Psychological contract and employment relationship

Psychological Contract | Factsheets | CIPD

psychological contract and employment relationship

Jan 30, On its own, the legal contract of employment offers a limited representation of the employment relationship, with workers contributing little to its. Dec 2, This paper identifies the connection between 'breaches' of the psychological contract and employment relations as reflected in three. May 3, Tags: Psychological Contract employee engagement diversity can leverage the employee-manager relationship by equipping and.

It would be helpful to us all for this expression and its related theory, as an extension of the Transactional Analysis usage, to become more generally used in human communications and understanding.

The Importance of the Psychological Contract

In life, relationships and communications generally operate on a very superficial level. Opportunities to explore, understand, explain and agree mutual expectations are largely ignored or neglected - mostly through fear or ignorance. It is a wonder that humans manage to cooperate at all given how differently two people, or two parties, can interpret a meaning, and yet be seemingly incapable of seeking or offering better transparency or clarity.

The Psychological Contract is becoming a powerful concept in the work context. Potentially it is even more more powerful when we consider and apply its principles more widely. Because psychological contracts represent how people interpret promises and commitments, both parties in the same employment relationship can have different views New expectations are added over time as perceptions about the employer's commitment evolve Schein's view reflects the early identification of the concept in the s.

psychological contract and employment relationship

The definition of the Psychological Contract on Wikipedia April is: It sets the dynamics for the relationship and defines the detailed practicality of the work to be done. It is distinguishable from the formal written contract of employment which, for the most part, only identifies mutual duties and responsibilities in a generalized form. It [the Psychological Contract] has been defined as '…the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other'.

These obligations will often be informal and imprecise: Some obligations may be seen as 'promises' and others as 'expectations'. The important thing is that they are believed by the employee to be part of the relationship with the employer You will see his ideas and models commonly referenced if you research the subject in depth. Within these referenced definitions you will see already that the concept is open to different interpretations, and has a number of complex dimensions, notably: Work used to be a relatively simple matter of hours or piece-rate in return for wages.

It is a lot more complicated now, and so inevitably are the nature and implications of the Psychological Contract. At this point a couple of diagrams might be helpful.

Diagrams Much of the theory surrounding Psychological Contracts is intangible and difficult to represent in absolute measurable terms. Diagrams can be helpful in understanding and explaining intangible concepts. Here are a couple of diagram interpretations, offered here as useful models in understanding Psychological Contracts. Venn diagram Here is a Venn diagram representing quite a complex view of the Psychological Contract, significantly including external influences, which are often overlooked in attempting to appreciate and apply Psychological Contracts theory.

Venn diagrams devised c. The Venn diagram below provides a simple interpretation of the factors and influences operating in Psychological Contracts. In the Psychological Contract Venn diagram: Note that only the visible contract vc element is written and transparent.

psychological contract and employment relationship

For referencing purposes this diagram is an original interpretation of the Psychological Contracts concept and was published first on this website in May For team-builders and trainers, and leaders too, it's also potentially a useful tool for explaining and exploring the concept and its personal meaning for people.

This metaphor fits the Psychological Contract very well, in which most of the Contract perceptions are unwritten and hidden, consistent with its definition.

By contrast the Psychological Contract between a more modern enlightened employer and its employees, especially senior mature experienced and successful staff, is likely to be much more clearly understood and visible, with deeper inputs and rewards, formally and mutually agreed.

These percentage figures are not scientific - they merely explain the way the model works. The iceberg metaphor extends conveniently so that the 'sky' and the 'sea' represent external and market pressures acting on employee and employer, affecting the balance, and the rise or fall of the iceberg.

As the iceberg rises with the success and experience of the employee, so does the contract value and written contractual expectations on both sides. Increasingly deeper inputs and rewards emerge from being hidden or confused perceptions below from the water-line, to become visible mutual contractual agreement above the water-line. The process can also operate in reverse, although in a healthy situation the natural wish of both sides is for the iceberg to rise.

A quick key is shown with the diagram. A more detailed explanation is below the diagram. In reality a representation of the Psychological Contract for most modern work relationships would include several more mutual obligations with work and pay 'above the water-line', i.

Above the water level: Below the water level: Explanation The left side of the iceberg represents the employee's inputs. These are also the employer's needs or expectations, which may be visible and contractually agreed, or informal, perceived, inferred, etc. The right side represents typical examples of rewards given by the employer. These are also the employee expectations or needs, which again may be visible and contractually agreed, or perceived, inferred, imagined, etc.

Perceptions from the employee's standpoint are crucial, which tend to differ markedly from the employer's perceptions, and also from the employer's methods of assessing such factors. The employer may vastly under-estimate the stress or erosion of life balance that the job causes to the employee. The examples of factors on the iceberg are not exhaustive, and the sequences are not intended to be matched or directly reciprocating.

Many other factors can apply. I have referred already to the importance of encouraging open communications, without which a leader will never discover what the iceberg looks like, let alone how to manage it. This loosely equates to the 'vc' segment in the Venn diagram. This visible employment contract is typically the written contractual obligations on both sides. The iceberg diagram shows the the most basic work and pay exchange. In reality most workers are formally responsible for other inputs and are formally entitled to benefits beyond pay alone, so in this respect the iceberg here represents a very basic situation.

These influences would include specifics such as market demand for and availability of people who can do the job concerned. This extends to market rates of pay and salary. More mature experienced and high-achieving employees will tend to see their personal icebergs rising so that increasingly the hidden contractual factors become visible, and written into formal employment contracts, above the water-line, so to speak.

Employees generally want the iceberg to rise. So do enlightened and progressive employers.

psychological contract and employment relationship

They want the hidden unwritten aspects of the Psychological Contract which are below the surface to become applicable, and to be visible and formalised contractually. A rising iceberg signifies increasing employee contribution towards organizational performance, which is typically rewarded with increasingly deeper rewards and benefits. These are the hidden perceptions which strongly affect interpretation of the Psychological Contract, notably by the employee.

These factors loosely equate to the 'pc' area of the Venn diagram. Interestingly, in cooperatives and employee ownership organizations the iceberg model will tend to be due to the nature of the employee ownership model mostly out of the water, and perhaps even floating on top, as if by magic, which is a fascinating thought. The sequential listing of factors shown below the water-line on both sides is not definitive or directly reciprocating of equal values. The model provides a guide to the concept, not a scientific checklist of equally matched or balancing factors.

That said, the diagram offers a broad indication of relative seriousness of the factors in both lists, with the deeper items representing the most serious potential inputs and rewards, which tend to be matched by deeper elements on the other side.

Use the framework to map your own situation, rather than attempting to fit your own situation into the specific examples given. Many hidden influences are not well understood by either side.

The psychological contract

Many of these factors change unpredictably, but many are relatively constant and can easily be clarified.

Both sides may assume the other side already knows about these factors, or alternatively has not right to know about these factors. Some factors are hidden because they are difficult for anyone to understand or predict, but a great many others result simply from secrecy, borne of distrust or insecurity.

Some employers and leaders will wonder how on earth all these hidden and subjective factors can possibly be identified and balanced. In fact they can't in absolute terms; but they can be made far more transparent and agreed if management philosophy and methods strive for good open positive cooperation between employer and employees. A healthy Psychological Contract is one where both sides agree that a fair balance of give and take exists.

This is impossible to achieve where there are lots of hidden perceptions, so the first aim is to encourage greater openness and mutual awareness. Employees in large organisations do not identify any single person as the 'employer'. Line managers are important in making day-to-day decisions but employees are also affected by decisions taken by senior management and HR. Employees may have little idea who, if anyone, is personally responsible for decisions affecting their welfare or the future of the business.

It is fair to say that for many employees the psychological contract is largely the deal they have with their direct line manager.

The Importance of the Psychological Contract | HR Exchange Network

The significance of psychological contract The quality of the psychological contract heavily influences how employees behave from day to day.

Workers who perceive as balanced in terms of the contributions they make to the organisation and what they receive back from the employer perform better, demonstrate more extra-role behaviours, and indicate a higher level of commitment to the organisation.

Listen to our podcast on creating an authentic organisation. This is why violation or breach of psychological contract by the employer can have sudden and powerful consequences for people and organisations, affecting job satisfaction, commitment, performance, and increasing turnover intentions. Read more in our report The changing contours of fairness. Others may react by displaying proactive behaviours, treating the situation as an opportunity to learn, to offset loss of position and uncertainty.

To deal with contract repair successfully and avoid people leaving the organisation, individuals need to have the psychological and social resources, building resilience skills in advance. Read a case study from Zurich Life about managing change in the employee proposition. Managers need to remember: Preventing breach in the first place is better than trying to repair the damage afterwards. Where breach cannot be avoided, it may be better to spend time negotiating or renegotiating the deal, rather than focusing too much on delivery.

Interventions aimed to build resilience skills will help individuals cope better with contract breaches. How is the modern employment relationship evolving? The psychological contract is a dynamic concept that can be applied to understand varying employer-worker relationships. Yet, patterns and trends can be observed over time: However, employers should not underestimate the impact of individual differences: Changes affecting the expectations of workers include: In this changing context, employers have to pay attention to the key drivers of the employment deal, in order to be able to attract and retain key talent.

To aid this, the psychological contract offers a framework for monitoring employee attitudes and priorities on the dimensions influencing performance. How are employers responding to the changes? The recent recession has had a negative impact on employee attitudes, particularly in relation to job satisfaction and security.

Psychological Contract Research Part 1 - What is it and why is it important?

Current statistics on topics including job satisfaction, trust and fairness can be found in our Employee Outlook surveys. Our own research shows that despite the modern employment deal being based on the promise of employability, employers are highly selective about offering development and career opportunities across their workforces. Our report Attitudes to employability and talent shows that in three out of ten organisations, opportunities to enhance careers were only available to some workers based on the value they could offer the employer.

Those in roles requiring high levels of skills, holders of degree-level qualifications, as well as individuals whose skills were hard to replace, were more likely to receive training and development opportunities and have a degree of autonomy in how they perform their jobs.