The Psychological Contract.

… has the power to make or break a relationship – in an instant…..

Every manager should understand the concept of the psychological contract. This unwritten contract has the ability to enhance, or destroy, everything you do. It’s all about people, and as a manager, everything you do should relate to people!

To understand the psychological contract, let’s first look at what we mean by ‘contract’.

A contract is simply an agreement made between two parties. Contracts are usually formal, requiring a signature, and state clearly what needs to be done or agreed to. For example, an employment contract lists the intentions and expectations of both employee and employer. It is a formal, signed document.

A psychological contract is also concerned with intentions and expectations between parties but is not formal. Rather, it is based on people’s perceptions that typically relate to the give and take (or informal negotiations) between two individuals — issues surrounding what is right and wrong, how people should work together, what is fair and what is not, loyalty and trust.

The psychological contract is far more powerful than the employment contract. The employment contract will not unlock potential and high performance, whereas the psychological contract will do exactly this because it is based on thoughts, feelings and emotions, and more often than not the desire to go over and above expectations often referred to as discretional effort. The agreement is, as Denise Rousseau puts it, its implicit, involving an individual’s beliefs of reciprocal exchange between two parties pertaining to trust, loyalty and the well-being of all involved’.

Importantly, the psychological contract relies on commitments by both parties as it is based on very significant human behaviours that can help build a relationship or break it in an instant.

Psychological contracts are typically focused on ensuring that the employee and the organisation share understandings so they can work together to achieve mutual goals. To accomplish this, a manager needs to understand their team’s perceptions of them in terms of their obligations to their team, their personal behaviour, how they deal with staff and others, and the quality of their work.

The key here is that managers must accept that reality in itself is not enough; it must be demonstrated to, and perceived by, your people.

For example, a manager may believe they are fair in their dealings with staff, and indeed they may be. Most managers, however, would not be conscious of being ‘seen’ to be fair; they would simply hope others would think this of them.

But a manager needs to understand that the perception of fairness in the workplace is a hot button for most people. For example, when an employee feels their manager is not fair, it will more often than not break the psychological contract. This, in turn, kills the employee’s desire to go over and above expectations, shutting down discretional effort, which is so often the very thing required for the achievement of sustained high performance.

When the psychological contract is broken, it usually comes down to managers:

  • not understanding that they need to manage both tasks and people
  • not understanding the impact they have on their team’s thoughts and feelings
  • promoted into their roles without the sincere desire to help others
  • promoted into their roles without the necessary people skills
  • lacking in self-awareness
  • lacking in empathy
  • not understanding what makes people tick
  • not understanding that they are tasked with the responsibility to coach and mentor
  • favouring some people over others
  • deemed not to be trustworthy, fair or consistent.

Often when the contract breaks it has nothing to do with tasks, competence, technology, policies, practices, procedures or products. Yet most of an organisation’s time is spent in these task-focused areas. The bottom line is that people may feel discomfort but they can live with things if the people factors are in place.

When the people factors are overlooked, their discomfort grows and resilience starts to diminish, triggering varying degrees of disengagement and disconnection. Left unchecked, this can escalate to acts of aggression, passive or active withdrawal, acts of sabotage such as petty theft, or the formation of team alliances — all of which can undermine the manager or organisation.

There are many psychological contracts in play in our lives. Outside of work, we have them with our parents, siblings and friends. In each instance there are implicit expectations and an element of give and take. Similarly, at work we have psychological contracts with clients, peers, other departments, suppliers and employees.

Understand that the strength of the psychological contract is determined by the quality of the relationship you have with people, and at times this will absolutely override what is written in any formal contract.

This is your first crucial step to understanding what makes your people tick.

Excerpt from The Best Selling Book – The Four Mindsets – How to Influence, Motivate and Lead High Performance Teams (Wiley) by Anna-Lucia Mackay.

Available at Amazon, all good bookshops and on Audio.