Everyone knows how vital the employment contract is to the relationship between the employee and the organisation. Less well known is the concept of the psychological contract, which sets out the beliefs employees have about the exchange or the deal between themselves and their employer.
We all think that if we behave in particular ways at work then certain outcomes will be more or less likely. We may believe, for example, that if we perform exceptionally well on a project we will be given more challenging and interesting work next time. In turn, we may believe that, by doing so, our employer will be more relaxed if an assignment we're working on is delivered slightly behind schedule.
Unlike the employment contract, the psychological contract is highly subjective. Psychological contracts are not explicit, not written down, and not legally binding. In spite of this, they can exert a strong influence on behaviour precisely because they capture what employees really believe they will get in return for what they give.
Over the past 10 years, the psychological contract has emerged as an important framework for understanding employee wellbeing, attitudes and performance.
However, while HR policies and practices are clearly important, the subjective and individual nature of psychological contracts means that each employee and line manager will interpret such policies and practices differently. Not only this, but they will overlay these policies with their own sets of beliefs and expectations. Understanding how these deals are formed and how they shape behaviour is, therefore, essential.
How it is made
It is likely that every stage of the selection process - including job advertisements, job descriptions and titles, and the interview itself - sends out signals to prospective employees about what they can really expect as they 'read between the lines' of what they see and what they are told.
Once selected, newcomers actively make sense of their induction to see if this fits with what they were told during the selection process. They listen to their new work colleagues, observe who gets on and who doesn't, and continue to shape and re-shape their psychological contract.
Managing the contract
What about managing the psychol