What's Up with your Psychological Contract?

Burbank, California; November 7, 2002;
Joan Marques, MBA, Doctoral Student
(URL: http://www.joanmarques.com)

Whenever we enter a work environment, we establish a psychological contract with our employer. Although there are many definitions of what a psychological contract really is, they all trickle down to more or less the same idea. In a general sense a psychological contract can be defined as "An individual's belief regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party Ö a belief that some form of promise has been made and that the terms and conditions of the contract have been accepted by both parties" (Robinson & Rousseau, 1994)

More focused toward the business environment, Schermerhorn (2002) formulates it as follows, "a psychological contract is the set of expectations held by an individual about working relationships with the organization" (p.389).  Schermerhorn further explains, that "a healthy psychological contract offers a balance between contributions made to the organization and inducements received in return" (p. 389). In this perspective contributions are the values a person brings into the organization (skills, effort, time, creativity, loyalty), and inducements are the ones offered by the organization in return (pay, benefits, training, opportunities, advancement).

In fact a psychological contract is a transactional type of agreement that exists in the mind of an employee focused on his or her employer. Needless to say that this contract may vary from one person to another, even if they all work in similar positions at the same workplace. Robinson & Rousseau (1994) clarify this by asserting that "an individual may form beliefs pertaining to their expectations and obligations in an organization as soon as they enter the recruiting phase, or even before."

It is therefore not so strange that some may perceive a violation of their psychological contract while others are perfectly fine with theirs. Itís all about perception and personal experiences. In cases where people conclude violation of their psychological contract, Robinson & Rousseau (1994) distinguish 4 main courses of action to be taken: 
1) Exit. Often the last resort when dealing with contract violations. It entails voluntary termination of the violated relationship.
2) Voice. Voicing any feelings to help reduce losses and restore trust.
3) Silence. A form of non-response, which reflects a willingness to endure or accept unfavorable circumstances in the hope that they may improve.
4) Destruction/Neglect. This can vary from neglect of one's duties to the detriment of the interests of the organization by performing counterproductive behaviors like vandalism, theft and work slowdowns.

Seen within the scope of its reciprocity organizations can, from their side, also undertake actions if they register a violation of the psychological contract. In line with the 4 aforementioned courses of action that an individual can take, the organization or its management could deal with perceived violation of the psychological contract as follows:
1) Firing. Often executed when the employee has behaved in ways that are entirely unacceptable to the organizationís mission and strategies.
2) Voicing. This can, depending on the seriousness of the registered violation, be done through a verbal reprimand, or a written warning or suspension.
3) Silence. For several reasons, such as fear of race- and gender-related issues, the organization may decide not to take any action, in the hope that things will improve.
4) Degrading/Setting up to fail. The employee can either be assigned low-level jobs that damage his or her esteem in the eyes of fellow workers, or difficult tasks, which he or she will not be able to accomplish. In both cases the pay remains the same. However, the purpose of the action is to elicit the employee's voluntary exit.

Good managers understand the principle, and hence, the importance of a psychological contract, and will attempt to establish a relationship with their subordinates where there is at least enough mutual trust to voice dissatisfactions, and at most an appropriate settlement with each worker, so that there is no violation to be perceived by any party involved.

Closely related to the phenomenon of the psychological contract is work-satisfaction, which, in turn, is linked to "meaning at work."
Look at it this way: an employee who is happy at work is one who finds meaning in what he or she does. Therefore, he or she will perceive his or her psychological contract as a fulfilling one. Itís one of the eternal vicious cycles that you can think of when discussing workplace relationships.
And while we're at it, we may as well briefly sum up what a manager could generally do to maintain a solid psychological contract:
- Making sure the fit between the worker and his/her job is right
- Making sure that people feel comfortable in approaching their manager
- Making sure there is appropriate communication under all circumstances, but definitely when changes are about to happen.
- Making sure people are recognized for good performance, but at the same time, realizing that this recognition should be done in a way that the particular worker appreciates. Not everyone wants to be publicly put on a pedestal.

Now, it may not always be possible to find the right approach toward each and every worker, but the majority will be appreciative of the above-mentioned attitude. Understanding is the key to solving most problems. And a psychological contract, more than any tangible document, gets positively influenced by a good understanding between worker and manager. So, what's up with your psychological contract?

Robinson, S. L., & Rousseau, D. M. (1994). Violating the psychological contract: Not the exception but the norm, [On-line]. Journal of Behavior. Available: http://www.odysseyzone.com/news/hot/rousseau/contract.htm [2002, November 7].

Robinson, S. L., & Rousseau, D. M. (1994). Violating the psychological contract: Not the exception but the norm. Ahoy Magazine. Available: http://www.odysseyzone.com/news/hot/psychologicalcontract.htm [2002, November 7].

Schermerhorn, J. R., Jr. (2002). Management ( Seventh ed.). New York: John Wiley & Sons, Inc.