One important factor to consider when making a change in an organisation is the type of psychological contract you have with staff. Put simply the psychological contract is the 'unwritten' agreement that is believed to exist between the individual and the organization. It is a particular view of the 'exchange' (e.g. how much extra work I do in return for some level of job security). It is at times of change that this unwritten contract often becomes most important.

The psychological contract has gained a lot of interest lately, with a number of books on the subject written over the last ten years in particular.

This is partly because it is fairly easy to understand, and because research demonstrates quite clear links between perceived breach or violation of this type of contract and performance at work.

However there are some problems with the notion of the psychological contract, which I will post up about later. Some of them are 'theoretical' in that we are concerned about differing definitions, some are about 'content' - because the contract is perceived differently (potentially) by every individual, it may be difficult to manage.

But a lot of the practical issues are about fairness - and I will be doing some postings about that too.

Some people say the psychological contract is more (or less) interesting these days because it has changed so much over the years - people should no longer expect job security, for example.

But has it?

Do you feel your own psychological contract has changed - with your staff or employers?

kind regards

Stephanie

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Dr Stephanie Morgan
Crosslight Management
www.crosslight.co.uk

Hi Stephanie, anyone.

I would like to hear a bit more about how this psychological contract is defined and how it 'works'.

Beth

Hi Beth,
Here is a quick note about problems with defining and measuring the psychological contract. I will post another note up about why it may be useful shortly.



The Psychological Contract

Defining the Psychological Contract

The first issue of definition concerns whether the contract is only an individual perception, in the mind of the employee, or whether it concerns the perceptions of both parties.

Claims for usefulness of this ‘contract’ vary depending on the extent to which this mutuality is accepted. Although Rousseau (1995) argues that the potential organizational agents are numerous and that research should focus upon the individuals perceptions, others highlight that this does not enable consideration of the contracting process. This issue impacts upon the scope of the construct, and highlights the difficulty of assessing who the ‘contract’ is with.

The second main issue surrounding definition concerns how to operationalise the concept – how can you decide what to measure with all these disputes about what it consists of? Whilst some studies define the concept as beliefs concerning entitlements, others focus on expectations (returning more to Argyris’s original definition of ‘practical and emotional expectations of benefits’. Most of the Rousseau ‘school’ focus on obligations, but others argue this is too strong a word. Many stress the implicit and unwritten nature of the phenomena, although some suggest differing degrees of explicitness are likely. For example, some things may have been discussed and noted in performance appraisals, there may be ‘witnesses’ to other discussions, or the agreements may only reside in the mind of the employee (or employer!)

Problems with measurement

Measuring hypothetical constructs always requires high levels of interpretation, as they are abstract phenomena, they can only be inferred, not directly measured. Rousseau (1995) discusses a range of methods available for assessing psychological contracts, however, most research is based on self-reports. It is possible that initiating these self-reports may create the very perceptions concerning the obligations or expectations that they are attempting to measure (Arnold 1996). The debates over mutuality also impact upon measurement, such as who should be included and how many parties (see Arnold 1996). The distinction between relational and transactional contracts is also unclear, although there is some agreement that contracts can be measured along a continuum, where items fit on this seem to vary, which can create considerable validation difficulties (see Arnold 1996). Moves to create further distinctions between balanced and transitional contracts may actually serve to exacerbate this. Furthermore, as psychological contracts seem to represent rather idiosyncratic and situation bound agreements, measuring with a view to generalisation is particularly challenging. Finally with few exceptions much of the research to-date is correlational, offering little insight into processes and causal relationships.

We will discuss why the psychological contract is likely to be important over the next few discussions, but with all of these concepts, it is worth bearing in mind these issues of definition and measurement.


Further reading (recommended):

Arnold, J., (1997) Managing Careers into the 21st Century, Paul Chapman Publishing Ltd.

Conway, Neil & Briner, Rob (2005) Understanding Psychological Contracts at Work: A Critical Evaluation of Theory and Research (Paperback) Oxford University Press.

Coyle-Shapiro, Jacqueline, Shore, Lynne, M Taylor, M.S. & Tetrick, Lois (eds) (2005) The Employment Relationship: Examining Psychological and Contextual Perspectives (Paperback) Oxford University Press


Rousseau, Denise (1995) Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements (Paperback)

__________________
Dr Stephanie Morgan
Crosslight Management
www.crosslight.co.uk

As promised I am going to say a bit more about the psychological contract (PC) and how useful it can be for organizations (and managers).

I think the primary area of usefulness is in understanding how people react to change that is not good for them and to reduce the risk of adverse reaction - basically they are likely to perceive it as a breach, or evan a violation, of the unwritten contract and you can use the ideas from the PC to reduce this perception. In particular you need to pay attention to fairness (organizational justice) during the process. I will post some more up about that aspect later, but there has been a lot of interest in the areas also of career development and career management? Here is a little part of a paper I was writing on that subject:

Psychological Contract - Usefulness in Career Management Practices

Some research on the psychological contract indicates that career development is an important part of the contract (e.g. Robinson, 1996), although this may be particularly relevant to the MBA’s in the samples. Guest (1998a) calls for caution in assuming career concerns are salient. Herriot & Pemberton (1997) discuss a case study where past, present and future contracts were assessed, career issues were highlighted in different ways and were not pertinent to all groups, suggesting career management practices may only form a small part of the psychological contract, and only for some people. Indeed, the term ‘career’ means different things to different people (Arnold 1997, Sullivan et al., 1998). Although there are difficulties with using retrospective accounts, the framework, and the participation process, did appear useful in assessing the effectiveness of career management practices and in increasing employee commitment.

Much of the interest in the concept has been due to the belief that employment relationships, and particularly career processes, are changing (Herriot & Pemberton, 1997 Jenkins & Hendry 1996, Sullivan et.al. 1998). The move towards encouraging employees self-development and ‘employability’ rather than a unitary and progressive organizational career has been highlighted in the literature (e.g. Hind et al. 1996), the psychological contract would suggest that individual reactions to these developments may vary considerably. Although there is reason to doubt the extent of these changes (in Arnold 1997 and Guest 1998a), where change is occurring, such as in delayering and outsourcing, the construct may be useful to consider potential impact, particularly in how to manage the careers of those remaining.

It has been suggested psychological contracts should be measured before implementing new career management policies (Andersson & Schalk 1998). Hendry & Jenkins (1997) argue HR practitioners should develop more differentiated career contracts, implementing a process based on the psychological contract may aid this.

Evidence suggests that misperceptions can occur between managers and their bosses concerning career development (Herriot et al. 1994), research also indicates that care should be taken in making promises, or comments that could be perceived as promises, and not to inflate hopes during interventions (Morrison & Robinson 1997, Anderson 1996). These insights have practical application when planning and implementing career management practices.

Kidd (1996) suggests career interventions could be viewed as manifestations of a relational form of psychological contract, which impacts upon perceptions of procedural equity and support. As there is evidence of increased perceptions of support leading to increased innovation, this notion could be useful in explaining and providing evidence for why career management practices should be implemented.

There are some difficulties in applying the concept within organizational career management practices, in addition to those discussed for the concept generally. For example Law (1996) highlights the importance of shaping interventions based on organizational culture, this aspect could be forgotten if one focused too deeply on the individual contract approach (although this is somewhat addressed by the process model by Herriot and Pemberton). There are issues concerning differing stakeholders when developing career management practices (Law 1996), and the problem of with whom the psychological contract is made, and individual differences in career expectations, are pertinent. These difficulties limit the extent to which the psychological contract can be used within career management practices, it is but one aspect of the process that should be born in mind, particularly during implementation and change.

If anyone wants the references, just ask.

kind regards
Stephanie

__________________
Dr Stephanie Morgan
Crosslight Management
www.crosslight.co.uk

Dear Stephany,

i have read about psychological contract, thank you for so much information you provided.
what do you think potential implications are for an individual's career and career management strategies.

Many thanks,

jurgita

Dear Jurgitta,

Thanks very much for this - a very important question.

I think there are two main implications. One is that we need to articulate a little more explicitly our own expectations (our view of the contract) to our employers and discuss any mis-match or changes. That way both sides can have a better understanding and hopefully be more likely to keep to their side of the 'bargain'.

The second implication is that we perhaps need to be more aware ourselves of how the contract changes. It has been said that people should no longer expect a 'job for life' for example (though how many of us really expect that can be questioned). If we do have expectations that we have not really thought-through, and then there is a change we only notice it when something goes wrong, and then it is a shock. If we can think about how we should perhaps be changing our contract, then it is not such a surprise when the old contract is 'broken'. Hopefully we are not only better prepared but have a different view of both sides of the bargain (and have adjusted our own behaviours, therefore feel less let down).

I am not sure if I have explained that very well, so do let me know

kind regards

Stephanie

__________________
Dr Stephanie Morgan
Crosslight Management
www.crosslight.co.uk