The concept examines theoretical and empirical issues related to the psychological contract and provides an overview of the types of psychological contracts - transactional and relational, as well as some information on how to implement it. Psychological Contract DefinitionThe psychological contract refers to the mutual expectations people have of one another in a relationship and how these expectations change and impact behaviour. The psychological contract is often used to describe the expectations an employee has of the organisation (salary, pay rate, working hours, benefits, privileges), the expectations the organisation has of the employee (loyalty, confidentiality of sensitive information, or enhancing organisational image), or the expectations customers have of an organisation. The idea, however, can apply to any relationship (Schein, 1965; Wellin, 2007). Psychological Contract Description ** The full technique overview will be available soon. Contact us to register your interest in our business management platform, and learn all about Psychological Contract. Business EvidenceStrengths, weaknesses and examples of Psychological Contract ** The business evidence section is for premium members only. Please contact us about accessing the Business Evidence. Business Application
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* The further reading section is for premium members only. Please contact us about accessing the further reading.  Learn more about KnowledgeBrief Manage and how you can equip yourself with the knowledge to succeed on Psychological Contract and hundreds of other essential business management techniques Related Concept: Safeguarding What is the psychological contract?The term 'psychological contract' refers to the unwritten beliefs and expectations that: Employees have about their roles and the support they will receive from their employer, e.g. conditions of employment, opportunities for growth and development, the culture in which they will work. Employers have about the commitment and organizational outcomes that will be generated through the efforts of the employee, including hours worked, effort and contribution, quality of performance. These contracts are relational rather than contractual in nature: they operate on the principle of mutual obligations and are not explicitly guaranteed by the employer (unlike the employment contract). Consider the following examples of elements in the employer psychological contract and the employee psychological contract. Note that the employer is likely to focus on the employee outputs that will be contributed, while the employee will be more concerned with the rewards and benefits that will be made available. Priorities for employers
Priorities for employees
These examples illustrate that the employee is likely to have many different assumptions about the type of work setting that will be offered. The less secure they feel their position is, the greater their focus on benefits that will prepare them for the next role is likely to be. Variation in psychological contractsJob security is not the only factor which may cause variance in psychological contracts. As employees progress through their careers, they will probably move toward a different mix of informal expectations. Early career staff, for example, might be more likely to look for development and growth opportunities, while more senior staff will be seeking a chance to assume managerial or profiled positions. Research faculty who must find the funds to maintain their employment will be more loosely allied to their university communities and their expectations will differ too. What are your key expectations from your work? How effectively is your workplace meeting those expectations? Evaluate your own views (as a manager) on the psychological contract by considering the following list of psychological factors. For each factor, rate your view of the importance of the expectation. Then rate how well this particular expectation has actually been fulfilled.
Now complete this process again, but from the perspective of an early career staff member. Reflect on the following:
This is a useful reflection to place in your portfolio. Why does all this matter?The concept of the psychological contract is crucial for heads of department. Fulfilling its terms can improve individuals' well-being and performance. Conversely, managers who fail to do so will swiftly find themselves in deep water. Consider the following question. Pause for a moment to reflect on your answer before moving on to consider about our thoughts. Question: What might happen when the psychological contract is unmet or broken by the employer?Our thoughts: The employee may:
An additional complication is the variation in expectations between individuals, which we saw earlier. This variation can result in some dissatisfaction and frustration for particular groups, who may find it difficult to reconcile the disparities and tend to see the differences as inequitable. How to keep to the contractThe research to date highlights the importance of thinking about the mutual obligations of both parties and how they can be achieved and maintained throughout many years of interaction. But how can you actually achieve this? The first step is to make sure that things get off to an appropriate start. The orientation of new staff is an important stage where the two parties can clarify what is entailed in the psychological contract. The greater the clarity and agreement across the parties, the less likely that there will be confusion or dissension further down the line. (Consider the pod at the end of this section for a checklist of points to discuss.) The challenge is then to ensure that those mutually-agreed commitments are adhered to. This takes care and attention – but it is worth being aware that employer violations of the psychological contract are most likely to relate to training and development, promotion opportunities or inequitable rewards and compensation (Arnold, 1996). The following two lists give examples of expectations a university might have of its members, and then examples of what a member might anticipate in return for each of the university's expectations. Consider both lists and try to match each example of the university's expectations with the members' answering desire. When you have finished matching the examples, move on to check whether you were correct. University's expectations
Members' expectations
Answers:Pair 1 of 7 Pair 2 of 7 Pair 3 of 7 Pair 4 of 7 Pair 5 of 7 Pair 6 of 7 Pair 7 of 7 The previous section highlighted an important point: the psychological contract relates to the balancing of the employee and employer needs and expectations. This accommodation and understanding of the different perspectives creates a more responsive and adaptive work setting where all parties prosper. Click here to download a list of items that might be discussed with a new department member and may assist you in setting the right expectations with your staff from the beginning. If there are other aspects that you would also include, then add them to the list and save it as part of your leadership and management portfolio. What are the types of psychological contracts?Following these two dimensions, four types of psychological contracts were identified: mutual high obligations, mutual low obligations, employee over-obligation, and employee under-obligation.
What is included in psychological contract?The term 'psychological contract' refers to individuals' expectations, beliefs, ambitions and obligations, as perceived by the employer and the worker. The concept emerged in the early 1960s and is core to understanding the employment relationship.
What is a psychological contract and why is it important?Unlike a formal, codified employee contract, a psychological contract is an unwritten set of expectations between the employee and the employer. It includes informal arrangements, mutual beliefs, common ground and perceptions between the two parties.
What is a positive psychological contract?The psychological contract, by definition, represents the understanding of mutual expectations between employees and employers. In theory, the psychological contract is used to maintain a positive employee-employer relationship by founding a set of mutually agreed ground rules.
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