Trade secrets: Protecting the psychological contract

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 psychological contract? How can the employer influence or shape these beliefs?

Early thinking about psychological contracts emphasised making contracts explicit and negotiating them in a formal way.

However, there are many potential disadvantages of trying to make an implicit deal explicit. For example, it may be difficult for employers to make clear and binding promises about what they can deliver when they don’t know what the future holds.

Managing the psychological contract effectively, as much as it can be managed, may be more about awareness and recognising individuality. Perhaps most importantly, it involves equipping line managers with the knowledge and resources they need to understand how it is part and parcel of their relationship with each employee they manage.

Broken promises

If employees feel the employer has broken promises or violated the contract, employee reactions range from mild irritation or withdrawing effort and goodwill to handing in their notice. Employees may hold such strong beliefs on their psychological contract that, if they discover that what they felt had been promised to them will not materialise, they feel cheated and that they have wasted much time and effort.

However, small violations of the contract are part of everyday work experience and, rather than damage relationships, may actually help to develop and strengthen the bonds between employer and employee if they are handled appropriately.

Repairing the damage

Dealing effectively with violations to the psychological contract may not be easy. Feelings may run high and employees may want to vent or withdraw rather than engage with the issues.

This is where line managers play a crucial role. They need to use their awareness of the individual and their psychological contract to make sense of what the employee believes to be a broken promise. From the outside, violations can sometimes seem trivial but they are still significant to the individual who experiences them. Line managers can talk to their superiors and demonstrate that they at least understand the employee’s perspective. It’s then important to clarify everyone’s expectations and beliefs of what the psychological contract involves.

Of course, prevention is better than cure. The greater understanding line managers can develop of the sometimes highly individual contracts, the greater the chances of avoiding broken promises.

Where next?

The psychological contract is one of the most useful and important ways of understanding the relationship between employer and employee and how this affects behaviour. But more recent research suggests that it may be just as important to look at the employer’s side of the deal.

The next step is understanding the dyn­amics of the psychological contract. What happens when a promise is broken? How do employees forgive broken promises?

Understanding what employees believe to be the ‘real deal’ at work can only help you manage them.

5 ways to strengthen the psychological contract

1 Consider how you build the psychological contract during recruitment, and honour it during an employee’s first weeks in a new role.

2 Realise that every psychological contract will be highly individual and subjective. Notice how it changes depending on professional and personal circumstances.

3 Equip line managers with the right resources to manage the psychological contract they have with each member of their team.

4 Act quickly if the employee feels a promise has been broken. This is when the contract is at its most explicit.

5 Understand that small violations of the psychological contract happen everyday. Deal with these sensitively and you will strengthen the bond with your staff.

Psychological contract in practice

Jane has been with the company for just over three years and is relatively junior but has strong aspirations to progress and enjoys her work.

Her boss asks her to take on the production of an extra report somewhat outside her normal role.

The report turns out to be difficult and very time consuming, resulting in Jane falling behind with her regular work. She eventually completes the report to the deadline and sends it to her boss. She receives no reply or acknowledgement.

The next day she finds out that her boss has successfully presented the findings of the report to his boss. Now she is angry and starts to wonder if she’s in the right kind of organisation.

Jane thinks seriously about what it would be like to quit and starts searching the internet for another job. She decides that she’s never going to put herself out again for her boss or for this company if this is the way they’re going to treat her.

This example shows how a breach in a psychological contract can turn a happy worker into a disgruntled one.

Our experts

  • Rob Briner is professor of organisational psychology at Birkbeck College, University of London. He has studied the links between work and wellbeing for more than 20 years and has published numerous papers in academic and practitioner journals. He is currently an associate editor of the journal Human Relations and has edited a special edition of the European Journal of Work and Organizational Psychology on emotions at work.

  • Neil Conway is a lecturer in organisational psychology at Birkbeck College, University of London. Together with Rob Briner, he is co-author of Understanding Psychological Contracts at Work – A Critical Evaluation of Theory and Research, published by Oxford University Press.

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