used, it may be the team’s responsibility.

Two different approaches to discipline are widely used. They include progressive and positive discipline • Progressive Discipline The most commonly used form of discipline, progressive discipline, consists of a series of management interventions that gives employees opportunities to correct their behavior before being discharged. • Positive Discipline Encouraging employees to monitor their own behaviors and assume responsibility for their own actions is called positive discipline. Management still intervenes, but with counseling sessions as opposed to punishment.

Progressive Discipline • Gradual movement from less to more severe penalties • Why? • Fair treatment for employees (chance to improve) • Preserve company’s investment in employees • Maintain employee morale • Ethical considerations • Professional approach to discipline • Legal considerations

Establishing Discipline Establish Rules Communicate Rules Assess Behavior Change Inappropriate Behavior

Tools … • Organizational culture and practices. • Performance tie ups. • Reward and Punishment policies. • Organizational rules and regulations • State law and rules.

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MGT 674 Employee Relations Management