THE PSYCHOLOGICAL CONTRACT

The Psychological Contract



The Psychological Contract

Psychological Contract

Spindler (1994) describes the psychological contract as “the bundle of unexpressed expectations that exist at the interfaces between humans”. It is highly subjective, defined by the individual, and is to be understood from the employee's perspective, not the organization's. Organizations provide the context in which an employee's psychological contract exists (Guzzo et al., 1994). The parties concerned may not have articulated or agreed to their expectations and, in fact, they might be incapable of doing so. When expectations are met, psychological contracts could be described as the glue that binds employees to organizations (Guzzo and Noonan, 1994).

Because psychological contracts represent perceived needs, when these needs are not met, the subjective issues covered might be so emotionally laden that strong feelings can be provoked and emotional cans of worms opened (Guzzo and Noonan, 1994; Morrison, 1994; Spillius, 1996; Spinder, 1994).

Broadly speaking, psychological contracts are transactional or relational, or both (Guzzo and Noonan, 1994; Guzzo et al., 1994), although this theme has been developed (see Rousseau and Wade-Benzoni, 1994). Transactional contracts have well-described terms of exchange (e.g. receiving a promised wage). Relational contracts are less defined and more abstract (e.g. being treated with respect by an employer).

The psychological contract in HRM

Much of the current literature concerns the changing psychological contract through organizations delayering, flattening and restructuring. Literature states that the “old” psychological contract of job security in return for loyalty and hard work is now a thing of the past, and that a new trend of multiple career changes and fewer promotional opportunities is emerging (Coles, 1995; Crace, 1995; Herriot and Pemberton, 1995; Hiltrop, 1995; Houlder, 1995; Spillius, 1996; Trapp, 1995).

Nevertheless, there are signs of a new psychological contract emerging in which companies promise to give employees support as they acquire new skills (Houlder, 1995). Employability, rather than stability, is the centrepiece of this contract.

The psychological contract has also been discussed in relation to the expectations of new employees to an organization (Filipczak et al., 1994; Robinson and Rousseau, 1994; and Robinson et al., 1994), where a sharp drop in loyalty and commitment towards employers was reported by graduates, largely because the companies failed to live up to promises and fulfil obligations made at the recruitment stage. This has wide implications for the psychological contract of the expatriate.

The psychological contract in international HRM

The psychological contract of the expatriate is different from that of the same person operating in his/her own country. This is because the expatriate leaves behind a lifetime's history of family, friends, hobbies and interests. Consequently, the expatriate's life space outside work is initially significantly smaller (Guzzo and Noonan, 1994).

Overseas, the employer has a far more significant influence on the expatriate's life, both on and off the job (Guzzo et al., 1994). This broader influence is through the provision of housing, education, welfare, recreation and social events, and other services (e.g. financial) which are not usually present in the home country. The tangible, transactional aspects of the contract co-exist with less ...