Contracts are a normal part of every business and have been for decades. They take on many different forms all based on the function the document is meant to perform, but all are meant to ensure the parties agree to perform particular actions. For instance, a new employee generally will sign a contract with their new employer promising to perform tasks in return for payment.

But unlike the contract mentioned above, there is one contract that isn’t signed. In fact, the contract is not written or typed on paper or any digital surface. No. It resides in the minds of the employee and the employer. This is known as the psychological contract.

The Psychological Contract

Defining the Idea

As I have written before… the concept of the psychological contract was developed by Denise Rousseau, H. J. Heinz II University Professor of Organizational Behavior and Public Policy at Carnegie Mellon University. She speaks more about the psychological contract in the video below.

Again, a psychological contract is not written. It is not formal, nor is it codified in anyway. It sets forth a set of expectations between the employee and the employer. It includes informal arrangements, mutual beliefs, common ground and perceptions between the two parties.

Key Elements

Communication

With the psychological contract not existing on paper or in a digital database somewhere, and is not formal or codified, it remains in a constant state of flux. It consistently undergoes changes. Those changes are impacted by a great many things, but most of all communication… something that must regularly happen between employer and employee.

While consistent communication positively impacts the psychological contract, it is worth noting a lack of communication can the opposite impact. This includes conversations, voice tone, body language and even implication or inference between the two parties.

Without effective two-way conversation, the contract between employee and employer (or even employee and employee) can become imbalanced and a “breach” can occur. Breaches and how they occur will be discussed later in the article.

A balanced contract shows employees their employer values and respects them and finds their role within the company important to its success. This leads to increases in productivity and a positive impact on the business itself. Consistent interaction between employer and employee can improve employee loyalty and further allows the employee to use their talent to promote and further the company’s goals.

The Role of the Working Environment

It is no secret the world is constantly changing, but none of the changes so far have impacted the psychological contract more than the changes the world is facing today… namely the ongoing COVID-19 pandemic. More and more employees are re-evaluating what they expect from their employers and even their co-workers as they navigate their lives with decisions around vaccinations, mask wearing, flexibility, family and work expectations.

In fact, a change is happening in the way people choose work and for whom they choose to work. Family has become a driving factor is a person’s decision to work for an employer or to continue to work for said employer. Time is a factor as well. Considerations around the idea of the job being worthy of the time spent doing the work. Is it work that must be done during “regular business hours” or can it be managed at different hours throughout the day taking into account childcare and so on.

This is just the tip of the iceberg when it comes to the development or change surrounding an employee’s psychological contract.

Diversity

The benefit of a psychological contract versus a more codified contract is that it’s individually focused. Every psychological contract is different because each employee is different.

Don’t underestimate the impact of diversity. This can make a huge impact on both the employee and the employer.

Individual psychological contracts allow the employee to see their value and role within the business. It also helps both sides avoid creating unrealistic expectations of one another. And it allows for “amending” the terms of the contract if needed, which is done through regular communication.

Learning Expectations

Now that the topic has been thoroughly defined, how is it shaped by learning expectations? Again, while these vary from employee to employee, there are at least five areas where employees expect to see the organization deliver.

1. Personalized Training – Whether the training happens online or in a classroom setting, employees expect training to be specific to their role, tasks, and responsibilities. No employee wants to spend time on content, no matter how good it is, if it is not something he/she/they will use on a regular basis while performing work duties. Additionally, this provides learning leaders and teams a fantastic opportunity to engage with employees to figure out what learning is needed/wanted and how it is best delivered. It should not be forgotten that it is paramount to pre-assess the employee(s) before holding these types of conversations. Why? Learning leaders and teams can assist, as they should, in assisting the employee(s) in picking content that best suits his/her/their specific needs.

2. Setting Goals and Flexibility – Personalized training is the best segue into goal setting and flexibility. Employees expect and want some control over deciding when and how to access training/learning content. Given the new thrust in to remote work, this is not only an expectation but a necessity when considering how work schedules vary for employees now. That said, learning leaders and teams should play a role in defining short term and long term learning goals for each employee and/or teams. Setting benchmarks and milestones is key to ensuring continued learning and achieving successful expectations.

3. Varied Platforms and Devices – As stated previously, flexibility in learning/training is commonly an expectation. So too must be the way in which employees access that content. Learners are using various devices to access training materials; devices such as tablets and smartphones in addition to the traditional personal computer and/or laptop. Consider using platforms that can be automatically be configured based on the device being used. These must work in concert with content that is multi-platform friendly.

4. Real-World Application – Learning/training cannot be theory only. It must offer practical application. Whether it’s new training or a brushing up of skills, employees expect the information to be easily used in the real world. Simulations are a great way to provide this context. So is gamification. Whatever the tool and mode of learning used, it must be applicable to real situations.

5. Continued Support – This is critical and sometimes forgotten most regularly. The organization and its learning leaders/teams must continue to provide additional support after training/learning has occurred. That can sometimes take the form of supplemental training, one-on-one coaching, or team building exercises. Without these opportunities, organizations will find learner participation will diminish as will the use of content being learned.

Psychological Contacts in Practice

What makes up the "contract" can vary with the unique needs and aspirations of each employee, but that does not imply an organization should seek to satisfy each employee’s unspoken expectations.

It is, however, an area where an organization can leverage the employee-manager relationship by equipping and encouraging managers to discuss and address psychological contract expectations with employees. Managers can help employees explore and, if necessary, modify their expectations, offsetting negative reactions when unrealistic expectations are not met.

By initiating the one-on-one conversation and listening uncritically, managers demonstrate that they care, thereby improving communications and strengthening the manager-employee relationship.

The Breaching of Contracts

When one hears the term “breach” it is almost always a bad thing. The same can be said when it is a “breach of contract.” A breach of the psychological contract happens when one party perceives the other as failing to fulfill promises. Those expectations can be many things. Example include:

• Training
• Type of Work
• Promotion
• Pay
• Feedback

What is the result when a breach happens? That depends on the severity of the breach itself, but typically it can be assumed leadership will begin to see negativity from the employee(s). That can take the form of anger, betrayal, or sadness. A lack of trust can also occur between the employee and his/her/their manager, company leadership, and/or the whole organization.

Other items include:

• A lack of commitment from the employee(s).
• Decreases in job satisfaction..
• Withdrawal categorized by the employee being less willing to work hard, share ideas, and engage with co-workers.

Conclusion

Given the ongoing pandemic and the changes associated with it, the expectations between the employer and the employee are undergoing a dramatic change. That means the psychological contract is more important now than it has ever been. Leaders and employees aren’t as often in the same room any more meaning the separate environments in which people work can influence expectations in unexpected ways. In other words, unexpected consequences can be damaging.

Regardless… both the employer and the employee are responsible for the creation, state, and carrying through of the psychological contract. Have conversations openly and often about the topic. Transparency and clarity of purpose are key to avoiding breaches and successful execution.