The effect of human resource practices on psychological contracts at an iron ore mining company in South Africa

Abstract

Orientation: Human resource practices influence the psychological contract between employee and employer and, ultimately, organisational performance.

Research purpose: The objective of this study was to examine the effect of human resource practices on the types of psychological contracts in an iron ore mining company in South Africa empirically.

Motivation for the study: Although there have been a number of conceptual studies on the effect of human resource practices on psychological contracts, there has been no effort to synthesise the links between these contracts and various human resource practices systematically. This study endeavoured to provide quantitative evidence to verify or refute conceptual studies on this relationship. Its findings could inform human resource strategies and, ultimately, the prioritisation of human resource practices to improve the cost-effective allocation of resources.

Research design, approach and method: The researchers administered two questionnaires. These were Rousseau’s Psychological Contract Inventory (2000) and the Human Resource Practices Scale of Geringer, Colette and Milliman (2002). The researchers conducted the study with 936 knowledge workers at an iron ore mining company in South Africa. They achieved a 32% response rate.

Main findings: The findings showed that most participants have relational contracts with the organisation. Another 22% have balanced contracts, 8% have transitional contracts whilst only 1% have transactional contracts. The study suggests that there are relationships between these psychological contracts and specific human resource practices. The study found that training and development was the most important human resource practice for developing relational and balanced contracts. Employees thought that they contributed more than their employer did to the relationship. The researchers developed a model to illustrate the influence of the various human resource practices on psychological contracts.

Practical/managerial implications: The influence of human resource practices on relational contracts could assist organisations to invest in human resource practices. During recessions, organisations tend to reduce expenditure on human resource practices, especially training and development. The findings of this study, about the relationship between training and development and relational contracts, highlight the negative effect that this trend could have on psychological contracts, individual and organisational behaviour and, ultimately, organisational performance.

Contribution/value-add: Based on this empirical study, the researchers proposed a conceptual model to illustrate the relationship between different psychological contracts and specific human resource practices, like training and development, which had the strongest relationships with relational contracts.