Download Approaches on Construction Strategies of Psychological Contract Based on Internal Marketing

Approaches on Construction Strategies of Psychological Contract
Based on Internal Marketing
ZHAO Jixin, CHENG Lu
Economics and Management Institute, North China University of Technology, Beijing,
P.R.China,100144
[email protected]
Abstract: The construction of psychological contract plays a significant role in the management of
labor relations. This paper proposes a new approach of the construction of psychological contract which
is easy to realize by the use of theory of internal marketing. Because of the same core target and similar
expectation modes between both of them, labor relations are managed through both internal marketing
and psychological contract, which complement each other. The theory of internal marketing provides
some methods and approaches for psychological contract, and psychological contract does the guarantee
for the smooth implementation of internal marketing. According to the analysis of segmentation
procedures and position procedures in internal marketing, staff’s variant needs can get known more
clearly. For the purposes of satisfying staff’s needs in their organization, enhancing their loyalty to their
organization and realizing trade, relation and self-improvement dimensions in psychological contract,
this paper designs some work products in the organization which regard salaries, relations and career
planning as the core respectively. In addition, the strategy of promoting, distributing and pricing in
internal marketing reflect fixing and distribution of salary, construction of communication platform, and
training and encouragement to staff respectively. As a result of the three strategies above, staff’s
psychological contract to their organization can be enhanced.
Keywords: Career planning, Internal marketing, Psychological contract, Salary, Work “product”
1 Introduction
With the development of global economy and fiercer competition, the company not only produces and
does service with the guidance of high-technology, but also holds down the labor cost more and more.
So the labor relation is still nervous today when the labor law has been improved gradually. In the labor
relation, the psychological contract, as the supplementary elements of the explicit contract (labor
contract), is the mutual implied expectation and mutual beneficial psychology and action procedures
between organization and staff. They need undertake the contractual obligations and responsibilities
respectively. It becomes necessary and possible to improve the complex labor relation by concerning
about the implied psychological contract of the labor contract and using the flexible psychological
contract. But the construction of psychological contract is a relatively abstract concept and approach.
Through the method of internal marketing, this paper tries to design a work “product” with the strategy
of promoting, distributing and pricing which can improve the staff’s satisfaction and build the
psychological contract in order to manage the staff by using of theory of internal marketing.
2 An analysis of relationship between the internal marketing and the
psychological contract
The concept of the psychological contract is clear relatively and its content is abundant with the fifty
years’ development of its theory. First, in the contract relation, the psychological contract, as the
supplementary element of the explicit contract, is a bidirectional obligation and responsibility; second,
the psychological contract is the mutual implied expectation and mutual beneficial psychological and
action procedures between organization and staff. So the organization and staff need undertake the
contractual obligations and responsibilities respectively. The relationship between internal marketing, as
a tool of the management of organization, and human resource management becomes closer. First, the
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internal marketing is a pursuing human-oriented idea which considers the staff as its consumer
concerning their needs
attractions development and encouragement. It is also a procedure of
management of keeping the high quality staff. Second, the internal marketing is that all kinds of
marketing theories, ideas and methods are applied to the inner organization. The organization does the
position and segmentation of staff and gives staff salary and welfare according to his\her value. So it
need build a communication channel, do career planning and spread the organization’s culture during a
series of management. Inner staff is the core of the internal marketing. So internal marketing is a
procedure which does communication and management of staff by using the theory and method of
marketing.
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2.1 The same target of internal marketing and psychological contract
There is the same core target of internal marketing and psychological contract. Both of theories aim to
improve the satisfactions of staff, thus to improve the efficiency of work, and achieve the growth of
company performance. The target of internal marketing includes attracting, developing, and encouraging
staff and keeping them staying. Their loyalty will bring high work efficiency and continuous growth of
performance to the organization. External customer does not attain satisfaction until the staff is satisfied;
quality service provided to customers brings the organization greater benefits and retains customers’
loyalty. Through a series of human resources management methods, the psychological contract satisfies
the staff’s needs, enhances their satisfaction to the organization and realizes the staff’s loyalty. The
staff’s loyalty can decrease the management cost and improve the efficiency. So there is the same target
of internal marketing and psychological contract.
2.2 The similar mode of the internal marketing and psychological contract
There is the similar mode of the internal marketing and psychological contract. At the same time, the
commitment occupies a very important role in both theory of internal marketing and psychological
contract. The psychological contract stresses an implied psychological expectation, but internal
marketing values not only heart-hidden and nonpublic expectation, but also the expectation in public
statement [1]. The “expectation” in internal marketing and psychological contract includes both staff’s
expectation and organization’s expectation. The inner exchange relation implies in the mutual realization
of the expectation. In both theories, when the staff’s expectation in internal marketing and psychological
contract is satisfied, they will give back their corresponding responsibility to the organization. The
theory of internal marketing, by the satisfying “production” provided by organization, exchanges the
staff’s responsibility and the loyal attitude and behavior to organization as well as meets the staff’s need.
The theory of psychological contract, by construction of the psychological contract between the staff
and organization, attains the staff’s loyalty to the organization and their beneficial action to the
organization. Both emphasize the exchange role between the staff and organization. The commitment
occupies an important role in the theory of internal marketing and psychological contract, because both
theories pursue a balancing state of psychology between expected value and perceived value. For either
staff or organization, it could be a virtuous circle of the exchange relation between the staff and the
organization by realizing the commitments. And they come to trust each other.
2.3 The method of psychological contract provided by internal marketing
So far, some defects have still existed in the research of psychological contract. First, the psychological
contract is one building on the employment relationship. So, to some extent, the organization and the
staff are unequal, and the theory of psychological contract has more colors of production relation. As a
concept of the employee management, internal marketing regards the staff as subject equal to the
organization in the market. It views the staff as an internal “customer” on the basis of stressing attributes
of the “exchange” theory, concerning about the demand of “customer” and improving the staff’s
satisfaction by providing “products” which meet their need. Second, many of the studies of
psychological contract stressed such issues as the exchange and what is used to exchange between the
organization and staff. But the individual differences of staff lead to the diversities of exchange target
manner and means between the organization and staff. So internal marketing can compensate the
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unequal employment contract existing in psychological contract and provide the method and means. The
construction of psychological contract is a dynamic process. It includes employee’s recruitment
development and psychological contract revision after breaking between organization and staff. The
reasons for the dynamic process are that the staff’s expectation and psychology during the construction
of psychological contract keep dynamic. Psychological contract gets to know the staff’s expectation and
psychology by using the theory and method of internal marketing. Then the organization can make sure
the staff’s value, build communication platform and spread the organization culture. In a word, as a
means of management easy to implement, internal marketing is throughout the process of psychological
contract construction during the construction of psychological contract between the organization and
staff. But what needs to emphasize is, it will influence on psychological contract relation and even cause
its violation if internal marketing is applied inappropriately.
At the same time, the construction of psychological contract offers favorable atmosphere and
precondition for implementation of internal marketing management. To some extent, the implementation
of internal marketing relies on honoring of the expectation and promise in psychological contract. When
psychological contract is built, the implementation of internal marketing is more efficient, and then the
employees who are managed by this means offers better products and more stable service; when the
expectation and promise in the organization are not honored, the basis of the internal marketing of the
organization has vanished. So, internal marketing provides the method and channel for the construction
of psychological contract, and psychological contract guarantees for the smooth implementation of the
internal marketing management. Both of them manage employees complementarily and mutually.
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3 The strategy of construction of psychological contract based on internal
marketing
3.1 The construction mode of psychological contract based on internal marketing
This paper divides psychological contract into three dimensions: transactional dimension, relational
dimension, and self-realization dimension. It sets a construction mode of psychological contract,
according to theory of hierarchy of needs and internal marketing theory. As is shown in figure:
Self-realization
Social
communication
Manner of
leadership &
human
relation
Safety
Physiology
Maslows’s hierarchy
of needs
Need of
existence
Salary
Self-realizatio
n dimension
Salary
Need of
relatedne
ss
Respect
Communication channel
Career
planning and
realization
Encouragement, training, etc.
Need of
growth
Promoting,
Market
Core product
distributing and
segmentation and
positioning
pricing
Practice of internal marketing
theory
Fig.1
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Relational
dimension
Transactional
dimension
Psychological
contract
dimension
3.2 Segmentation and position to staff to create psychological contract
According to staff’s hierarchy of needs in the organization, there are three types of staff: need of
growth-based, need of relatedness-based, and need of existence-based. The reasons for segmentation to
staff lie in that staffs’ demands differ because of their different life and educational backgrounds. Some
pay more attention to salary, that is, the material benefits, while others concern more about
self-development and realization of and self-value. Meanwhile, different staffs have different
psychology conditions. According to the segmentation strategy of internal marketing, the organization
takes staff’s vital demands into consideration basically and satisfies them accurately, so that their
expectations are realized. Accordingly, staff gets to know fully the attention and respect of the
organization to its staff. It helps construction of psychological contract. As for the positioning of staff,
staff is distributed into appropriate departments and positions to achieve the matching-up between
people and post, according to their difference and ability. In staff’s opinion, the organization distributes
the staff the appropriate position which the staff is competent and interested in. On the position, the
staff’s career development and value are consistent with those of the organization. The organization
exploiting its staff reasonably is active to build a psychological contract.
3.3Designation of core product to protect the psychological contract
In internal marketing, the product is demands that are satisfied by organization and a series of
related-to-work affairs which are consistent with self-development of the organization and improve
staff’s self-development. It includes salary design, career planning, organizational leadership,
performance evaluation, organizational culture and so on. So, the organization designs the
corresponding products according to the different demands of staff. It is helpful to build psychological
contract. According to three levels theory of product, the organization develops the different core
“products” for staff’s different demands to achieve the construction of psychological contract.
3.3.1Development of salary-cored products to realize the transaction dimension
When the organization builds the psychological contract facing the existent needs-based employee, it
needs take the salary as core product to design and develop it. The career planning and manner of
leadership should be taken as formal and additional product. First, the salary-cored product is supposed
to value equality specially. Whether the staff thinks his/her salary is equal or not, will directly impact on
his/her satisfaction and construction of psychological contract. Second, diversity of the salary content is
helpful to construction of psychological contract on transaction dimension, for diverse salaries are easy
to meet staff’s the demand. John E Tropman in University of Michigan of US proposed a set of buffet
–style salary scheme. It is integral scheme which holds ten main parts of the salary from the basic salary
to some personal demand elements in that. It reflects flexibility and diversity which is able to produce
greater encouraging effect than traditional salary system [2]. In the salary encouraging system, on the
basis of his/her own demand staff does adjustment and combination in the systematic frame of given by
the organization and builds a personal salary system which manages to change with different demands at
any time, so that the psychological contract becomes more stable.
3.3.2 Development of relation-cored products to realize the relational dimension.
When the organization faces the relational needs-based employee, it designs and develops product
according to the staff’s demand for interpersonal relationship and the manner of leadership. The staff
gets great satisfaction from the harmonious interpersonal relationship. Receiving the praise and
affirmation from the leaders and colleagues is an efficient encouragement when you get the achievement;
receiving the understanding from leader and colleague is a consolation when unexpected accident
happened in one’s work. This dependence and satisfaction in staff’s psychology are a sense of
attribution, which helps the organization to build the relational dimension in psychological contract. The
organization provides not only the harmonious relationship of colleagues, but also the harmonious
relationship between employee and employer. Organization keeping the consultative and
mass-participatory style of leadership, and staff participating in the management, the staff feel the sense
of master. Thus, the staff dares to undertake the responsibility bravely and is loyal to the organization.
As a result, the relational dimension in psychological contract is built. At the same time, with the
construction of communication platform, employer is able to communicate with employees without any
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obstruction, understand staff’s psychological changes and correct and interrupt them in time, avoiding
violation and break of psychological contract, in order to guarantee the relational dimension to be built
stably.
3.3.3 Development of career-planning-cored products to realize the self-realization dimension
Taking part in some organization and working hard, staff expects not only to receive the material
benefits from the organization, but also obtain the reasonable career planning which achieves the target
of self-improvement and self-realization. The career-planning-cored product includes three aspects: first,
the organization designs the career planning suitable for the employee’s character. According to each
staff’s character and ability, the organization gives each of them the suitable career planning “product”.
Under the guidance of his/her own one, he/she can develop and improve him/herself. It is helpful for
each staff’s career development. Second, it can provide a chance for staff developing the career. The
employer should offer the chances and positions of promotion for the staff in the organization. Then the
staff that performs well and has development potentiality can get the promotion position. The existence
of these chances makes the staff believe that the career planning provided by the employer are not a
blueprint which has no way to realize, but come true by their own efforts. So the staff works harder and
will get the chance. And he/she may realize his/her own self-value and have a good sense on
contribution of the organization to staff’s career. Psychological contract consolidates further in the mode
of “expectation-promise” and staff’s self-realization in psychological realizes. At last, when the
organization can not realize career planning, they should make the adjustment in time. Promotion
positions are limited in an organization. With the flattening development of the organization, the chance
would become less and less. It is difficult for the organization to realize the promise. The organization is
supposed to compensate the staff in another way if some career planning cannot come true. For example,
the organization may provide some training chances or increase salary or other compensative behaviors
for those who are capable but not able to develop themselves because of resources. In addition, the
organization comfort staff on their psychological condition, avoiding the violation of psychological
contract produces for staff feels the organization disobeys the promise.
On the other side, the organization carries out the different management methods of psychological
contract according to the different stages of the career planning. In the initial stage of staff’s entry, the
organization guides him/her in both behavior and psychology, helps him/her adapt to his/her own work
as soon as possible, listens to his/her voice and arranges him/her development chances on his/her career
as many as possible. When staff stands in the arising stage, the organization should adopt promoting
management manner in psychological contract. In this stage, the contract relationship between the
organization and his/her is usually in that of fair exchange. At this time, the organization is supposed to
offer its staff various study chances but must show its fairness at any time. By the stage of stable career,
the organization develops its staff’s potential and provides rational promotional platform for the staff. In
this stage, the staff usually stands in the top of career. The organization must avoid the staff’s career
plateau. Finally, for the staff who will retire, the organization needs to consider his/her always-changing
psychology fully, taking comfort and concern as main method, to make him/her accomplish his/her own
work and avoid the break of his/her psychological contract because of his/her dissatisfaction with the
organization and thus influence the whole work atmosphere. To sum up, in each stage of the whole
career, the organization should justify its staff’s psychology; have him/her satisfy with the “product”, i.e.
the work through all kinds of channels. The whole process of career realizes the staff’s demand of
self-realization, and his/her expectation. Staff’s satisfaction with the organization, indicates the set-up of
self-realization dimension in psychological contract.
3.4 The strategy of pricing, promoting and distributing to improving the psychological contract.
The price of internal marketing reflects staff’s performance on their good achievement after receiving
the internal marketing product. And one approach evaluating good achievement is to performance
examination. It fulfills on staff’s salary at last as evaluation standard of currency. Therefore, the strategy
of price may base on salary and formulate depending on the above three integral products [3].Yet the
formulation of salary must conform to the principle of fairness which includes internal, external and self
fairness. Staff’s efforts must be consistent with their corresponding salary. In the same industry, salary is
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to reflect its reasonability. Basing on the fair salary system, staff’s psychological contract gets to be
improved.
Distributing in internal marketing mainly builds a communication platform. The construction of
psychological contract needs the “service” on the basis of communication. Without communication, the
corresponding “service” cannot precede each other. At this time, a communication platform is to be built
for the organization through the idea of distributing channel in internal marketing, such as using web,
building mutual communication channel in inner organization, issuing some notice of company,
spreading culture of the organization, and collecting staff’s suggestions and opinions to the organization
on the web. The organization also holds certain non-obstruction communication meetings among
organizational members from different hierarchies, which is beneficial to the development of the
organization and its staff. And psychological contract consolidates during the process of communication
with that. What’s more, through design and management of the channel, information such as culture,
system, policy, etc. of the organization is transferred to each staff, which will know the condition and
expectation of the organization more clearly and take actions in time. Meanwhile, the organization gets
to know its staff’s psychological changes at any time through communication platform, corrects and
interrupts them in time, so as to avoiding break and violation of psychological contract. Therefore,
communication platform built through distributing channel in internal marketing is good for the
enhancement of psychological contract between the organization and its staff.
The strategy of promotion in internal marketing is to help staff understand behaviors of the organization;
accept the product of the organization and other assistant behaviors in mutual responsibilities between
the organization and its staff. The most effective is training and encouragement. By the training to the
staff, his/her identity on the organizational culture is strengthened, his/her skills are improved, and
his/her responsibility to the company is carried out better. Furthermore, the staff’s capability and
competitive ability in a market is to be enhanced. There is no doubt that that helps the staff improve
him/her. By the means of encouragement to the staff which fits him/her in time, occasion and his/her
personality, and various needs meeting his/her, the staff’s enthusiasm is taken, so that the staff will serve
the organization harder which enhances his/her psychological contract to the organization.
4 Conclusion
This paper tries to construct the model of realizing psychological contract by the use of theory and
method of internal marketing and describes the relationship among theory of hierarchy of needs, core
product of internal marketing and dimensions of psychological contract For staff of existential-based,
relational-based and self-realization-based needs, the developed work products are supposed to include
strategies of pricing, promoting and distributing of internal marketing, as well as take salary, human
relationship and manner of leadership and career-planning as the core respectively, to enhance staff's
satisfaction, realize the construction, enhancement and consolidation on transactional, relational and
self-realization dimensions of psychological contract.
This paper has received funding from Beijing Middle-aged & Young Key Teacher Specialty.
References
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thought. Enterprise vitality.3(2006),p64-65(in Chinese)
[3]. Yangyang. The application of internal-marketing theory on Chinese knowledge-based enterprise
HRM. Beijing: Beijing Jiaotong university, 2007(in Chinese)
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