Volume 19, Number 3 Article by Upasana Aggarwal, Sumita Datta and Shivganesh Bhargava September, 2007
The Relationship between Human Resource Practices, Psychological Contract and Employee Engagement — Implications for Managing Talent :
In today’s fiercely competitive times, organisations need employees who are flexible, innovative, willing to contribute and go ‘above and beyond the letter’ of their formal job descriptions or contracts of employment. Two constructs which are said to achieve tangible as well as intangible firm level outcomes by developing and retaining talent and fostering pro-social behaviours are Psychological Contract (PC) and Employee Engagement (EE). While psychological contract is perceptual in nature and defined as a set of promissory expectations held by the individual employee, employee engagement is defined as the physical, cognitive and affective involvement of an employee and the harnessing of organisation members’ selves to their work roles. Both have significance for the effectiveness of human resource management practices.
In this paper, the author suggests that although these closely related constructs are both psychodynamic mechanisms of motivation, they are essentially different and the direction of relationship between the two needs investigation. They posit that if psychological contract is fulfilled, it will lead to higher employee engagement. The literature establishes that human resource practices (HRP) help in the formation of the psychological contract of an employee and also create conditions for employee engagement. It is thus plausible that HRP may have a significant impact on PC and EE and thereby influence organisational outcomes, although further research is needed to explore if HRP moderates the relationship between the two. Therefore it is important for organisations to view employee psychological contract, employee engagement and human resource practices as an integrative whole. The paper concludes that HRP is the linchpin between PC and EE which can serve as important strategic tools for talent utilisation and retention.
Reprint No 07308c
