Psychological Contracts: an introduction to the concept
Associate Professor in Work and Organisational Studies
University of Sydney
While the origins of the concept of ‘the psychological contract’ can be traced to the 1960s, the idea gained widespread currency in the academic and research fields of organisational psychology, organisational behaviour and HRM in the 1990s following the publication of a key article, then a book, by Rousseau (1989, 1995) which stimulated renewed interest in the idea. The concept is now also popular in practitioner circles. Its contemporary popularity with human resource professionals is suggested by a 2002 UK survey that found that 36% of HR Managers used the concept ‘to manage the employment relationship’ and that 90% agreed that it was ‘a useful concept’ (Guest and Conway 2002). Despite its popularity in both academic and practitioner circles, the concept remains controversial for several reasons: questions remain as to the precise meaning of the concept, its theoretical and practical utility and its ideological and political usage in organisations.
This overview seeks to introduce the concept by: defining psychological contract, identifying what is normally thought to be contained in one, explaining the different types of psychological contract, explaining why the concept is so popular and highlighting some potential problems with the concept.
The implications of psychological contracts for management, leadership and organisations are considered in companion briefing paper – Why do psychological contracts matter?
What are ‘psychological contracts’?
While there is no one universally accepted definition of the psychological contract, most definitions tend to see it as the implicit understanding of the mutual obligations owed by an employee and their employing organisation to one another. It is often contrasted with the formal, legal employment contract that specifies the formal duties, responsibilities and obligations of employer and employee in the employment relationship. Commentators vary in the extent to which they see these two sorts of contracts as mutually exclusive, overlapping or interdependent. Shields (2007: 49), for example, sees the psychological contract as ‘filling in the gaps’ left by the formal legal contract of employment to constitute a more complete account of the entire range of mutual obligations between employer and employee.
The most widely accepted definition is Rousseau’s (1995: 9):
The psychological contract is individual beliefs, shaped by the organization, regarding terms of an exchange arrangement between the individual and their organization.
Rousseau’s (1989) earlier definition is also instructive:
The term psychological contract refers to an individual’s belief regarding the terms and conditions of a reciprocal exchange agreement between the focal person and another party. Key issues here include the belief that a promise has been made and a consideration offered in exchange for it, binding the parties to some set of reciprocal obligations.
Key features of the concept include the following1:
1) the psychological contract is based on beliefs or perceptions. It follows that different individuals (even in the same organisation) will have potentially different conceptions of what the psychological contract actually entails.
2) 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. Therefore the parties are thought to draw conclusions as to the existence and substance of various promises and obligations based on the observed behaviours of the other party.
3) the psychological contract is based on perceived agreement rather than an actual agreement. This suggests the possibility that employees and managers will often disagree as to the content of the psychological contract, and research...
References: Bratton, J. (2007) Work and Organizational Behaviour. Houndmills, Basingstoke: Palgrave.
Conway, Neil & Briner, Rob B. (2005) Understanding Psychological Contracts at Work: A Critical Evaluation of Theory and Research. Oxford: Oxford University Press.
Herriot, P., Manning, W. and Kidd, J. (1997) ‘The Content of the Psychological Contract’ British Journal of Management, 8: 151-162.
Rhoades, L. and Eisenberger, R. (2002) ‘Perceived Organizational Support: A review of the Literature’ Journal of Applied Psychology, 87 (4): 698-714.
Robbins, S.P., Judge, T.A., Millett, B
Rousseau, Denise, M. (1989) ‘Psychological and Implied Contracts in Organizations’ Employee Responsibilities and Rights Journal, 2(2): 121-139.
Rousseau, Denise M
Shields, J. (2007) Managing Employee Performance and Reward. Cambridge: Cambridge University Press.
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