Author's name: Anna Lucia Mackay

Every manager needs to understand the concept of the psychological contract. This unwritten contract has the power to enhance or destroy everything you do. It's all about your employees, and for you as a manager, everything you do should be about your employees! To understand the concept of the psychological contract, let's look at what the word "contract" means. A contract is simply an agreement between two parties. Contracts are usually formal, requiring, and clearly state what needs to be done or agreed upon. For example, an employment contract outlines the goals and expectations of both the employee and the employer because it is a formal, signed document. The psychological contract concerns the goals and expectations between the parties, but it is not specific. It is based on employee perceptions, which are typically related to give-and-take (or informal negotiations) between two parties. These include issues such as what is right and wrong, how employees should work together, fair and unfair procedures, and the concepts of loyalty and trust. The psychological contract is stronger than the employment contract. The employment contract does not unlock potential and high performance, while the psychological contract does. It is based on thoughts, feelings, and emotions, and often a desire to exceed expectations, referred to as discretionary effort. The concept of contract, as coined by Denise Rousseau, is “an implicit concept involving employee beliefs about mutuality in terms of trust, loyalty, and the well-being of all involved.” It is also important to note that the psychological contract is based on the commitment of both parties; it relies on critical human behaviors that can help build or break a relationship in an instant. Psychological contracts typically focus on ensuring mutual understanding between the employee and the organization so that they can work toward shared goals. To achieve this, managers need to understand their teams’ perceptions and ideas of them in terms of their commitment to them, their personal behaviors, how they treat employees and others, and the quality of their work. The key here is for managers to accept that truth in itself is not enough; they must make this clear to their employees and ensure they understand it. For example, some managers may believe that they treat their employees fairly and justly, and this may certainly be the case. However, most managers are not aware of the need for their employees to perceive them as fair, and their ultimate hope is that others perceive them as such. A manager must be aware that the perception of fairness among most employees in the workplace is extremely important. For example, when employees feel that their manager is unfair in their treatment of them, this often leads to a breach of the psychological contract, which in turn kills the employee's desire to do their best at work and exceed expectations. This disrupts the role of discretionary effort, which is most needed to achieve sustainable high performance.