The role of psychological contracts

The role of psychological contracts

The psychological contract is a concept that originated in the 1960s and describes the understandings, beliefs and commitments that exist between an employee and employer. 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. Traditional psychological contracts are generally less formalised than employment contracts, and contain an element of employee expectations. They are usually presumed to be relatively fixed, and continue to reflect an assumption of permanent employment, and a long-term career within an organisation or sector. The old concepts of the psychological contract, such as security of the position, tenure, loyalty, have changed, for-ever.

New psychological contracts are potentially more unstable, since they can be more temporary or ad hoc. They assume a greater sense of partnership between employer and employee, usually on the expectation of a less permanent period of salaried employment. There is a growing trend towards employment arrangements with interim workers, contract workers, portfolio or knowledge workers, or interim managers. Such people may work with an organisation for a limited period, on an agency or freelance basis. The psychological contract of interim workers is even more complex, because it is negotiated – consciously or unconsciously – as a tripartite relationship between the placement agency, the temporary worker and the temporary employer.

Psychological contracts change over time and are thus inherently unstable. As we ourselves change, as the composition of our work team changes around us and as our business environment changes, so do our respective psychological contracts. They become even more complex, because each of us tends to project aspects of the psychological contract that we think we’ve negotiated but may never have checked out explicitly, on to how we think that other people should behave towards us and to each other at work.

This can create huge problems. We use psychological contracts as a kind of mental map to help us to navigate our way through our working day. If we are not conscious of the existence of this mental map, it may lead us unwittingly to avoid or resist embracing necessary change.

In HR Business Management we know relational and transactional psychological contract types that are made explicit in HR policies addressing topics such as employee influence, HR flow, rewards and work systems. Only there are challenges providing relevant information and keeping up with change in the organization and so HR policies remain on a compliance need to know level. The challenges are that transactional contracts don’t involve all parties, are focused on short-term efficiency and try to cope with financial obligations. For some time the workforces’ identity did not seem to play an important role as the emphasis was on work processes to be standardized while the production philosophy might be structured on a performance-ratio reward system. Relational contracts on the other hand were to emphasise broad, long-term socio-emotional obligations, such as commitment, loyalty, teamwork and integration consistent with collective interest and were seen in this sense to have a pervasive effect on personal as well as work life. It’s the idea that we were to bridge an imaginary gap between machine bureaucracy that calls for numerical flexibility and symbolic job boundaries in transactional contracts while in relational contracts administrative adhocracy states functional flexibility and autonomy. Also, while transactional contracts imply higher level of knowledge codification, less customization and more process standardization, relational contracts call for more face to face knowledge transmission. Today we know we can achieve latter in virtual teams as well.

Due to the pace of economic, social, conceptual, organisational and technological development there is more flexibility and empowerment employed in working relationships. Responsibility is distributed amongst more and more individuals within an organization to protect valid and a safer decision-making with making value generating units be swift and responsive to the needs of their customers.

So even if you have those policies and processes in place, still there seems to be information missing. All of the aforementioned views imply different expectations, different employees and knowledge, strategies and culture of conduct. And we need a structure that supports all of these aspects. Not just a formal structure but an informal map. One that allows an integration of discretionary information on a need to know basis for performance tracing and compliance purposes while respecting privacy and allowing people to bring their whole self into the workplace. We need consent of participants on what and how to make relevant information available. Given the governance and compliance aspect and the use of data and information management services, there seems to be a need to better showcase performance and communication on a formal and informal map.

A people strategy with the definition of team roles is a simplified yet helpful tool to emphasize characteristics of formal and psychological contracts. But persona with demographic and psychographic information along with the use of JTBD might get you closer to this goal.

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