Psychological Contract

Voluntariness

Psychological contracts motivate people to fulfill their commitments because they are based on the exchange of promises in which the individual has freely participated. Commitments made voluntarily tend to be kept. A worker who agrees to work for a firm for a set time period is likely to be internally conflicted on receiving an outside offer shortly after being hired. That worker is more likely to decline the offer than a colleague who had made no such commitment to the employer.

Perceived Mutuality

An individual's psychological contract reflects the person's own understanding of the commitments made with another. Individuals act on that subjective understanding as if it were mutual, regardless of whether that is the case in reality.

Incompleteness

At the outset of employment, initial psychological contracts tend to be incomplete and need to be fleshed out over time. Neither worker nor employer can spell out all the details of an employment relationship that will last a period of time. Because of bounded rationality, neither party can recall all relevant details to [Page 646]be shared with another. Moreover, changing circumstances mean that not all contingencies can be foreseen. As a result, psychological contracts tend to become more elaborate and detailed over the course of the employment relationship.

Multiple Contract Makers

A variety of information sources shape how workers interpret their psychological contract with an employer. Employers are represented by several parties including the top management team; human resource representatives; and in particular, a worker's immediate superior, often the most influential agent in shaping employee psychological contracts. Informal sources such as coworkers can influence how individuals interpret the terms of their psychological contract as well as the extent to which the contract has been fulfilled. Human resource practices such as development programs and performance appraisal systems can signal promised benefits and required contributions. In particular, early experiences with an employer, from recruitment to early socialization and initial assignments to particular bosses and coworkers, can have pervasive effects over time on worker psychological contracts. When contract makers convey different messages, they erode the mutuality of the psychological contract.

Reliance Losses

When a party relies on the psychological contract as a guide to action, losses result if the other party fails to fulfill its anticipated commitments. Losses mean that benefits a party has relied on failed to materialize; and they are the basic reason why psychological contract violation and change generate adverse reactions, including anger, outrage, termination, and withdrawal of support. Efforts that both workers and employer take to manage their psychological contract with the other typically focus on fulfilling commitments as well as on managing losses when existing commitments are difficult to keep. Psychological contracts are a subset of a broader array of beliefs and expectations workers and employers may hold, where expectations that are not promise based are not relied on to the same extent as more general expectations regarding worker and employer behavior. Non-promise-based aspects of employment that workers find satisfying, such as the quality of their workspace or the camaraderie of colleagues, can eventually be viewed as part of the promised status quo—and generate negative reactions comparable to contract violations.

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