The Psychological Contract Between Newcomer Employees Commerce Essay

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Critically evaluate the contribution of two popular methods of employee selection to the development of the psychological contract between newcomer employees and the organization. Consider in your answer the different role played by different selection methods (e.g. interviews, assessment centres, psychological tests, etc.) in the formation of the psychological contract. Also, compare and contrast different views that selection methods solely perform predictivist objectives versus the view that selection methods can also serve the development of a viable psychological contract between the individual and the organization.


In this assignment the two selection methods that would be defined are Panel Interviews & Assessment centres, they have been chosen as both of them are widely used and are quite efficient methods of selection. The limitations of each selection method will be discussed and their role in the formation of psychological contract will also be defined. Later, towards the second half of this assignment there will be a comparison in between different views that the selection methods just perform predictivist objectives & the view that they can help in the formation of a viable psychological contract. In the end there will be a conclusion, which would discuss the inference drawn from the study of selection methods & their contribution in formation of a psychological contract.

I have chosen this assignment as being a master's student of H.R & employee relations, it is very important to have a deep understanding of the first step or base of H.R , which is employee selection. This study will help me in understanding the drawbacks & shortcomings of the selection methods & would also help me in understanding the Psychological Contract's formation and its implications. If the psychological contract is well understood & if it is transparent, then I think most of the issues related to H.R & employee relations will be dealt with & there would be no absconding by staff, no strikes, no clashes in between management & employees & no problems in the functioning of the organisation which would further lead to profit maximisation, employee satisfaction & would make work place a better place to be in.


Definition of psychological contract:

As per Rousseau(1985) the psychological contract has been defined as the exchange relationship that exists in between the individual employee and their organisation. It is not a formal written contract on a paper but a relationship based on mutual contributions. It has also been defined as employees perception or understanding of reciprocal obligations that exist within an organisation ( Paul M. Muchinsky,1999).


Selection method is not a gate that must be crossed to form a relationship with the organisation, but it in itself is the part of that relationship. It helps applicants know how the organisations deal with people once they're hired, how they view their social responsibilities, and even how worthy their products & employees are to them. This process gives both the candidates & the organisation, their first opportunity to craft a deal between them(Davenport,1999). In today's highly competitive world, personnel assessment and selection is one of the most important methods available to organisations to ensure that they have effective workforces (Smith &Robertson, 1993).


Panel Interviews are widely used method for the selection of candidates. For the candidates it presents an opportunity to show their ability in front of the assessors, to seek answers for their questions, to know how the organisation is structured and managed, its organization chart, current initiatives and new developments going on, the personnel who lead the organization and so on. Such questions help the candidates in forming a picture of the organisation and help him to think where can he fit in that picture. This in fact is the first step in the formation of the psychological contract (Tolly & wood,2010).

For interviewers it gives an opportunity to find out whether the applicant can make a contribution to the organization or not. They assess the candidate on the basis of work values which are: achievement, honesty, fairness and concern for others. Recruiters carry with them a criteria based on which they decide a candidate's employability and match it with the organizational values. They express the organisation's psychological contract to the prospective employee. Interviewers share the organization's values & they convey the broad outlines of the company's psychological contract(Davenport,1999).

In general, three interviewers are there as panel members who are seated right in front of the candidates vision, so that the candidates feel exposed and vulnerable. It is done to see if the candidates can deal with pressure in the interview, on the assumption that they will be able to transfer that ability to the workplace, this is an essential part of the psychological contract that the organizations build when selecting an employee i.e. candidates ability to cope with particular kinds of pressure in certain work related contexts.

In such interviews one person asks the candidates questions around an area of competence, another one probes into some aspect of their CV such as their previous work experience, the results of the psycho- metric tests, about the health, qualifications, interests. Just exactly candidates can ask what an organisation produces or what services it provides; its origins and history the place on the training course that is on offer.

There are certain questions that help the organization in checking the candidates capability & creating psychological contract for e.g.

Leading questions

Q: We are looking for somebody who can work to deadlines: By such a question the organisation puts forward its part of the psychological contract in terms of the expectation from the employee. This kind of questions foretell the employee what kind of work atmosphere he will be in and what is expected out of him. Later on the employee cannot complain that he is over burdened or his responsibilities don't seem to end.

Hypothetical question

The interviewer describes a situation to the candidates and asks them what they would do in those circumstances. Interviewers tend to be fond of such questions because they project how candidates might handle a situation in the future. For eg. How would they deal with an irate customer if candidates were faced with one? Such kind of questions also help in determining the situation handling skills of employee & foretell whether the candidate has managerial traits or not.

Questions about Past experience & achivements:

Many interviewers ask candidates to tell them about their previous challenges in other organistaion & also ask them to cite an example wherein they handled a difficult situation & the outcome of that situation.

It helps the organisation in knowing the calibre of the candidate and ensuring that he wouldn't be a misfit as per their psychological contract.

(Tolly & wood,2010)

Contribution of Panel Interviews towards creating psychological contract by the candidate:

Panel interviews contribute the most towards the formation of psychological contract on the end of the candidate as, the candidate has the maximum opportunity of asking questions to the management, other types of selection methods like bio data, presentations, group activities don't encourage the candidate to ask questions.

Certain questions that the candidate use in forming psychological contract are:

Q: What is the hierarchy in the organisation?

By asking this the candidate does not want to know who does what but he is interested in knowing the time required to reach the next level so that he can know when can he reach the next level if selected & this is a common part of every candidates psychological contract i.e. promotion.

Q: Which all countries does the organisation has its branches?

Such question help the candidate in checking the scope of international assignments, and he will ask this only if he is keen in going to a particular country that the organisation operates in or if he wants to have international experience.

Apart from asking such indirect questions the employee can bluntly ask questions that can help him in forming the psychological contract. For e.g what is the career progression plan in the organisation? Or How often is the appraisal done for an employee? Or What are the added benefits of working with the organisation? Such questions are the best questions that put forward clear picture of the organisation & if a candidate asks such direct questions, instances of psychological contract breach will be minimized.

Critical Analysis of Panel Interviews:

In spite of the evidence for the great predictive validity of panel interviews, organisations still largely prefer unstructured or one-on-one interviews (Graves & Karen, 1996, cited in Hough & Oswald, 2000). This is because of general reliance on intuition to make decisions (Beach, 1990; Dawes, 1988, cited in Dipboye, 1997) and a tendency for interviewers to have faith in the accuracy of their own judgements (Dipboye, 1997). A panel interview has been viewed as deskilling the role and reducing it to merely a monotonous exercise (Dipboye, 1997); less structure appears to be more attractive to managers because it gives greater authority to them(Torrington et al, 1991). Research has also shown that applicants generally prefer unstructured interviews over panel interviews because they allow more control over the situation (Schuler, 1993, Latham & Finnegan, 1993, cited in Dipboye, 1997). Panel Interview selection method has a limited usage and is generally used in business & government sectors (Milia,2004). In the 1970s and 1980s, it was common for management selection to depend on the assessment of candidates made by interviews but a research found interviewer decision to be doubtful of reliability and validity (Keenan,1975,1977; Schmitt,1976; Herriot & Wingrove,1984).


In an article Jinarek(2004) mentions the need & importance of assessment centres by saying that when employers are judging a candidate for a job in their organisation, they are looking for more than just a resume and the interview process. As a result, the need for assessment centres became popular in judging a person's motivation and capacity to perform. Assessment centres use a range of selection techniques which give the management an opportunity to test candidates intellectual, interpersonal, intrapersonal skills(which cannot be identified using other techniques). Candidates are asked to undertake a series of assessments that have been designed to reveal to the assessors if the candidate can: work effectively in the relevant job; benefit from a further training opportunity; or cope with the demands of an education programme(in short, forming psychological contract). The assessment process can take anything from a few hours to a couple of days. In the latter case, both the candidates and the assessors are likely to be in residence at the same place so that the assessors can check how candidates might be expected to perform in a real work- place, such as dealing with a difficult customer, working together in a team or handling electronic communication effectively.

It generally includes: an aptitude (ability) test; a personality questionnaire; a group discussion exercise; perhaps a case study; a presentation; and an in-tray/in-box exercise.

Personality questionnaires

Personality questionnaires, sometimes called inventories are designed to measure such personal characteristics or traits as candidates motivation to work and how candidates handle their emotions.

Contribution to Formation of Psychological contract:

The information which questionnaires provide is of great interest to the organisation because it provides a basis for predicting how candidates individual personality is likely to affect their future performance. It is important for them to know if candidates are the kind of person who can stay calm but alert in the conditions that prevail in a particular workplace, or have the ability to adapt to the culture of their organization.

Group exercises

Group exercises require candidates to interact with others in pre- arranged ways in order that the assessors can observe and evaluate candidates behaviour. The group exercises used at an assessment centre fall into three main categories: group discussions; problem solving; and team games.

Contribution to Formation of Psychological contract:

Such exercises are used to check whether the candidate can do team work or not & whether he can be team leader going further or not?

Case study

The most common form of a case study used at assessment centres is a business or technical problem that has been chosen because it is both realistic and relevant to the job on offer. Candidates are given information relevant to the problem, and are required to work with others in a group. A case study is used to check the candidates oral communication and team-working skills as well as their ability to analyse issues embedded in the case.

Contribution to Formation of Psychological contract:

It helps in checking the clarity of thought of candidates. If the candidate can think clearly in dealing with such problems he/she can definitely handle problems at workplace, it will give him confidence in accepting the job role & forming the psychological contract.


In-tray/in-box exercises : In-tray/in-box exercises are essentially an attempt to simulate the conditions candidates might expect to encounter in real work- places, in order to observe how well candidates can cope with the contingencies that typically occur within them.

Contribution to Formation of Psychological contract:

It helps in boosting the confidence of employees and the organisation can be sure that they are hiring someone who will fit in their psychological contract(Tolley & Wood,2010).

Critical analysis of Assessment centres:

Small companies cannot afford the expense involved for using different techniques in assessment centres (Tolley & Wood,2010). As per Kleinmann (1993) candidates can fashion their behaviour to impress assessors , especially when candidates are aware of the dimension on which their performance is being evaluated. So assessment methods may at times lead to selection of wrong candidate. Klimoski & Strickland (1977) proposed that since assessors & supervisors hold common stereotypes of the ideal employee, they may give higher ranking to candidates who look like good company people, and so eventually the organisation will be filled with people who are mirror images of each other & not with creative people who can go out of the way to innovate(Paul M. Muchinsky,2003).

Some candidates find assessment centres to be quite stressful, not because they are in an unfamiliar environment with people who are strangers to them, but because they think that they are being assessed all the time & even during informal breaks in the proceedings.

The use of tests in personnel selection is based on the assumption that there are stable job-related differences between candidates, and that these differences can be measured with a sufficient degree of accuracy to be of value to employers. The ability tests chosen for use at an assessment centre, therefore, will have been specifically designed to assess how good people are at doing certain things. Such an approach is generalised and does not take into factor that every individual is different.

Do selection methods solely perform predictivist objectives or they can also serve the development of a viable psychological contract between the individual and the organization:

Selection methods are they Predictivist : As per this approach the job is viewed as a stable entity into which the most suitable candidates need to be recruited. Person-job fit is of primary importance (Cook,1993 cited in Chimel,2000) and the entire power lies in the hands of the recruiting organization (Anderson & Cunningham cited in Chimel,2000). Predictive validity means the extent to which an assessment measure can predict the subsequent job performance (Smith et al, 1993) such as error rate, production rate, appraisal scores, absence rate, or other criteria that maybe really important to the organisation.(Theresa Feathers,2000)

In the 1920s it was realised that different studies conducted on the same selection procedure gave different results. Predictive validity estimates for the same method and same job were quite different for different studies. Later in the 1930s and 1940s the belief developed that this variation resulted because of subtle differences between jobs that were difficult or impossible for job analysts and job analysis methodology to detect or predict. That is, researchers concluded that the validity of a given procedure really was different in different settings for what appeared to be basically the same job, and that the conflicting findings in validity studies were just reflecting this fact of reality(Schmidt & Hunter, 1977; Schmidt,Hunter, Pearlman, & Share, 1979 cited in Schmidt & Hunter,1998). This led to the formation of view that selection methods help both the parties in forming a psychological contract, which keeps on getting evolved.


Selection methods form viable psychological contract: As per Herriot(1989) during the selection process, expectations of the organization & potential employee both build up & they both use it to construct a viable psychological contract .Nowadays job roles are becoming more flexible and organisations have become aware that they need to compete for best candidates. As per constructivist approach selection consists of a series of social episodes providing an opportunity to both the organisation & candidates to explore whether a future working relationship would be viable. Selection process serves an opportunity for information exchange and development of mutual expectations & obligations. Hence selection not only aims at person-job fit but also at person-organisation fit & person -team fit( Anderson &Cunningham cited in chimel,2000).Whilst the assessment and selection process provides information for decisions by both the employer and the potential employee, yet employment decisions have long been regarded as a management prerogative (Torrington & Hall, 1991). However, because of the predicted skill shortages and the fact that selection is also concerned with the future life plans of individuals, the predictive validity of selection methods is not valid anymore (Meijer, 1998) both for organisations and for individuals.(Theresa Feathers,2000)

Thesis to prove that Selection methods not just serve predictivist role but form a viable psychological contract:

The thesis focused on the psychological contracts that were formed by higher education lecturers in a University Business School in the UK.. Interviews were undertaken which allowed participants to provide life history accounts and the data suggested that each individual had analysed the extent to which a new employment context would deliver transactional, relational, and ideological reward and thus had formed their psychological contract. The notion that selection methods just perform predictivist role was not supported & it was found that they help in the formation of psychological contract in higher education(Gammie,2006).


It can thus be seen that selection is a crucial step that leads to the formation of a psychological contract between the candidate & the organisation, however it is very important to use the correct selection method that would give maximum chance of interaction in between the management & the candidate. By the use of correct selection methods like assessment centres & panel interviews a viable psychological contract can be formed as in these selection methods both the parties are at each others display, asking questions & setting expectations. It has also been seen that the thinking that selection methods just perform predictivist role has become obsolete & because of the shortage of skilled labour & approaches like person-organization fit selection methods serve the purpose of forming a viable psychological contract.