A psychological contract is the unwritten set of expectations between an employer and an employee. While formal contracts outline salary, benefits, and job responsibilities, the psychological contract includes intangible elements like trust, respect, job security, and career development.
This contract is based on mutual understanding and plays a crucial role in shaping workplace dynamics. When the psychological contract is honored, employees feel valued and motivated. When it’s broken, it can lead to dissatisfaction, disengagement, or even turnover.
Examples of Psychological Contract Elements
- From the Employer:
- Providing job stability and opportunities for growth.
- Offering recognition, respect, and a supportive work environment.
- Treating employees fairly and maintaining transparency.
- From the Employee:
- Demonstrating loyalty and commitment to the organization.
- Upholding professionalism and delivering high-quality work.
- Supporting the company’s goals and values.
How Psychological Contracts Are Formed
Psychological contracts develop through:
- Onboarding: Initial impressions during hiring or orientation.
- Workplace Culture: Observations of how leaders and colleagues behave.
- Communication: Verbal and nonverbal cues from managers or peers.
- Past Experiences: Expectations shaped by previous jobs or cultural norms.
Why Psychological Contracts Matter
- Builds Trust: A strong psychological contract fosters loyalty and commitment.
- Enhances Engagement: Employees who feel their expectations are met are more motivated and productive.
- Reduces Turnover: Honoring the contract minimizes dissatisfaction and burnout.
- Strengthens Culture: Promotes a sense of fairness and mutual respect within the organization.
What Happens When the Contract is Broken?
A breach of the psychological contract can lead to:
- Distrust: Employees may feel betrayed or undervalued.
- Decreased Morale: Productivity and engagement can drop significantly.
- Higher Turnover: Dissatisfied employees are more likely to leave.
- Toxic Culture: Broken expectations can lead to resentment or disengagement.
How to Maintain a Healthy Psychological Contract
- Set Clear Expectations:
Communicate openly about roles, responsibilities, and opportunities. - Foster Transparency:
Be honest about challenges or changes that may affect employees. - Recognize Contributions:
Show appreciation for employees’ efforts and celebrate their achievements. - Provide Development Opportunities:
Offer pathways for growth and skill-building to align with employee aspirations. - Seek Feedback:
Regularly check in with employees to ensure their needs and expectations are being met. - Act Consistently:
Ensure leaders’ actions align with the organization’s values and promises.
Creating Strong Workplace Relationships
The psychological contract is a dynamic and evolving part of the workplace. By honoring and managing it thoughtfully, organizations can foster trust, loyalty, and long-term success for both employees and employers.
Remember: it’s not just about what’s written on paper—it’s about how people feel. Build trust, honor commitments, and create a workplace where mutual respect drives meaningful success.
