The Psychological Contract
Objectives
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Define and understand the importance of the
psychological contract
Examine the influences that affect workplace
expectations
Examine generational work expectations
Work on a psychological contract with your
professor
PSYCHOLOGICAL CONTRACT
The psychological contract is
individual beliefs or
perceptions regarding the
terms of exchange between
the individual and
organization.
PSYCHOLOGICAL CONTRACT

The perceptual and dynamic nature of the
contract makes it common that a violation will
occur
Types of Violations
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Inadvertent –divergent interpretations
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Disruption –impossible to fulfill the contract,
despite willingness to do so

Breach of Contract – One side refuses to
fulfill the contract
Contract Makers’ Violations
Sources
Violations
Managers
 Unfamiliar with actual job
 Overpromise
 Say one thing, do another
Co-workers
 Failure to provide support
Mentors
 Little follow-through
 Few interactions
Top management
 Mixed messages
Recruiters
Broken Contracts
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Consequence
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Outrage, shock, resentment, anger
Decreased trust and good faith
Decreased job satisfaction
Decreased productivity
Decreased attendance
Decreased commitment
Turnover
RESPONSES TO VIOLATIONS

Personality Characteristics
–
Equity Sensitives – monitor exchange
relationships carefully and are more likely to
perceive an imbalance in the relationship
–
Beneficients – are more willing to let others come
out ahead in the exchange relationship
RESPONSES TO VIOLATIONS
Constructive
Destructive
Active
Voice
Exit/Destruction
Passive
Loyalty/Silence
Neglect/Silence
Exit
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When attempts to fix the situation have failed
When the relationship is transactional
When another job is available
When the relationship has been brief
When other people are also exiting
Voice
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When a positive relationship and trust exists
When there are methods for voice
When other people use voice
When people believe they can influence the
other party.
Others
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Silence: When there is strong loyalty to the
company
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Neglect or Destruction: When there are no
other options available to express
dissatisfaction
Managing the Psychological Contract
Provide realistic job expectations
Have frequent discussions of expectations
Check employee understanding
Give feedback
Be sensitive to individual differences
Check for changes in expectations
Psychological Contract Reading
Aren’t there two parties in an employment relationship?
Antecedents and consequences of organization –
employee agreement on contract obligations and
violations
By
A Tekleab & S. Taylor
Journal of Organizational Behavior, 2003
Purpose

Assessed employee tenure in determining
the level of agreement of reciprocal
obligations between parties

Evaluated the consequences of perceived
violations of the psychological contract on
employee-related outcomes
Comparison of manager/employee
responses
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Responses to violations
–
Employees reported significantly lower levels of
their own violations than did the manager
–
Both parties tended to agree on organizational
violations
–
Both parties react negatively to violations
Comparison of manager/employee
responses
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Perceptions of obligations:
–
Early in the manager/employee relationship employees had
high expectations of their obligations to the organization
while managers had low expectations of employee
obligations
–
As tenure of the employee increases perceptions of the
employee obligations converge. Employee perceptions
decreased and manger’s perceptions increased
–
Perceptions of the organization’s obligations are not
significantly different at any point in time. Parties agree on
organization’s obligations
Employee/Manager perceptions of
Employee Obligations
Employee perceptions
Manager perceptions
Time
Employee/Manager perceptions of
Organization’s Obligations
Employee perceptions
Manager perceptions
Time
Responses to violations
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Found the driving force for employee job
satisfaction and their intent to leave was
organizational contract violations
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Found that manager’s judgment of employee
performance was negatively impacted by
perceptions of employee violations
The Generations
who they are; how they think
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Each generation is a product
of historical events that
shape their values and views
of the world
Emotional memories shape
feelings about institutions,
authority, materialism, family
and careers
The Silent Generation (1922-1945)
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The depression, WWII, Holocaust
The most traditional – working fathers, at
home mothers, traditional work ethic
Highly disciplined, hard working, much
sacrifice, loyal to their employer (employer
loyal to them).
A source of much tacit information
Baby Boomers (1946-1964)
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Product of the end of war baby boom and a
consistent increase in birth rates until 1964
A time of affluence, opportunity
Self-absorbed, free love, social issues, civil rights
Educated, competitive, focused on personal
accomplishment
–
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1. lots of jobs, able to drop out and come back; 2. less jobs;
3. disadvantaged, high competition, going no-where fast
(boiled frogs)
Want pensions, health care and to be left alone
Generation X (1965-1976)
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Both parents working (latchkey kids), saw
parents laid off, high divorce rate
Not loyal to a company, pessimistic
Independent and resilient
Want immediate feedback and work to be fun
Want transferable skills, most stressed out
group
The Echo Generation/Generation Y
(1977-2000)
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Babies of the Boomers who gave their children
everything and rewarded them for anything
Sense of entitlement, mostly interested in what will
be given to them
Self confident, multitaskers, want to be guided (have
goals set for them), hard workers, technologically
savvy
want money, challenging work that matters, learning
opportunities, harder to please, require more
direction
Observations about Gen Y
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Offer choices: expect state-of-the-art, cooperative scheduling ,
many choices with freedom to pursue them
–
Want work-life balance
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Offer training opportunities (all generations): expect coaching
and rewarding
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Offer an evolving workplace: expect new motivational
techniques; relationship-intensive environment; to be part of the
decision making process
Concerns about Gen Y
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Every performance is excellent. Input (effort) is
confused with output (achievement)
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Passion is replaced by standard of living (pay)
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Short-term time management is the priority. Getting
to the next event has replaced getting the most out
of the experience
–
Short-term career outlooks
How are the generations affecting work
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Numbers!!
Lack of employees to fill current jobs
I. As a manager…
1.
2.
3.
4.
Can you ensure that the psychological contract is
not broken? Why?
What do employees do that you would consider a
breach of the contract?
What is most important to you to have in the
contract?
How would you ensure that a contract with an
employee remains ?
II. As an employee…
1.
2.
3.
4.
Can you ensure that the psychological contract is not
broken? Why?
What do employers do that you would consider a breach of
the contract?
What is most important to you to have in the contract?
How would you ensure that the contract with an employer
remains?