What is the psychological contract?
The concept of the psychological contract was originally developed by Denise Rousseau.
Rousseau is a H. J. Heinz II University Professor of Organizational Behavior and Public Policy at
Carnegie Mellon University.
A psychological contract is an unwritten set of expectations between the employee and the
employer. It includes informal arrangements, mutual beliefs, common ground and perceptions
between the two parties.
Communication is a Key Element
Since the contract itself is not formal and codified, it exists in a state of flux. It is constantly
developing based on communication between the employer and the employee. This includes
conversations, voice tone, body language and even implication or inference between the two
parties.
Without effective two-way conversation, the contract between employee and employer (or
even employee and employee) can become imbalanced and a “breach” can occur.
A balanced contract shows employees their employer values and respects them and finds their
role within the company important to its success. This leads to increases in productivity and a
positive impact on the business itself. Consistent interaction between employer and employee
can improve employee loyalty and further allows the employee to use their talent to promote
and progress the company’s goals.
Contract Diversity
The benefit of a psychological contract versus a more codified contract is that it’s individually
focused. Every psychological contract is different because each employee is different..
Individual psychological contracts allow the employee to see their value and role within the
business. It also helps both sides avoid creating unrealistic expectations of one another. And it
allows for “amending” the terms of the contract if needed, which is done through regular
communication.
Exploring the psychological contract
