The Psychological Contract: 3 Rules to Keep it Live and Real

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The principle of the psychological contract has been around since the 1960’s. On the CIPD website a psychological contract is described as ‘describing the perceptions of the relationship between employers and workers and influences how people behave from day to day’.

What is a psychological contract?

Originally developed by organisational scholar Denise Rousseau, the psychological contract includes the less formal arrangements and perceptions between the employer and the employee. It refers to the unwritten set of expectations of the employer and employee as distinct from the formal employment contract.

Taken together, the psychological contract and the employment contract define the employer-employee relationship. When the health of that relationship is taken seriously by both parties and managed purposefully, it can form the basis of a long and productive working association.

But, is it taken seriously by organisations?

Sometimes. For the most part, I believe it is not a choice for the business, but a choice for the manager. Some organisations wish it to be a part of their employer branding and the way they like to be perceived by those that work there, but unless the manager buys in to the principle, it won’t be ‘live and kicking’ in their team or department. Some managers ‘live it’, some talk about it and don’t really see it through into execution and others just don’t buy it.

It’s the difference between McGregor’s X and Y theory management with a big chunk of people somewhere between the two.

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When we say psychological contract, what do we actually mean?

Nowadays we tend to talk about employee engagement, which sounds less formal and scientific but essentially the same thing. Having a sound approach to implementing a psychological contract will drive up levels of engagement.

In 1974, BlessingWhite of Princeton, NJ, developed a model of employee engagement that demonstrated the psychological contract perfectly by showing what organisations want from their people and what their people want from the organisation.

If you satisfy both, you can have the perfect contract where the business provides high levels of personal satisfaction in the workplace for their people in return for high levels of contribution from its people.

The employees’ obligation

Organisations want each employee to show up to work on time, work hard, work smart and safely. They want loyalty, commitment, high levels of service and productivity. The require us to develop ourselves and develop others. There are many requirements, so we just sum it up in one word… contribution.

How much contribution depends on the individual – let’s call it discretionary effort. I get to make a choice about how much I go beyond the requirements of my job description depending how I’m feeling, e.g if I have a bad morning, it’s harder to give that effort however and on better days, I could be (metaphorically) ‘on fire’.

The employer’s obligation

For my employer to motivate me, they need to provide an environment where I can be creative, flexible (come in early and leave early) and where I have opportunities to work with clients. As long as I feel sufficiently and fairly rewarded for the work that I do, money often doesn’t come in to it.

My real motivators are mainly outside of work and include family, dogs and motorcycles.

The contract

My employment contract is with the business. My psychological contract is with my Manager. The Managers’ role in this is to create a ‘partnership’ between what I want and what they want.

It requires us both to be clear about what the other one wants and expects, and that we can have an open and honest conversation, anytime one of us feels short-changed.

How do I apply a psychological contract in my team?

There are three straight-forward rules to deploy, or the three C’s:

#1. Commitment to your team members and to applying the partnership. Every manager needs to understand and buy in to the idea of the psychological contract. Their commitment is to creating and sustaining that partnership approach to managing people.

#2. Clarity can be difficult to provide and the clarity of your expectations as a manger is the keystone to a successful partnership. It is being able to describe your expectations, over and above the basic tasks of a job as laid down in the job description.

Providing clarity to employee requires some key rules:

  • Providing constructive feedback
  • Recognition of their input
  • SMARTer goal setting
  • Listening
  • Providing meaningful conversation
  • Exploring (when appropriate) when someone is performing under expectations
  • Regularly telling people why their job is important
  • Translating the companies ‘Vision’ into a more meaningful purpose for your team members

We’ve all heard the quote about the man sweeping the floor for NASA in 1968. When asked, “what are you doing?” he replies, “I’m helping put a man on the moon.

Without that why, or a purpose, a job is in danger of become meaningless and therefore less worthwhile.

#3. Communication is the only real tool at a manager’s disposal. Do it well, often, honestly and the partnership will be easy to sustain. Do it badly and you’ll lose people. The premise, ‘people join companies and leave managers’ becomes easier to understand if communication is lacking from a manager to its employees.

Keeping the psychological contract alive and real

In conclusion, if you value the relationship you have with your employees and wish to create a psychological contract or just sustain it, then you’ll need to demonstrate it by offering your own personal commitment to sustaining the partnership and engage your managers to do the same.

Your commitment is to be open and honest with your people as to why you value them, why their work is important and focus on people going above and beyond the job description. In return, you need to ask them “how can we go above and beyond for you?” Describe what maximum contribution looks like by publicly recognising it when you see it and providing feedback when you don’t.

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