HRM Essay Example: Layoffs and Downsizing

A psychological contract is an unwritten commitment between employees and their employer that guarantees job security and rewards for loyalty. Over the past years, psychological contracts have changed as employees no longer expect to stay at the same job for the rest of their lives. The reason for this change is that businesses are constantly changing as well as their strategies, workforce, and design due to economic, internal, and external factors.

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Therefore, when a psychological contract is breached, it means that the employer has to let the employee go for what could be mainly layoffs due to downsizing. Employees that are dismissed from work usually begin to experience large amounts of stress, especially if it was not something they were expecting. Also, employees who have been let go, due to downsizing, have a more negative view of their employer and the company. These victims are less likely to recommend the business or company to friends and family and are also reportedly less likely to work for the company again if asked to go back. According to Jennie Brand, who tracked high school graduates over forty-five years, those who were dismissed were about thirty to thirty-five percent and were less likely to join extracurricular activities, as well as friend gatherings. Also, the people who only experienced dismissal due to the company becoming smaller once were less likely to involve themselves in these activities than those who were displaced multiple times.

High involvement in human resource management has been becoming more of a focus in recent decades. High involvement HRM is aimed towards treating people as assets and many organizations are introducing programs to show this new view towards employees. A layoff is an employer's action of terminating an employee for lack of good work and they mostly take place at the economic downturn time as overall demand always declines (Guchait, & Meurs, 2015). A worker who has been laid-off is always not sure of being called back to work as employers focus on people who deliver quality work. In the past decades, layoffs have become a euphemism for a reduction of force. If a high-involvement place of work resorts to layoffs, there is a possibility for the organization to rise and become more productive. However, companies or organizations that shed workers frequently lose time that is invested in training them, their relationship networks and the knowledge of how to get some work done (Li, Wong, & Kim, 2016). For instance, frequent layoffs can make employees feel that they have lost control and their peers' fate impacts in them they do not fit where good performance and hard work is in their jobs.

According to Zatrick and Iverson from the textbook, companies that have many practices suffer more from layoffs than those organizations that have fewer practices. The reason is that high involvement practices of work have specific employees that are good in certain fields and if they are dismissed temporarily or permanently the organization suffers great losses ((Ng, Feldman, & Butts, 2014). Also, downsizing in most cases, declines revenue due to increased foreign competition or poor economy, because employees do not have the interest in delivering quality services. They will always work in fear of layoffs they might be offered. Moreover, if there is labor at lower costs overseas and work can be shifted or transferred, some businesses will relocate their jobs to reduce the costs (Guchait, & Meurs, 2015).

Other implications of a breach in the psychological contract for employees and the employing firm are that there is workplace deviant behavior. This activity is true for employees who view the relationship to the company or organization as something that is more transactional than relational. Those individuals who are entitled to experience the psychological contract breach often have a tendency of "evening the score" with the company through engaging in deviant behavior like starting rumors, slacking-off or even causing conflicts that affect the well-being and productivity of other employees negatively (Ng, Feldman, & Butts, 2014). Also, there is a lack of organization citizenship as those workers who think their organization failed to meet their commitments will not demonstrate the citizen behavior or beneficial actions that is required in the organization. Organization citizenship behaviors that are often directed to employees include communicating work-related intel that is important or helping those who have a heavy workload (Li, Wong, & Kim, 2016). The strategy aimed at the company are such as updates on company developments or willingly participating in the activities of the company. These findings depict that workers who feel that an organization cannot provide what is promised and the things that were due rightfully to them will only work as required (though not self-driven) and will not have the mind of doing more to help the organization.

Therefore, to curb psychological contract breach, it is always critical for organizations to be cautious on the promises it makes to employees who are potential. People who apply for job vacancies should also be given previews that is realistic of the organization and their job, for expectations to be clarified and truthful and transparent conditions and parameters of employment be established. Additionally, organizations should remain true to their commitments so that potential employees are not demoralized by the work or do not see the essence of working to make the organization successful.

References

Guchait, P., Cho, S., & Meurs, J. A. (2015). Psychological contracts perceived organizational and supervisor support: Investigating the impact on intent to leave among hospitality employees in India. Journal of Human Resources in Hospitality & Tourism, 14(3), 290-315.

Li, J. J., Wong, I. A., & Kim, W. G. (2016). Effects of psychological contract breach on attitudes and performance: The moderating role of competitive climate. International Journal of Hospitality Management, 55, 1-10.

Ng, T. W., Feldman, D. C., & Butts, M. M. (2014). Psychological contract breaches and employee voice behavior: The moderating effects of changes in social relationships. European Journal of Work and Organizational Psychology, 23(4), 537-553.