By Chip Joyce
Recently I’ve had a number of conversations about The Alliance (Reid Hoffman, Ben Casnocha, Chris Yeh, 2014) and the concept of psychological contract. Employer-employee relationships are damaged when these contracts are violated — and unfortunately, they are regularly breached. You might have had yours violated. If you are a manager, you may have unknowingly violated employee contracts.
If you’re running a company, you really need to stop and consider this — because when psychological contracts are violated, morale can be low and productivity can suffer. Good people might leave as a result. That’s an incredible shame.
You’re probably asking what is a psychological contract? That’s a fantastic question. So, here’s the short version:
Marla (our Senior Consultant) sent me an academic paper, published in 1994, titled “Violating the Psychological Contract: Not the Exception But the Norm.” It defines the psychological contract as follows: An individual’s belief regarding the terms and conditions of a reciprocal exchange agreement between that focal person and another party.
A psychological contract develops when one party believes that a promise of future return has been made (e.g. pay for performance), a contribution has been given (e.g. some form of exchange) and thus, an obligation has been created to provide future benefits. It is comprised of the belief that some form of a promise has been made and that the terms and conditions of the contract have been accepted by both parties. (Note that these are beliefs or perceptions regarding promises and acceptance.)
Each party believes that both parties have made promises and that both parties have accepted the same contract terms. However, this does not necessarily mean that both parties share a common understanding of all contract terms. Each party only believes that they share the same interpretation of the contract…. parties are thus likely to possess somewhat different and possibly unique beliefs about what each owes each other. These beliefs can arise from over promises (e.g. bonus systems discussed in the recruitment process), interpretation of patterns of past exchange, vicarious learning (e.g. witnessing other employee’s experiences) as well as through various factors that each party make take for granted (e.g. good faith or fairness).
Let’s put this in simpler terms for a non-academic like myself: a psychological contract is a promise you think you’ve mutually made with someone, whereupon you both made commitments to each other. The problem is that the other party might not see it the same way, but you’re oblivious to that consideration because you are confident it’s what was agreed upon.
It may well have been — but that’s beside the point: to you, it is fact that the promise was made.
The consequences of a breach can be severe: When employees encounter a contract violation, their satisfaction with both the job and the organization itself can decline… [as the violation] undermines the very factors (e.g. trust) that led to the emergence of a relationship.
And as you might imagine, a violation can lead to “the dissolution of the relationship itself”. Sadly, this does occur.
In other words, if your boss violates your psychological contract, you may feel let down, and may look for a new job. In this particular study, 57% of newly hired MBAs reported being unhappy within the first two years of tenure.
Here are some examples of psychological contract violations:
- Training and development (absence of training, or training experience was not as promised)
- Compensation (discrepancies between promised and realize pay, benefits, bonuses)
- Promotion (promotion or advancement schedule not as promised)
- Nature of job (employer perceived as having misrepresented the nature of the department or the job)
- Job security (promises regarding degree of job security one could expect were not met)
- Feedback (feedback and reviews inadequate compared to what was promised)
- Management of change (employees not asked for input or given notice of changes as they were promised)
- Responsibility (employees given less responsibility and/or challenge than promised)
- People (employer perceived as having misrepresented the type of people at the firm, in terms of things such as their expertise, work style or reputation)
Instead of relying on unstated psychological contracts, which are clearly troublesome — you should develop an explicit, agreed-upon, documented, mutual commitment. The Alliance describes the process for doing this between a manager and an employee: craft an agreement called a “Tour of duty”.
The tour of duty represents an ethical commitment by the employer and employee to a specific mission. Defining an attractive tour of duty lets [the manager] point to concrete ways that it will enhance the employee’s personal brand. If and when he works elsewhere— his or her career can be advanced by integrating a specific mission, picking up real skills, and building new relationships.
As a manager, recognize that it’s natural to form these psychological contracts. Moreover, it seems likely that they will be violated (even if inadvertently), and negative outcomes result.
The great news? You can prevent many of these outcomes, by mastering Tours of Duty.
Chip Joyce is the Co-Founder and CEO of Allied Talent. He brings the Alliance Framework to organizations worldwide.