Introduction
The primary objective of this report is to analyze the concept of flexible working and psychological contracts. Also, it aims at evaluating the influence of flexible working in an organization. The first part covers literature review of psychological contract and its impacts on business performance. Psychological contract is a notion that the employee and employer have a mutual relationship whereby both have expectations. According to CIPD (2016a) flexible working is whereby the employees have a degree of flexibility on work schedules such as working four days a week, part-time work, job-sharing, and annual hours. Flexible work improves retention and motivation, but it impacts teamwork negatively (CIPD, 2015). In the second section, the report will discuss the existence and effect of flexible working on KPMG, which is the identified organization. KPMG is one of the biggest audit companies in the world, which offers tax, audit and advisory services. Apart from audit services, KPMG also provides legal services. The firm has about 174,000 employees globally, and it is regarded as on the best organizations to work for in the US and UK (KPMG, 2015). The company is famous for offering a flexible working environment for its employees including sabbatical leaves and compressed working hours. KPMG also provides attractive allowances and health insurance for its employees. The last two parts of the report will include conclusion and recommendation for improvement of the firm.
Literature Review
A psychological contract is a concept that defines the mutual relationship between the employers and workers. Even though the psychological contract is an informal obligation, it stipulates what a worker expects to offer and receive from their employer. Importantly, an employment contract acts as an exchange relationship between the parties. When entering into an employment contract, an employee focuses on matters of salary and hours of work. However, issues of trust and fairness are open to discussion between the parties.
Argyris (1960) introduced the concept of psychological contract, but the idea remained marginalised until in the recent past. He stated that foremen noticed that the workers delivered maximally under acquiescent leadership which resulted in the evolution of a mutual relationship the “psychological work contract.” Schein (1980) defines psychological contract as undocumented expectations that exists between members of a company and different administrators and other institutions. According to this explanation, every party holds a particular set of expectation and obligation. Evidently, psychological contract is based on the notion that employer and employee expect to benefit from each other. However, there are different views of the psychological contract. For instance, Schein defines the concept as what workers offer hoping to benefit either through salaries or promotions (1978 pp. 112). Ideally, it is the individual who hold expectations not the organization (Kotter 1973 pp. 92). This view suggests that the perception of the firm is held by the people who are within it including the manager, human resource, directors and other stakeholders. Notably, the organization is an entity so it cannot have perceptions. According to CIPD (2016b), the psychological contract instructs the employees what is required of them and what their job can offer. Further, CIPD reports that psychological contract is not legal and cannot be enforced in the court. However, the relationship between the worker and employer may influence the court to enforce psychological contracts.
In the recent past, the notion of psychological contract has gained importance among human resource managers due to its ability to address challenges in the employer-employee relationship. Most UK and US based companies are continually adopting the concept of psychological contract as they strive to minimize expenditure and improve efficiency. Employees have also become more aware of this unwritten obligation, and it impacts their commitment, trust, and ability to perform in the workplace. Just like the Herzberg’s hygiene factors, psychological contract supports the workplace relation (Sparrow 1996). Ideally, an elaborate psychological contract does not warrant an excellent performance, but an unclear physiological contract may lower employee morale, which reduces productivity. Unmotivated employees tend to underperform since they do not expect a reward from the employer. According to Sparrow and Hiltrop (1997), the psychological contract helps employees envision the type of reward they expect for committing time and energy to the company. This perception makes the employees feel as influential parties in the realization of the business’s goals. The ability to predict keeps employees motivated to deliver their best in the workplace, as they desire to preserve equity in the distribution of rewards. Evidently, psychological contracts help improve production as employees associate decent work to fair pay. Conversely, proper employee behavior and attitude are among the variables that impact HRM-Performance (Purcell, Kinnie, and Hutchinson, 2003). Marchington and Wilkison (2002) assert that the HRM is a key factor that determines the success of an organization. Thus, proper employee management coupled with good psychological contracts results in success of the business.
Discussion
The KPMG offers flexible working scheme to all staff, especially in the UK and US. Importantly, the company encourages the employees to volunteer to take a paid sabbatical leave. The flexible working is available in various modes offering the employees a chance to choose what they prefer. The most popular flexible working scheme in KPMG is the compressed hours. This flexible working method requires the interested employees to sign up to work four days a week. The other flexible working scheme in KPMG is the career break or sabbatical leave. Employees can choose to extend their holidays but in this case, they only receive a portion of their current salary. However, the sabbatical leave cannot extend beyond three months. Eligibility of the sabbaticals is determined by the firm based on the role of the employee. KPMG also offers maternity and paternity leaves to the employees. This leave is mainly designed to suit the female workers and men who wish to care for their kids and family. Nevertheless, the company encourages most of the employees to sign up for flexible work. Most employees of the firm have embraced the scheme and the company pride of the employment practice. Employees who work four days a week lose only 10 percent of their current pay. KMPG also offers 30 percent pay to employees who apply for sabbatical leaves not extending to three months.
While some of the flexible working schemes of KPMG contribute, others do not lead to the realization of its objectives. After implementing the flexible working scheme, KPMG has realized numerous benefits, but there are also so some drawbacks. The firm has reduced its operation costs significantly since employees do not get a full pay when working under the flexible scheme. Ideally, the company is no longer paying for undesired work as it used to do before implementing the flexible working scheme. Also, KPMG has eliminated redundancies in the workplace. Initially, there was a duplication of duties and work. Additionally, the system helps improve employee engagement. Flexibility at the place of work motivates the employees to employ effort towards the realization of the firm’s objectives. There is more collaboration among the employees, which makes the firm competitive. Flexible working helps to retain top talent in the company. Talent ladies and men workers have access to maternity and paternity leaves respectively. These employees feel at ease when working for the company since there are flexible arrangements to care for their children. Also, employees seem reluctant to exit since they have sufficient time to engage in personal life.
KPMG is at the advantage of attracting top talent due to its flexible working system. Fresh grandaunts exhibit willingness to work for the firm since they are assured of a work-life balance. The graduates also have high expectations and view flexible working as a legal standard. The flexible working scheme helps KPMG to respond to the current economic conditions effectively. The firm remains profitable even with hard economic status due to the reduced expenditure. The organization has created a healthy working environment for the employees. The flexible working system eliminated monotony of work since employees have an opportunity to engage in other activities. This aspect makes the staff happy and passionate about their job. Hence, a healthy working environment is realized. The firm has also realized an increased client satisfaction. Since the employees serve customers with excellence, they offer quality services. In turn, the customers become loyal and refer other people to the company. KPMG has also realized a decrease in cases of absenteeism. Initially, employees missed work to attend personal issues. However, flexible working offers them a chance to handle private matters without missing work.
Nevertheless, long sabbaticals leaves that extend to three months may not be beneficial in the realization of KPMG objectives. The employees who work for many days as substitutes for those on vacation may lack motivation. Also, when employees resume from their vacation, they may require some time to adjust to the new working systems. These aspects may lower the firm’s productivity. Further, some of the flexible working schemes are not appropriate for all employees. The managers face challenges deciding which employees should take a vacation at a particular time. The flexible working schemes may also impact team collaboration in KPMG adversely. For instance, if employees work in a team, they may have to work together always. In this case, the company management may have challenges when scheduling sabbaticals leaves. Knowledge sharing is impacted negatively by some flexible working schemes. For instance, the sabbaticals introduced by KPMG separate the employees for a long time. These employees cannot share information effectively during their holidays. Consequently, productivity may also be affected adversely. Employees may act without engaging in consultations, which increase the possibilities of making wrong decisions. KPMG avoids this issue by relying on talented employees. However, this challenge may occur in the future and affect client satisfaction. Notably, KPMG realizes more benefits than shortcomings from the flexible working schemes.
Conclusion
A psychological contract is a concept that defines the mutual relationship between an employer and employee. Importantly, the employee puts effort towards the achievement of the organization’s objectives expecting to get a benefit from the company. Some of the perceived benefits include salary increase, and promotions. The notion of the psychological contract remained marginalized until companies realized the essence of a "psychological work contract." Notably, a good psychological contract helps solve challenges between the employer and employee. The concept makes employees feel like a vital part of an organization since they assist in the achievement of its goals. Also, it helps keep the employees motivated. However, psychological contract cannot be enforced in the court since it is an unwritten obligation. KPMG offers flexible working in various modes including compressed hours and sabbatical. Employees earn 30 percent and lose 10 percent of their pay during sabbatical and four-day week work respectively. Additionally, KPMG offers maternity and paternity leaves to its employees. The flexible working scheme is available to all employees, but the management can influence who and when takes a leave. Evidently, KPMG has realized many benefits from the flexible working conditions, but there are also some drawbacks. The employees of the company stay happy and motivated due to the flexible working scheme. KPMG has also achieved other benefits including top talent retention and hiring, improved client satisfaction, steady profitability and retention of loyal customers. However, the management faces a challenge of deciding the employees who should or not take sabbatical leave. Teamwork may also be impacted adversely when some members work under the flexible working scheme. Although the flexible labour condition is effective to some extent, KPMG should consider shortening the length of the sabbatical leaves.
Recommendations
Unlike in the past, organizations that want to perform better and enhance their competitive advantage should strive to establish more elaborate psychological contracts. That does not suggest that psychological contracts should be part of the employment contract, instead employers should act in a way that improves employees expectations. This suggestion will help improve motivation in the workplace and also encourage the employees to perform better. Ideally, workers tend to put more effort in handling their duties if they are sure of hefty rewards. The employers should also increase their expectation towards the employees. They should expect the workers to be more vigilant in helping the firm to achieve its objectives. This action will eliminate the notion that it is only the employees who expect a reward from their employees.
KPMG should consider shortening the length of their sabbatical leaves to one or two months. When employees stay out of work for three months they may lose concentration and the passion to work. Shorter sabbatical leaves will ensure the employees do not struggle to adapt to any changes in the company. The firm should also consider increasing the payments during sabbatical leaves from 30% to 45%. This move will motivate employees to volunteer to take holidays. Further, KPMG should increase the pay for those willing to work four days a week. They should lose less than 10% of their current pay. KPMG should consider introducing a means of information sharing when employees are on sabbaticals to ensure steady productivity and client satisfaction. Finally, the company should consider launching other flexible working schemes such as term-timer working and working from home.
Action plan
Bibiliography
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