Psychological Contract: The intangible agreement between an employee and their employer

Every organization has a basic set of rules it abides by. This is to ensure that there is a form of conformity and consistency in its operations.
Business woman making plans with somebody, shaking hands.

Every organization has a basic set of rules it abides by. This is to ensure that there is a form of conformity and consistency in its operations. The grand scheme of an organization as the word denotes is to bring everyone to a set purpose based on a contract between an organization and its employees. However, just a formal document cannot contain and regulate all “corporate human’s” set of expectations, idiosyncrasies, efforts, informal associations, and all tendencies that form the crust of the tacit aspects of the organization.

What is a psychological contract?
Before each of us started working in formal settings, we had our own set of expectations and views about the organization that we wanted / wished to work for. The organization on the other hand, also had its views on what the best talent should have, to fulfill its set objectives. The thin line that falls between these two divides is where the issue of psychological contract comes to play – the huge iceberg below visible levels.
The term psychological contract refers to the unwritten sets of rules, implicit actions and agreements between an employee and their employer that defines informal commitments, expectations and understandings that affirms their relationship.
 Ideally, a great organization should run a perfect system, where the psychological contract of employees is cherished beyond the visible contract or equal, at least in measure: PC > VC or PC = VC. Usually, on both sides, each party feels that it has brought the best to the table, just like in most marriages, but unfortunately, it does not happen like that.
Edem studied BSc Administration Marketing option in one of the prestigious private Universities in Ghana. His dream is to become a Brand Strategist transforming the single stories of brands in Africa, but after University he landed a job in an engineering company owned by his Uncle. Often more than not, Edem is required to take up tasks that require a bit of technical expertise, a situation he has no qualms with. Usually, Edem brings to bare skills that he acquires on his own, to the benefit of the organization. The organization, on the other hand, provides all that is required to get the job done, but does not provide training that is applicable to his / her specific job roles. The commitment of Edem wanes over time due to their inability to accurately meet some changing job demands not clearly spelt out in any formal contract.
 In this case, it becomes important for organizations to constantly identify skills that are required and assist (if not fully sponsor) employees to acquire the needed technical skills.
Ama is a staff of a leading telecommunications company in Africa. At the beginning of the year, she states in her goals her objectives towards helping the company achieve its set objectives. She is given the support based on those objectives. However, as the year goes by and things take up a different turn, she is required to take up other major tasks which she is not appraised with, at the end of the year. Here, her efforts go beyond the documented scope of work (visible contract) and it’s not acknowledged by the organisation formally. In the long term Ama’s employers would lose her trust and become less engaged in the organization.There is a high possibility Ama would start job hunting.
It is important to have consistent conversations with your staff to ensure that any major milestone made during the year is captured in his or her achievements. This does not mean that plans when set should be distorted. This only means extra hard work should be recognised and rewarded, which often more than not leads to employee long term commitment.
Elements of the Psychological Contract
  1. Communication: Consistent communication is the anchor to maintaining a balanced employee / employer psychological contract. The absence of constant communication in the changing world of work can be a recipe for apathy. The use of good communication channels, voice, posture, and any other elements that bring understanding in an effective two-way conversation would help.
  1. Changing Nature of Work: Unexpected situations like the COVID-19 pandemic bring to bear a new way of working that could not be anticipated in any visible or formal contract. Under these circumstances, it is important that most organisations make extra provisions to support their employees through issues of depression, work-life balance arrangements, provision of protective wear like the nose masks, etc. Employees are also expected to keep the work environment safe through personal protection outside work hours.
  1. Informal Associations / Diversity: Codified contracts look at roles and functions and not individuals and their associations. Informal relationships between people at work can have a very huge impact on employee commitment. Focusing on individual employee efforts and team support allows employees to realise their value and contributions to the business.
Can Psychological Contracts be Breached?
Yes,when employees perceive a breach of a psychological contract it can alter their performance and commitment to an organization as well as lead the employees to consider leaving or to actually leave an organization. Psychological contract breaches are very frequent and intense in organizations that are downsizing or restructuring because the employees feel they have been deceived. This happened to a very popular organization in Ghana who outsourced departments to reduce cost, and employees were very disappointed with the decision. 
The key to maintaining a strong psychological contract is to clearly communicate and manage employee expectations in the short and long term. It is important that every employee in your organization understands what they can expect from their time with you. Organizations should also put in strategies that help to identify employees’ long term goals and how it connects with the organization.
Profile of Authors
Delasie  is a  Consultant, Ghostwriter and Corporate Coach.Email: [email protected] and Charles  is a Marketing Strategist and Corporate CoachEmail : [email protected]

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