THE PSYCHOLOGICAL

CONTRACT
BUA5BAM
Anthony Smolic
Chris Murphy
Roy Sharma
Stephen Wooster

THE PSYCHOLOGICAL
CONTRACT
Trust & the Psychological Contract

Psychological Contract?
What is a Psychological Contract?

Contract
Breach

Fail to deliver on
perceived promise.
Could result in:

negative response
reduced loyalty,

Decrease in
productivity,

Commitment

Lack of motivation.

Perception VS
Reality

More of a
Gentlemans
agreement as
suppose to legally
binding.
Ongoing as
suppose to for a
term in a written
contract.
Fills the
perceptual gaps in
employment
relationship and
shapes day-to-day
employee
behaviour in ways
which might be
hard in a written
agreement.

Trust

Relianceonan
dconfidencein
thetruth,worth,
reliability,etc,
ofapersonort
hing:faith
(Jackson.K,
2011, Pg. 12 of
354).

THE PSYCHOLOGICAL
CONTRACT
Critical Nature of the contract between n
organisation and its employees

Definition
The psychological contract is individual beliefs, shaped by
the organization, regarding terms of an exchange
arrangement between the individual and their
organization.

(Rousseu, DM 1995, p. 6)

FIVE KEY AREAS

Beliefs and Perception

the psychological contract is

based on beliefs or perceptions

Implicity
the psychological contract is

implicit rather than explicit. It is

thought to be inferred from the
promises made or implied by the
organisation or the employee.

Perceived vs Actual

the psychological contract is

based on perceived agreement

rather than an actual agreement.

Exchange and Reciprocity

the psychological contract is

based on an exchange and is

therefore founded on the principle
of reciprocity.

Evolution

the psychological contract is

ongoing and evolving.

Employee expects
Safe work environment
Job security
Adequate training

Organisation expects

Employee to work contracted hours

Honesty
Loyalty

THE PSYCHOLOGICAL
CONTRACT
Managements influence on the psychological
contract
Anythingmanagersdoorareperceivedasdoingaffectstheinterestsand
performanceofemployeesandwillmodifypsychologicalcontracts.
(Randmann, 2013 pp.126).

Recruitment and Performance Appraisals

Effective recruitment and performance appraisal

techniques.
eg: behavioral interviewing
Rousseau (1995), managers as agents of the

organisation are directly responsible for an employees

psychological contract.

Human Resource Strategies:

Follow the Leader
Managers as the link between HR strategies and

employee awareness.
Katou & Budhwar (2012), mangers mediate the

relationship between the psychological contract and

organisational performance.

My managers influence on my Psychological Contract

Psychological contract violations.

eg: managers actively seeking new roles.

Company violations were significantly correlated with

manager violations.
(Ballicci, 2003 pp. 5)

Pre-Social Rule Breaking

The bi-product of PSRB on an employees psychological

contract.
Paul et al (2000) argue that PSBR can at times lead to a

violation in the psychological contract and feelings of

anger by employees.

THE PSYCHOLOGICAL
CONTRACT
How a clearly understood contract results in
higher team performance

High Performing Teams

Does the clearly understood psychological contract result

in higher team performance levels?

Need for employers to understand the value of this on

their organisation

Commitment
Commitment DEFINITION
Commitment is different from Motivation & Attitudes
Results in effective workforce and high performing team

Three-Component Model (TCM)

Observation of characteristics displayed in individuals
Grouped into three groups based on common

observations
Affective
Continual
Normative

Affective Commitment
Strongly related to turnover and job performance
Commitment towards targets (organisational or personal)
Strengthen in an environment promoting flexibility and

participation within their team

Continual Commitment
Tenure in an organisation can lead to increased belief &

loyalty between employers & employees

Low staff turnover helps build productivity and efficiency

within the team

Strong performance occurs as a result!

Normative Commitment
Commitment to organisational goals tied with personal

achievement
Strong performance generated from meeting obligations

of the psychological contract

Performance driven by understanding the WIFM

Results of Strong Commitment

Results are often quite specific including:
Lower Staff Turnover
Reduced Absenteeism
Improved Performance

Other benefits:
Knowledge Retention
Reduced training costs

Generational Differences
Baby Boomers
Less of an emphasis placed on psychological contract to increase
performance
Generation X
Considered in line with factors like work life balance and job

security and autonomy

Generation Y
Lower commitment to the organisations
High staff turnover when the contract is not met

Results & Actions

A clear understanding of the psychological contract can

lead to strong returns via

Increased participation
Improved productivity
Engaged workforce

Thankyou!
Any questions