PSYCHOLOGICAL CONTRACT

Psychological Contract

Psychological Contract

Introduction

Exchange relationships and the promises on which they are based are as old as mankind. Indeed, the first recorded psychological contract violation may well be the story of Adam and Eve. When they violated the agreement not to eat from the tree of knowledge, they began a long history of promise, commitment, violation, and renewed relationships.

Employment relationships in today's global society are increasingly based upon mutually accepted, voluntarily exchanged promises between two or more parties, where each gains if the exchange agreement is fulfilled, and loses if it is not. These relationships confront certain common forces the world over, promoting comparable developments. At the same time, psychological contracts, like the people who are party to them, are affected by the societies in which they are embedded. We first address common developments in employment across countries and then examine the cultural and institutional similarities and differences that persistently affect the formation of psychological contracts. The chapter concludes with the prospects for the future (Arthur, 2004, 670).

Psychological contracts

The term psychological contract has been around since the 1960s and was first used to capture the relationship between a work group of employees and a plant foreperson in terms of what the two parties exchanged in their relationship (acceptable wages and job security in return for higher productivity and lower grievances). This initial definition of the psychological contract is similar to what is currently known as normative contracts. A number of other definitions of the psychological contract subsequently appeared, giving rise to different views on what the psychological contract was capturing. For example, the psychological contract was defined as mutual expectations, an implicit contract, and a set of unwritten expectations between an individual employee and the organization. While the early work on the psychological contract was characterized by disagreement, since the late 1980s there seems to be broad consensus that the psychological contract captures an individual's perception of the mutual obligations that exist between that individual and another party.

In the context of the employment relationship, psychological contracts encompass what employees believe their employer has promised to provide in return for certain employee contributions. Whether the employer fulfils these obligations is contingent upon the employee fulfilling its obligations to the employer. For example, an employee may believe that the employer has promised to provide long-term job security, career development, interesting work, and competitive rewards in return for employee loyalty, flexibility, and meeting the formal requirements of the job (in-role performance) as well as going beyond the formal requirements of the job (extra-role performance). Consequently, the degree to which an employee receives career development, competitive rewards, and so on is dependent upon the extent to which the employee performs at the required level, is flexible, and so on. The terms of the psychological contract may be unspoken and unwritten, and there may not be agreement between the employer and employee regarding the obligations each has to the other (Folger, 2008, 250).

A distinguishing feature of the psychological contract is its focus on contingent obligations ...