What is a Psychological Contract, and why does it matter?
You didn’t sign it. You can’t see it, or touch it. But it is there.
Every employee has one, and no manager has the first idea what is in it.
Until it’s broken – and then it’s usually too late to put things right.
Imagine yourself recruiting for a new employee. You place a job advert or instruct a recruitment agency, outlining the highlights of the job on offer. The job description and person specification have some brief bullet points about what the job involves.
As you interview the candidate, you talk about the job, majoring on the benefits – how this role will enhance and develop the applicant’s existing skills, the wellbeing initiatives, the autonomy the role offers, and of course the flexible working opportunities. The good stuff, obviously, because you don’t want to put the candidate off the job at this point. You want to be able to pick the best candidate.
The candidate asks a few pre-prepared questions about things that are important to them, and you give the text book answers – of course the company promotes from within and seeks to develop internally before recruiting externally, obviously great performance is recognised and rewarded with a range of initiatives, and it goes without saying that in this positive and supportive culture, managers know developing team members is their number one priority.
So when you decide to offer the candidate the job, and they choose to accept, they aren’t just accepting the words written in black and white on the offer letter, the contract of employment and the employee handbook. They are also accepting the unwritten ideal they have created in their own head.
Be very clear about this – their unwritten ideal isn’t the sign of some fantasy thinking on their part. They have a firm foundation for this unwritten ideal, which is based on their interpretation and beliefs about what they think you promised them during the recruitment process.
That unwritten ideal – along with the contract, offer letter and handbook – is their basis for deciding what the job is worth to them and how much effort they are prepared to put into the job. The better the deal looks to them, the more effort they will put in. And vice versa.
That, in essence, is their “psychological contract” with you. This unwritten contract – this psychological construction - is all the things they believe they can expect from their employer and their job, based on what you have said or not said, or implied or not refuted.
And they will never tell you what is in that psychological contract. Most of it they probably haven’t consciously thought about. So even if you ask them what is in their psychological contract, they probably won’t even know.
Until it’s broken.
For the employee that moment will be blindingly obvious. They will feel it, and know it, in an instant. And by then there will be virtually nothing you can do to restore the working relationship back to what it previously was.
Breaking the psychological contract can happen in many predictable – and unpredictable - ways.
The obvious ways to break a psychological contract include things like not giving an annual pay increase, cutting overtime, changing working hours so the role doesn’t fit as well with personal commitments, or not providing promotion opportunities.
But some of the less obvious might include changing commission schemes to reward different things; tweaking or radically changing pension schemes; making mistakes over pay and not being quick enough to put them right; not letting someone go home early because it’s too busy, meaning they miss parents’ evening at their child’s school or can’t collect their child on time from nursery; being unreasonable (in the employee’s eyes) over timekeeping during poor weather; not saying thank you, or please, or recognising when an employee has gone above and beyond to get the job done. Or even being too busy to provide the right support when an employee has asked for help in their role.
As a manager, the biggest challenge in understanding the psychological contract is realising that each person in your team will have a different version. You also have your own, several in fact, including one with each member of your team, and one with your own manager.
And this is why you can never really be sure when you make a change to something in your workplace, whose psychological contract with you is being tested to its limits.
Because at its heart, the psychological contract is about trust and mutual obligations. It’s that idea we have in our heads that “I do this because in return you are going to do that”.
“I’ll work a couple of extra hours tonight because you’ll let me finish early on Tuesday when I need to take my child to the doctor’s.”
“I’ll take on this extra project because you are going to make sure I get a pay rise next month”.
“I’ll do something above and beyond my day job because the company is in trouble and I believe they will look after me and not make me redundant”.
The problem really comes when their manager is unable or unwilling to deliver their side of the bargain – or even unaware that there is a bargain to be delivered. You can be caught completely off-guard when someone suddenly becomes upset or disengaged because of something you have done or not done. Said or not said.
So how can you minimise the chances of breaking an employee’s psychological contract with you?
Here are 5 steps that will help.
1) Really get to know your team members and what makes them tick. Regular 1:1s are a great way to ensure you have opportunities to talk openly and discover more about your team members’ values, beliefs and ambitions.
2) Involve staff members in discussions about changes at work. Advance notice and an opportunity to voice concerns can alert you to potential issues before they become big problems, and also allow staff time to get used to the idea of change.
3) Be human. Show you care about your employees by being genuinely interested in their families, hobbies and interests. Understand what is important to them and some of the day to day challenges their personal circumstances present.
4) Be available to talk. Sometimes people just need to air concerns and know they have been heard. Sometimes they need your support. Be there outside of formal 1:1s and team meetings so that people can raise their worries and concerns with you.
5) Don’t promise what you can’t deliver. It might seem like a great idea to sell a rosy picture of life in your company, but when people find out the truth they will vote with their feet. It’s better in the long run to be realistic from the start.
Remember when employing people you will attract candidates who want to do the job you describe, in the environment and culture you describe. If you want to attract the right person for the job, you need to be completely honest about what the job involves and what you can offer in terms of benefits or opportunities. That way, their psychological contract is likely to be much closer to what you are able to deliver.
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