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.Technique Overview
Psychological Contract Definition
The 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 *
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Business Evidence
Strengths, weaknesses and examples of Psychological Contract *
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Business Application
Implementation, success factors and measures of Psychological Contract *
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Further Reading
Psychological Contract web and print resources *
Psychological Contract references (4 of up to 20) *
- Argyris, C. (1960) Understanding Organisational Behaviour. The Dorsey Press Inc., Homewood, Illinois.
- DelCampo, R. (2007) Understanding the Psychological Contract: A Direction for the Future. Management Research News, Vol. 30(6), pp. 432-440.
- Erickson, J. (2010) The Leaders We Need Now. Harvard Business Review. May.
- Guest, D. and Conway, N. (2004) Employee Well-Being and the Psychological Contract. Research Report, London: CIPD.
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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
- Hours worked
- Effort
- Performance
- Results
- Commitment
- Contribution to extra-curricular activities
- Innovation
Priorities for employees
- Safe and healthy workplace with appropriate equipment
- Training/development and job variety opportunities
- Recognition and status
- Work–life balance
- Self-care and well-being
- Opportunities to interact with professional community
- Financial benefits
- Autonomy and control of role/outputs
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 contracts
Job 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.
- Effective management
- Effective leadership
- Opportunities to reflect and learn
- Positive and supportive culture
- Training/development opportunities
- Recognition
- Suitable work environment and equipment
- Support for keeping fit and healthy
- Promotional opportunities
- Life balance
- Job variety
- Opportunities to interact with professional community
- Status
- Financial benefits
- Autonomy
- Control of role and outputs
Now complete this process again, but from the perspective of an early career staff member.
Reflect on the following:
- Are there any expectations that you rank as very important, but which are not currently being fulfilled?
- Are there any significant divergences between your own expectations and those you have attributed to the early career academic?
- What do you think are the causes of these differences, and what are the effects?
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:
- Be less inclined to stay within the department
- Be less committed to meeting agreed obligations, let alone going beyond them
- Behave less like a 'good citizen'
- Be less efficient
- Consider future contractual benefits to be at risk
- Be less happy in their job – and share their views with fellow employees.
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 contract
The 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
- Productive outputs
- Quality work
- Competitive workforce
- High performance
- Efficient practices
- Loyal staff
- Responsive and flexible staff
Members' expectations
- Reasonable workloads
- Sufficient resources to perform work
- Opportunities and support to learn and develop
- Regular, constructive feedback
- Suitable systems and policies to streamline workflows
- Strong valuing and recognition of each individual
- Support for employee personal contexts and changing needs
Answers:
Pair 1 of 7
University expects: Productive outputs
Members expect: Reasonable workloads
Pair 2 of 7
University expects: Quality work
Members expect: Sufficient resources to perform work
Pair 3 of 7
University expects: Competitive workforce
Members expect: Opportunities and support
to learn and develop
Pair 4 of 7
University expects: High performance
Members expect: Regular, constructive feedback
Pair 5 of 7
University expects: Efficient practices
Members expect: Suitable systems and policies to streamline workflows
Pair 6 of 7
University expects: Loyal staff
Members expect: Strong valuing and recognition of each individual
Pair 7 of 7
University expects:
Responsive and flexible staff
Members expect: Support for employee personal contexts and changing needs
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.