Pros and cons of psychological contract
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A psychological contact in many instances can be just as important, if not more important, as your traditional employment contract. It is more often than not that a psychological contract is formed without the use of any written or verbal communication. For this reason, it is even more important to be aware of how they are created and the impact they can have on the employment relationship. Show
What are they and why are they so important?The psychological contract is a set of perceptions, expectations or promises made between two parties in an employment relationship. This is differentiated from a traditional employment contract whereby they are usually implicit and, in most cases, a written document. These perceptions can be made by prospective employees and current employees and have a significant impact on employee motivation, engagement and future performance. In a competitive landscape, psychological contracts when used effectively can attract and retain highly skilled and in-demand personnel. A strong psychological contract that is aligned to individual values and beliefs can create a workforce that is:
How can you develop the psychological contract to influence business success?To truly reap the benefits of the psychological contract, organisations should be leveraging their managers to openly discuss the psychological contract and unwritten expectations with their employees. 1. Communication As it is purely created in the mind of the employee, the psychological contract is a constantly moving and changing goal post. For this reason, communication between direct managers and employees is key. These conversations need to be an open forum for two-way communication to show a balance between what the employee desires and what an employer can facilitate. These conversations should happen regularly to take into consideration changes to the business and the individual and to ensure there is still an alignment. 2. Employee Diversity & Individualism When developing the psychological contract, you should be taking into consideration the employee’s individual beliefs and values and creating a way to satisfy these needs through the employment relationship. A contract that takes this into consideration will show genuine care for an employee and increase their loyalty and motivation. If genuinely understanding your employees’ needs is not a priority of your conversations, you will find a mismatch in the expectations resulting in a breach. Breaching the psychological contractNow that your managers have established a healthy and aligned psychological contract, the most detrimental next step would be to breach it. A breach or misalignment of the psychological contract has been seen to result in:
If organisations are upskilling their managers to have effective conversations with their staff, they will be able to more pro-actively influence and modify expectations reducing the risk of a psychological contract breach. Our HR Consultants can assist with coaching and training your line managers to have more effective 1:1 conversations so that you can get the most out of you managers and workforce. As defined by Denise Rousseau, a psychological contract refers to the unwritten set of expectations of the employment relationship as distinct from the formal, codified employment contract. It could also include assumptions, mutual beliefs, and perceptions between the two parties. The psychological contract is mainly verbal and not formally written down, so it’s easy to lapse into assumptions of expectations both on the side of the employer and employee. It involves promises such as promotion, salary increase, transfer, and other employment benefits, etc. According to Chapman Alan, a psychological contract is rather defined as a philosophy and not a devised plan. It can also be seen as an implicit agreement that defines the employee-employer relationship. But the implication of this is that, if expectations are not managed on the side of both parties, it could result in negative outcomes. These negative outcomes could be spurred by conflicting values that may arise along the way, external forces beyond either party’s control, or other unforeseen circumstances that may lead to a change in job functions and performance on the side of the employee and unsatisfactory reciprocation on the part of the employer. Therefore changes in expectations on both sides may be seen as a breach of the psychological contract, which could further cause a strain on the employee-employer relationship. On the other hand, an employment contract or contract of employment is a written document that attributes the rights and responsibilities between an employer and an employee, which must be signed to seal the agreement between both parties. The employment contract could include salary, work schedule, type of employment (i.e. full time or for a specific duration), general responsibilities and tasks of the employee, benefits, and other terms and conditions of employment. There must be an offer and an acceptance to validate a contract of employment. Both the employee and the employer are bound to the employment contract for as long as the employee-employer relationship lasts. The employment contract is important in order to avoid disputes or misunderstandings that may arise during the course of work in an organization and to serve as a guide to existing expectations. The major difference between these two is that, while the psychological contract is usually implicit, with a mutual belief and expectation from both employer and employee, the employment contract is clearly stated, written, and signed. No assumptions. Further contrasting between both is that, if a dispute arises in the course of work, an employment contract can easily be referred to, in order to provide guidance on what is binding on the job. But a psychological contract may be difficult to prove, as what the employee has might come from what was said during the job interview (i.e. comments from employer), the inference made during a conversation, training, conference, meeting, or even a promotion exercise. Such statements might be made reference to by the employee as what gave rise to the perception that certain expectations would materialize. Whether employment contracts or psychological contracts, managing expectations is key to maintaining a good employee-employer relationship. While the former can be generally referred to as binding, the latter may not be generally perceived as such even though there is a mutual, implicit expectation from both ends. Constant communication and possible documentation is key to avoiding any imbroglio that may arise from any psychological contract. What are the advantages of psychological contract?Individual psychological contracts allow the employee to see their value and role within the business. It also helps both sides avoid creating unrealistic expectations of one another. And it allows for “amending” the terms of the contract if needed, which is done through regular communication.
What are some problems limitations with psychological contract?It can lead to negatively affecting job satisfaction, commitment, performance, and increase turnover intentions. Breaches of the psychological contract by an employer are not always avoidable. External factors like negative economic outlook can impact the 'deal' between the business and its people.
What is a negative psychological contract?A psychological contract breach is defined as an employee's perception that his or her organization has failed to fulfill one or more obligations associated with perceived mutual promises (Gakovic & Tetrick, 2003).
Why is psychological contract difficult to manage?Why? The fact the psychological contract is so easily changed means it is difficult to “enforce” and equally difficult on which to rely for guidance when it comes to the relationship between the employee and employer.
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