Chapter 2: Psychological contracts: the amazing framework for better employee retention/engagement you've likely never heard of (outside of academics)

As a work- and organisational psychology Master's, when the time once came for the dreaded first step into the corporate world known as an “internship”, yours truly – big science-loving geek that I am – chose a radically different way. Instead of jumping into corporate straight away, I chose to accept the offer of the psychology department of my Alma Mater, who offered the possibility for a research internship: basically spending 6 months doing what a PhD student does.

It was an incredibly enriching experience, so much so that I wish someone has had the great idea of doing the same since then. For 6 months, under the guidance of Prof. Dr. Tim Vantilborgh, I delved deep into two different subjects, in the (quite mad!) hope of being able to write a publishable paper in 6 months time. Those two subjects were the “dark triad” of personality traits* (psychopathy, narcissism and macchiavellianism) on the one hand, and on the other what I would like to talk to you about today: psychological contracts.

“I must admit, I've never heard much of the term 'psychological contract', if at all ever...”

Then fear not while I express an “Excellent!” in my best Mr. Burns voice, dear reader! You are in for one royal management psychology treat, where you will surely recognize yourself and your own employment experiences along the way.

Psychological contracts are still kind of a relative unknown in the business world, which is quite unfortunate as they are an amazing framework for better understanding employee engagement and retention, to which their breaching is directly linked. In today's world where “quiet quitting” is the buzzword of the moment and retention seems to be one of the major problems for many organisations, being aware of the concept of psychological contracts might help alleviate problems in those areas. I will do my utter best to try and keep this article as succinct as possible – which is quite the big ask given the both interesting nature of the concept – while also not doing it injustice by excessive simplification. Much like a tightrope artist at Cirque du Soleil, I shall aim for balance to the best of my abilities (though disclaimer: the tightrope guy will – hopefully anyways! - succeed much better than me)

Anyways let's start at the start: what is a psychological contract? Just that answer might need a couple sections considering the lack of a clearly defined, universally accepted definition and the complex nature of the construct. Without entering the debate and for the sake of simplicity, one may take that a psychological contract constitutes the various perceived obligations between employer and employee in the context of an employment relationship, that are not defined in an employment contract.

An example is always worth an unclear definition, so let's take the simple example of overtime. While there might be clear overtime rules in an employment contract you sign or any company rulebook you thereby accept to adhere to, the clear nature of your overtime more than likely won't be. Is overtime a regular thing here? Is overtime actually exceptional, or is it just regularly 'expected' ? Those things that are not clearly defined in the company's rulebook or your contract about the what, how and when of your work; what you expect of those constitutes your “psychological contract” you have with your employee/employer (for it works both ways: an employer also has such 'expectations' and 'perceived obligations' towards an employee).

Let's face it, what you expect from an employer besides and beyond what is in your employment contract is plentiful: a clean and well-equipped work environment, efficient organisational processes, organisational fairness, sympathetic colleagues, up-to-date tools and systems,... All those things are not specified in any written contract, yet you have expectations for these things. You perceive them as being obliged, almost naturally, where you can also deem what would be great, what would be enough, what would be lacking, or perhaps even disastrous to you (more on this later: start seeing the value of the framework already, dear reader...?). The expectations about all those things constitutes your psychological contract. This psychological contract is subsequently also highly idiosyncratic in nature: you have a psychological contract, so does your co-worker and they might be very different, even towards the same employer in the same role. These might then again be different from the one your employer has regarding you, just like it might once again be different if you had a different employer.

So first of all, when talking about those psychological contracts, we need to talk about their possible typology. This way, we get a sense of what differences we might encounter by making a valid differentiation between possible broader “types” of psychological contracts. In other words: could psychological contracts be classified into broader categories and, if so, which?

Well, according to the different main expectations towards your employer/employee that your psychological contract holds, three broader categories of psychological contracts are found to be distinguishable: transactional-, relational- and ideological psychological contracts. An ideological psychological contract has the adherence to a certain ideology most intensely attached to it. A typical example might be someone who works for a certain volunteering non-profit, where he/she has a main expectation that this indeed helps make a real and valued difference. A transactional psychological contract is essentially exchangeable in nature, without any additional attachments and where the focus of the employment exchange is the mere 'harder' transaction itself. “I give you my work and my effort, in exchange I expect to be paid well and on time” in it's way too simplified format (remember, self: succinct!). A relational psychological contract – which is coincidentally also what nearly every company in the whole wide world unknowingly prays for – is one where the main focus lies in the relational dynamic between employer and employee. Where one expects an emotional connection and bond with his/her professional “significant other”, whether it be employee or employer. “I expect a great culture and a brand I can be proud to represent and belong to.”, as another much too simplified example.

Phew! Let's maybe take a breather for a couple paragraphs now... (for you've earned it and you are welcome)! Just kidding, I need one too, for here's a little visual representation of me, writing this article so far:

Anyways, back to our sheep: did you recognize yourself so far already, dear reader? Were you already able to say to yourself “I'm more ideological/relational/transactional in my psychological contract”? It's likely you were, but something else might even seem more specifically familiar. For now that we are covered in the rough basics of psychological contracts and their typology, it's time to take a short dive into their processes. So how does a psychological contract work and affects exit behavior?

As a picture is worth a thousand words, I shall begin with a picture of the overview of the cycle psychological contracts go through. For good reference and good measure, be sure to check out the original paper if you want to know more (waaay more!), it's published for free on Researchgate. Just copy the following into Google Scholar: Rousseau, DM,?Hansen, SD,?Tomprou, M.?A dynamic phase model of psychological contract processes.?J Organ Behav.?2018;?39:?1081–?1098

Firstly, there is the creation phase – which, FYI, already starts during the recruitment process! During the beginning of an employment relationship, a certain view of the other party develops, expectations are formed and perceived obligations ensued. This is one of the reasons you cannot – I repeat you cannot – embellish things during recruitment processes. See the direct relationship between creation phase and exit? That's why, because the way the psychological contract is originally formed, can have a direct impact on a later exit/termination. Once it is created, the psychological contract is maintained for as long as the perceived obligations (which can change over time: remember it is idiosyncratic) are mutually met. If at some point the perceived obligations are not met, either under-delivered or over-delivered, what is called a “psychological contract breach” and a broader disruption phase might begin – for there is a very slight possibility of the breach just getting voluntarily ignored, it seemed in prior research. If this disruption phase occurs and is associated with positive affect, a renegotiation of the terms of the psychological contract are likely to occur, before returning to a “natural” maintenance state - “harmony”, if you will. If this disruption phase is associated with negative affect however, a repair phase is instead likely to occur, where parties attempt to repair the original psychological contract to rectify things. This, in turn and unlike renegotiating the contract, can either lead to a return to the preceding psychological contract and it's subsequent maintenance, or an exit! Indeed, if reparations cannot succeed and renegotiation is not an option, both psychological and effective contract are likely to dissolve and an exit to follow... On to a new contract – both psychological and on paper at once – plain and simple!

Now then comes a fork in the road, dear reader... I could go deeper, but I feel that would also instantly mean I would need to go much deeper to do the concept justice. So I shall abide by my commitment to remain as succinct as possible and keep psychological processes at this for this article! I figure the usefulness of an overview of the global life cycle of psychological contracts will already enlighten somewhat, for I am quite certain you have recognized yourself even further seeing this process shown and explained “out loud”

For did you already find yourself renegotiating your psychological contract, or repairing it, dear reader? Assuredly. If you were to say that you cannot recognize this cycle, I am not sure I would believe you! What you've read so far about psychological contracts should be enough to understand the reason as to why this framework is such an effective tool to look at employment life cycles and – for employers – to potentially reframe the employee experience in an enriching and different way. Psychological contract breaches have namely been researched to have direct implications much broader than mere exiting, by being linked to various important work outcomes: organisational citizenship behavior, contraproductive work behavior and others!

The psychological contract framework is therefore a fantastic lens for looking at employment relationships and how these evolve. It could be very beneficial for both employee and employer to be able to interpret events using psychological contracts as a framework, perhaps even mediate “negative” psychological contract trajectories by openly discussing the undiscussed. Just the mere fact of being aware of all this, and taking this into daily considerations of people management in its broadest sense and with its most remote stakeholders, might help towards a more understanding employment relationship. For these psychological contracts could and should be better and more actively managed, by both employer and employee! But for this to happen, people must first know what psychological contracts are... Which you, my courageous reader, now do know!

Pheeew... As succinct as I could be! Not too shabby a job, I reckon... I do hope you will forgive the perhaps somewhat dryer tone of this episode. It is not easy cramming this much psychological science together in just a couple of pages that hopefully still make sense to anyone!

Nevertheless, I hope this somewhat heavier edition could bring you an interesting new perspective to use when looking at employment relationships. Insight into work psychological processes is a wonderful thing to have, dear reader!

See you on the next one (with a lighter subject and a fun experiment),

Your technocratic Don Quixote

* I am aware that nowadays there is more talk of a “dark tetrad of personality traits” rather than a “dark triad” - with the additional inclusion of the trait of 'sadism' due to recognizable core features that lie at the basis of the dark triad conceptualisation. It's actually quite exciting seeing psychological science progress, for back when I wrote my proposition paper, the 'dark tetrad' was a freshly posited hypothesis... Fascinating!