The psychological contract, developed by organizational scientist Denise Rousseau, developed in the 1960s and relies heavily on knowledge of psychology and organizational behavior. Below the waterline – the 90% metaphorical iceberg that lies beneath the surface. It is the hidden perceptions that greatly influence the interpretation of the psychological contract, especially by the employee. These factors loosely correspond to the “pc” area of the Venn diagram. Where the psychological contract is overwhelmingly hidden and mutually unclear perceptions, then we can imagine that the iceberg is overwhelmed at more than 90%. Where the treaty is healthier and clearer – for whatever reason – we can imagine that the iceberg may only be 60-70% underwater. Interestingly, the iceberg pattern in co-ops and employee share ownership organizations (due to the nature of the employee share ownership model) will tend to fall off the water and perhaps even float like magic, which is an intriguing thought. I reiterate that the openness and transparency of leadership must not extend to leaders who are freeing themselves from the concerns and pressures of leadership responsibility. Openness mainly refers to the flow of honest constructive communication within an organization, especially to build mutual trust and awareness between leaders/managers and followers (for whom the Johari window is a very relevant and useful model).
Next, we will summarize how “contracting” is considered in the transactional analysis. This is not the same as the psychological contract in employment, but some guiding principles are very similar. As mentioned earlier, what constitutes the “contract” may vary depending on the unique needs and aspirations of each employee, but that does not mean that an organization should try to meet the unspoken expectations of each employee. The quality of the psychological contract greatly influences the daily behavior of employees. When employees perceive that the contributions they make to the organization and what they receive from the employer are balanced, it can produce positive results. For example, employees who perform better, display more behavior outside the role, and show a higher level of commitment to the organization. Learn more about our employment management resources. Armstrong refers to the definition in Edgar Schein`s 1965 Psychological Treatise as a (somewhat vague) implication that: “. There is an unwritten set of expectations that apply at all times between each member of an organization and the various managers and other members of that organization. It is important for employers to understand that what constitutes a balanced psychological contract varies from employee to employee and, most importantly, it will also change over time.
The ICPD says it “describes how the parties themselves understand their relationship, their own views on engagement and what they can expect in return.” Although Rousseau`s 1989 paper was, as Coyle-Shapiro points out, “very influential in the conduct of contemporary research”, the concept of psychological contract was first introduced by Argyris (1960): “Since foremen recognize that employees in this system tend to produce optimally under passive direction, And since employees agree, a relationship between employees and foremen can be assumed. which could be described as a “psychological employment contract”. The employee will keep production high, grievances low, etc. if foremen guarantee and adhere to the standards of the employee`s informal culture (i.e. leave employees alone, ensure they earn a living wage, and have secure jobs).”  Managing expectations: Employers should make it clear to new employees what they can expect from the job. Managing expectations, especially when bad news is expected, increases the chances of building a realistic psychological contract. Our report Where has all this trust gone? re-examine the issue of trust and examine why it is important and what can be done to address it. People need to know what to expect and to be consulted and supported. Psychological contracts are defined by the relationship between an employer and an employee, in which there are unwritten mutual expectations for each party.
A psychological contract is defined as a philosophy, rather than an elaborate formula or plan. Characterization of a psychological contract by qualities such as respect, compassion, objectivity and trust.  Psychological contracts are formed by beliefs about exchange agreements and can arise in a variety of situations that are not necessary.  However, it is very important in its function of defining the employment relationship between employer and employee. As such, the psychological contract is an essential but implicit agreement that defines the relationship between employer and employee. These contracts can, under certain circumstances, lead to positive and malicious cycles. Several researchers define the psychological contract as a perceived exchange of agreements between an individual and another party.  The psychological contract is a kind of social exchange relationship.  Parallels are drawn between the psychological contract and the theory of social exchange, since the value of the relationship is defined by a cost-benefit analysis.  The implicit nature of the psychological contract makes it difficult to define, although there is a general consensus on its nature.
This consensus identifies psychological contracts as “promissory, implied, mutual, perceptual, and expectations-based notes.”  This last point is intriguing because organizations such as employee holding companies and cooperatives have a different constitutional business model in which workers and potential clients own the organization and can therefore determine to a large extent – through appropriate representation and management mechanisms – the nature and quality of the psychological contract and much more. Here we can see a glimpse of how organizations (and other relationships that involve leadership authority or governance) could be managed in a more equitable and sustainable way in the future. We live in hope. Violations of the psychological contract by an employer are not always preventable. External factors such as a negative economic outlook can affect the “deal” between the company and its employees. However, organizations can avoid many negative outcomes if they handle the situation fairly, even if they can`t promise positive outcomes for everyone. For more information, see our report The Changing Contours of Equity. Without ever having to sign on the dotted line, a psychological contract can be one of the most valuable things an employer “signs” with their employee. But it doesn`t even exist! Above the water level – “work and wages” – represents the basic employment contract – the traditional “fair work for a fair daily wage”. This roughly corresponds to the segment “vc” in the Venn diagram.
This visible employment contract is usually the written contractual obligations of both parties. The iceberg chart shows the most basic employment and payroll tables. In reality, most workers are officially responsible for other inputs and are officially entitled to benefits beyond pay, so the iceberg here is a very fundamental situation in this regard.