The Psychological Contract

Objectives

Define and understand the importance of the psychological contract

Examine the influences that affect workplace expectations

Examine generational work expectations Work on a psychological contract with your

professor

PSYCHOLOGICAL CONTRACT

The psychological contract is individual beliefs or perceptions regarding the terms of exchange between the individual and organization.

PSYCHOLOGICAL CONTRACT

The perceptual and dynamic nature of the contract makes it common that a violation will occur

Types of Violations

Inadvertent –divergent interpretations

Disruption –impossible to fulfill the contract, despite willingness to do so

Breach of Contract – One side refuses to fulfill the contract

Contract Makers’ Violations

Sources ViolationsRecruiters Unfamiliar with actual job

OverpromiseManagers Say one thing, do another

Co-workers Failure to provide support

Mentors Little follow-through Few interactions

Top management Mixed messages

Broken Contracts

Outrage, shock, resentment, anger Decreased trust and good faith Decreased job satisfaction Decreased productivity Decreased attendance Decreased commitment Turnover

Consequence

RESPONSES TO VIOLATIONS

Personality Characteristics

– Equity Sensitives – monitor exchange relationships carefully and are more likely to perceive an imbalance in the relationship

– Beneficients – are more willing to let others come out ahead in the exchange relationship

RESPONSES TO VIOLATIONS

Constructive Destructive

Active Voice Exit/Destruction

Passive Loyalty/Silence Neglect/Silence

Exit

When attempts to fix the situation have failed When the relationship is transactional When another job is available When the relationship has been brief When other people are also exiting

Voice

When a positive relationship and trust exists When there are methods for voice When other people use voice When people believe they can influence the

other party.

Others

Silence: When there is strong loyalty to the company

Neglect or Destruction: When there are no other options available to express dissatisfaction

Managing the Psychological Contract

Provide realistic job expectationsHave frequent discussions of expectations

Check employee understanding

Give feedbackBe sensitive to individual differencesCheck for changes in expectations

Psychological Contract Reading

Aren’t there two parties in an employment relationship? Antecedents and consequences of organization – employee agreement on contract obligations and

violations

By

A Tekleab & S. Taylor

Journal of Organizational Behavior, 2003

Purpose

Assessed employee tenure in determining the level of agreement of reciprocal obligations between parties

Evaluated the consequences of perceived violations of the psychological contract on employee-related outcomes

Comparison of manager/employee responses

Responses to violations

– Employees reported significantly lower levels of their own violations than did the manager

– Both parties tended to agree on organizational violations

– Both parties react negatively to violations

Comparison of manager/employee responses

Perceptions of obligations:

– Early in the manager/employee relationship employees had high expectations of their obligations to the organization while managers had low expectations of employee obligations

– As tenure of the employee increases perceptions of the employee obligations converge. Employee perceptions decreased and manger’s perceptions increased

– Perceptions of the organization’s obligations are not significantly different at any point in time. Parties agree on organization’s obligations

Employee/Manager perceptions of Employee Obligations

Employee perceptions

Manager perceptions

Time

Employee/Manager perceptions of Organization’s Obligations

Employee perceptions

Manager perceptions

Time

Responses to violations

Found the driving force for employee job satisfaction and their intent to leave was organizational contract violations

Found that manager’s judgment of employee performance was negatively impacted by perceptions of employee violations

The Generationswho they are; how they think

Each generation is a product of historical events that shape their values and views of the world

Emotional memories shape feelings about institutions, authority, materialism, family and careers

The Silent Generation (1922-1945)

The depression, WWII, Holocaust The most traditional – working fathers, at

home mothers, traditional work ethic Highly disciplined, hard working, much

sacrifice, loyal to their employer (employer loyal to them).

A source of much tacit information

Baby Boomers (1946-1964)

Product of the end of war baby boom and a consistent increase in birth rates until 1964

A time of affluence, opportunity Self-absorbed, free love, social issues, civil rights Educated, competitive, focused on personal

accomplishment– 1. lots of jobs, able to drop out and come back; 2. less jobs;

3. disadvantaged, high competition, going no-where fast (boiled frogs)

Want pensions, health care and to be left alone

Generation X (1965-1976)

Both parents working (latchkey kids), saw parents laid off, high divorce rate

Not loyal to a company, pessimistic Independent and resilient Want immediate feedback and work to be fun Want transferable skills, most stressed out

group

The Echo Generation/Generation Y (1977-2000)

Babies of the Boomers who gave their children everything and rewarded them for anything

Sense of entitlement, mostly interested in what will be given to them

Self confident, multitaskers, want to be guided (have goals set for them), hard workers, technologically savvy

want money, challenging work that matters, learning opportunities, harder to please, require more direction

Observations about Gen Y

Offer choices: expect state-of-the-art, cooperative scheduling , many choices with freedom to pursue them

– Want work-life balance

Offer training opportunities (all generations): expect coaching and rewarding

Offer an evolving workplace: expect new motivational techniques; relationship-intensive environment; to be part of the decision making process

Concerns about Gen Y

Every performance is excellent. Input (effort) is confused with output (achievement)

Passion is replaced by standard of living (pay)

Short-term time management is the priority. Getting to the next event has replaced getting the most out of the experience

– Short-term career outlooks

How are the generations affecting work

Numbers!! Lack of employees to fill current jobs

I. As a manager…

1. Can you ensure that the psychological contract is not broken? Why?

2. What do employees do that you would consider a breach of the contract?

3. What is most important to you to have in the contract?

4. How would you ensure that a contract with an employee remains ?

II. As an employee…

1. Can you ensure that the psychological contract is not broken? Why?

2. What do employers do that you would consider a breach of the contract?

3. What is most important to you to have in the contract?4. How would you ensure that the contract with an employer

remains?