The role of trust in the psychological contract and the contribution of both variables to employee engagement

The role of trust in the psychological contract and the contribution of both variables to employee engagement

Javier García Business School, University of South Wales

Abstract: The following research paper examines the importance of trust in an organisation with regards to the psychological contract it builds between management and employees and the consequent engagement it generates. The three variables are examined individually and in relation to one another for specificity purposes. Human Resource Management (HRM) theories are also explained through the findings from research on IKEA. The company´s most relevant Human Resource (HR) policies and practices are analysed in relation to trust, the psychological contract and employee engagement, to conclude that such policies and practices meet the requirements needed for a company to be succesful, especially in the HR department.

Key words: trust, psychological contract, employee, engagement, IKEA.

Introduction: This research paper is an attempt to provide the reader with some insight on the relationship between employee engagement, trust, and the psychological contract in a company. First, a literature review will be undertaken in order to examine what such terms refer to. Secondly, the Swedish company IKEA will serve as an example of how the trust between employees and employers, the psychological contract they build with one another, and, ultimately, how this affects the levels of engagement of employees, affect the outcomes of a real life case scenario. This will be done by first bringing some general information about IKEA as a company, to then analyse their practical initiatives, and finally explain how such initiatives relate to the theoretical framework on the topic. It is very important, as the reader will see in the literature review, for employers to consider every possible variable that can potentially

help them have greater levels of engagement from the employees. There is no doubt that, in modern times, employee engagement is one of the main drivers of effectiveness in a company, as Mackay et al (2017) explain, and should therefore never be overlooked. This is where the importance of this research paper relies, in the fact that it provides an explanation on how trust and the psychological contract could be utilised effectively such that Employee Engagement increases, with the consequent increase in organisational outcomes, and applies the theory to a real company so that a deeper understanding on the topic is facilitated and the practicality of the paper becomes more notiseable; that is, the reader can benefit from this information and apply it to other companies following a similar scheme to the one presented below.

Literature Review:

Employee Engagement

Traditionally, there has been two highs in the agenda of HRM departments: increasing employee engagement and increasing commitment (Bal et al, 2013). Throughout this essay, although both terms relate to each other, the focus will be placed on the former. To date, the concept of Employee Engagement doesn´t have a single and generally accepted definition to it (Markos, 2010). However, all the definitions point towards employee engagement being a positive attitude that an employee holds towards the organisation and its value, that drives him or her to improve performance for the well-being of the organisation (Robinson et al., 2004, cited in Markos, 2010, p.90). Kahn (1990) explains how employee engagement or employee disengagement develop to the degree that the following constructs can be fulfilled: Meaningfulness, which he defines as a “sense of return on investments of self in role performance” (Kahn, 1990, p.705); Safety, or lack of fear to show one´s authentic true self, regardless of status or career; and Availability, that is, the sense of the employee of possesing the necessary physical and psychological resources to engage. Very similarly, Macey et al (2011) state that Engagement will depend on the employees being capable and free to engage, while having a motivation to do so. However, despite the importance of the employees being able to express themselves physically, cognitively and emotionally (Kahn,

1990), these three fields should not be equated in relevance, and managers should in fact place a greater focus on identifying the cognitive and emotional engagement of their employees, as the work-environment dimensions, which they can manipulate to improve such environment and therefore allow employees to fulfill their basic human needs of relatedness, competence and autonomy (Deci & Ryan, 1985, cited in Mackay et al, 2017, p.109), don´t contribute to the physical engagement of employees to such a high degree (Raman and Sia, 2012). Saks (1986), on the other hand, offers a different and perhaps more complex approach to engagement, bringing a distinction between job and organisation engagement, so that, for instance, the wanting of an employee to quit a specific job might not mean that he or she is disengaged from the organisation itself and wants to leave it. To avoid job disengagement, it is crucial that social support, feedback on the performance of the employee, task variety, autonomy, and learning opportunities are provided (Garza and Slaughter, 2001, cited in Mackay et al, 2017, p. 109), that is, the employee shouldn´t be driven to work harder, but rather should be provided with the conditions under which he or she is more likely to work effectively. Despite minor differences in points of view, most authors agree that employee engagement is one of the most important drivers of employee effectiveness (Mackay et al, 2017). However, although EE has greater validity in predicting employee efectiveness over some specific individual job attitudes (e.g. Job commitment), it still does not have such validity over a higher-order construct, such as the invididual variables being combined (Mackay el at, 2017).

Trust in relation to employee engagement

One of the most important variables that affects the levels of engagement of the employees, and therefore the organisational outcomes, is the level of trust that such employees project in their superiors (Ugwu et al, 2013). As Couch, Adams and Jones (1996) state, trust is an attitudinal variable that can be of two main types: expectations towards people in general, which depends on the perception of strangers´ trustworthiness, and relational trust with specific partners. Increasing organisational trust is a viable and economic way to increase the levels of engagement of the employees and thus improve outcomes of the company. One

of the most effective ways to do so is by communicating effectively with the employees, displaying good problem-solving skills, putting discretionary effort in, and having proper organisational citizenship behavior (Gillespie and Mann, 2004). Thus, managers must place

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