Psychological Contracts
As part of the hiring process for most companies, a candidate who is selected for a position will normally sign some type of offer letter. This offer letter typically defines the salary and compensation for the position, start date of employment, information about the company, and other administrative information. On the surface, an offer letter creates an agreement that an employee will do work, and the company will pay for that work to be done. But like an iceberg, this offer letter agreement is only what you see above the surface, and there is much, much more below that is unseen and often unspoken. These unwritten factors that set the daily work expectations between an employee and their company is what we call a psychological contract.
A psychological contract is an unwritten agreement defining relationship expectations between an employer and employee. This agreement is aligned with a person’s job description but covers a much more general overview of expectations. For example, a company may expect that an employee provides a certain level of consistency and productivity on the job. Additionally, a company may expect an employee’s behaviors and actions to align with certain values and beliefs. Similarly, an employee may expect a certain level of stability in their job, continuity of benefits, and promotion or growth opportunities if they maintain consistent support and productivity.
Every employee maintains this psychological contract with their employer, but the level of alignment, complexity, and mutual understanding may vary. When an employer and an employee are not aligned, problems and conflict arise. Imagine if your definition of meeting expectations was not the same as what your leadership team expected. You may feel that you are doing a great job supporting your role, while leadership may feel that you are not meeting expectations. This situation could lead to disagreements, negative feelings, and job instability. However, when an employer and an employee are aligned in their expectations, great things happen, and everyone benefits. If you and your leadership are aligned with a mutual understanding of how to meet expectations, you have a much higher likelihood of success in your role, support from leadership, and future growth opportunities.
Certain aspects of a psychological contract have been culturally similar across the US, specifically when it comes to the definition of job stability. Up through the mid to late 1900s, job stability meant that an employee would typically stay with the same organization for most of their career. Often a person would not only stay with the same company, but they would stay in the same role for 20 to 30 years. In this paradigm, the psychological contract was such that a company expected its employees to provide consistent support, productivity, and company loyalty, and in turn, the company provided job stability over an entire career.
Beginning around the 1980s, American culture saw a major shift in this expectation. New technologies introduced more changes in job tasks more quickly. Where a person in the 1950s may expect their jobs to change only a small amount over multiple decades, today’s job requirements may change significantly within the span of a few years. Additionally, economic conditions beginning in the 1980s marked the first mass layoffs by large corporations. As you can imagine, this challenged the existing paradigm of the psychological contract; an employee who provided consistent productivity and met expectations could no longer depend on their company to provide stability.
Technology continues to drive change in jobs, tasks, requirements, and work environments. Never has that been so relevant as it is today with the ongoing COVID pandemic requiring mass telework and reliance on virtual communication. Additionally, as requirements and technology become more complex, interpersonal skills such as communication, collaboration, conflict resolution, and teamwork become much more critical. But instead of company loyalty, these complexities and changes are leading to a focus on individual contributions and capabilities. The psychological contract is changing from an organizational focus to an individual focus. Since meeting job expectations no longer ensure job stability, employees are driven to focus inward on personal knowledge, skills, and abilities (KSAs). This ensures employee stability not through staying with the same employer over time, but by maintaining marketability across multiple companies or industries. If one job goes away, a person’s capability can ensure another job is quickly attainable.
But this constant churn of jobs and uncertainty can become problematic through increased stress, lack of productivity, and lack of team synergy. We must work to find a balance between stability within a company and stability through our personal capabilities. Technology and economic conditions are changing too fast for anyone to expect that over their entire career they will do the same job, the same way, with the same skills. However, we can better align employee and company expectations by leveraging a clearly communicated and mutually agreed upon psychological contract.
Organizations can improve communication of their psychological contract in a variety of ways. They can put a greater focus on employee growth through training and education, internal promotional opportunities, and other career development programs. They can have defined organizational expectations for the values, behaviors, and actions employees should all be demonstrating every day. Furthermore, organizations can embrace change with continuous process improvement and enhanced, transparent communication.
There are other actions that everyone can take to help communicate and align their psychological contract. Setting clear performance goals by working with leadership to document and agree on what you hope to achieve in your role will increase the likelihood of aligned expectations between you and your supervisor. Additionally, embracing company mission, vision, and values will help ensure your alignment with organizational and cultural expectations. Furthermore, building trust with your team members and leadership is a critical factor for an effective psychological contract. Trust leads to open and honest communication where discussions can include different perspectives and resolve potential misalignments in expectations.
Communication is key. Managers and supervisors should be expected to contribute to maintaining a trusting environment where open, honest dialogue is encouraged. Consider talking to your organizational leadership about the expectations for your role and career development. Think about what it means to meet or exceed expectations and communicate how you define and measure productivity. If you are not sure about what is expected of you, or you do not think the organization is meeting your expectations, let your leadership know. The best way to affect change is to have an open dialogue. Overall, this creates a mutually beneficial outcome with a strong basis of trust. By working openly to communicate and align your psychological contract, you will find stability, continued growth, and success throughout your career.
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