What Are The Terms of Your “Contract?”

Is your psychological contract intact?

Every leader is working under a contract…a psychological contract with followers. This psychological contract spells out the terms of the relationship, the reciprocal agreement that defines your expectations on the one side and the employee’s expectations on the other. These mutual expectations are the conditions under which you as leader can expect loyalty and commitment from followers while at the same time define the accountabilities you promise in return for that loyalty and commitment.

Unlike an employment contract, the psychological contract remains in large part unstated. It’s not written down or kept in a file with Human Resources. It’s an understanding that is assumed and in that assumption lies the difficulty.

In the mid 1970’s, John Kotter proposed this concept as an explanation of the relationship between employees and organizations. In his work published by the California Management Review, he proposed that people join a company because of the perceived match of what the company offered as compared to their needs. For example, the company gives a fair salary, the employee gives a fair work day. The company gives personal development, the employee gives loyalty to the company. My focus instead is on the personal psychological contract because, in the end, it is an employees commitment to you as a leader that will often determine whether they stay or go.

Your people follow you in part because you fulfill various needs. Since these are psychological rather than concrete, these needs are sometimes not as clear as salary and work schedule. For example, while salary may indeed be an important part of the relationship, the respect for their talents and individuality may be part of the psychological contract. Because you value me, I will give you my effort. I will provide consistent productivity and you provide predictable security. I will give you discretionary effort—above and beyond my job duties— in return for you giving me the opportunity to grow my skills and talents.

When this contract is broken, regardless of the reason, the relationship becomes transactional very quickly.  As your follower, I will look at my options similar to any redress in the event of a broken contract. We can attempt to renegotiate the contract by spelling out the reality of the situation and finding ways to meet my needs creatively. I can sever the relationship because in my view you have failed to live up to your expectations. Or I can decide to “quit and stay” where, because of my view that you have stopped delivering, I choose to stop delivering as well. This is the situation that one manager described by saying, “We have too many people around here who are no longer with us.” This third condition can lead to enormous problems, not just for the leader but for the organization as a whole.

So, what are the terms of your psychological contracts with your employees? Do you have any real notion as to what their expectations might be from a personal and psychological view? Is it possible that the behavior you have started getting from your followers is due to breach of contract on your part?

The only way to fully understand an individual’s psychological contract is to make it explicit. Talk to your followers about their expectations, goals and aspirations. Ask them what is important to them and listen to the message when they tell you they are dissatisfied. Take the time to identify this unwritten contract and you’ll find some of the keys to a more productive and satisfied workforce.


Please note: I reserve the right to delete comments that are offensive or off-topic.

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