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The Psychological Contract


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Psychological contracts are an individual’s belief in the reciprocal obligation between employees and the organization – essentially what the employee believes the organization owes them and what they owe the organization in return. These beliefs about mutual obligations help employees informally deal with ambiguous work situations not covered by the formal written contract. In this talk we will give a practical definition of Psychological Contract and analyze its connection with Leadership. We will also try and give practical hints on how to make the Contract clear and explicit, and avoid typical pitfalls that lead to unwanted consequences on both sides.

Published in: Leadership & Management
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The Psychological Contract

  1. 1. The Psychological Contract Be a transparent leader.
  2. 2. Who am I Nicolò Pignatelli Director of Engineering tw: @nicolopigna Get involved! Feel free to have your say or ask a question anytime
  3. 3. What is a Psychological Contract?
  4. 4. A definition Psychological contracts are an individual’s belief in the reciprocal obligation between employees and the organization. A balance between how the employee is treated by the employer and what the employee puts into the job.
  5. 5. Example #1: annual salary raise
  6. 6. Example #2: overtime work
  7. 7. Three key concepts 1. Mutual transparency 2. Expectation alignment 3. Mutual fairness The goal of a Psychological Contract is to deal with ambiguous work situations not covered by the formal written contract.
  8. 8. Leadership & Psychological Contract
  9. 9. As a Leader, it’s your responsibility to...
  10. 10. the hard job You are the role proponent. As such you hold information about contractual offer and company needs. Feel responsible when it comes to start talking about and defining the Contract. No one else will do it for you.
  11. 11. transparent Transparency helps to kick-start a virtuous circle within the Psychological Contract. The employee will trust and be open towards the employer. Making the employee aware of facts will enable her to objectively judge the Psychological Contract.
  12. 12. ...align expectations The employee has the right to know what the company is expecting from her. Setting expectations right on both sides enables quality communication and ultimately boosts productivity. It also avoids misunderstandings about roles and responsibilities.
  13. 13. fair The employee must feel safe in accepting the Psychological Contract. It’s tempting to distort facts in the hope that people will absorb the problem when it looms larger than promised. Acknowledge that people have right to know and complain. Simply be objective and honest.
  14. 14. Your goal is to remove from the employee any doubt that he’s not doing the right thing.
  15. 15. Different seniority (self awareness) requires different Contract negotiation.
  16. 16. It’s there, whether you want it or not
  17. 17. Make the implicit explicit Avoid talking about it doesn’t mean you don’t have a Contract. It actually means you have two of them. You end up with two similar but different Contracts where you hold one version, the employee holds another. One part doesn’t know how the other’s Contract “looks like”.
  18. 18. With an implicit Contract you avoid some friction earlier only to face greater troubles later
  19. 19. Who’s affected by an implicit Contract? Both parts are. In the long run, the misalignment will cause the employee to be unhappy and the employer to experience degraded work output at a constant cost.
  20. 20. Ok, understood. Now what can I practically do?
  21. 21. #1. Already start defining the Contract during the interview and onboarding processes
  22. 22. #2. Avoid defining roles and expectations by contractual job title
  23. 23. #3. Do not assume seniority is related to years of experience
  24. 24. #4. Keep reviewing the Contract, especially when roles change
  25. 25. #5. Do not assume people know what’s in your head
  26. 26. #6. If you are in doubt whether something is trivial to say explicitly, say it anyway.
  27. 27. #7. Do not leave any violation of the Psychological Contract unchecked
  28. 28. #8. Use personal maps to explore expectations
  29. 29. Thank you. References - the psychological contract sigma assessment systems - psychological contracts in practice jurgen appelo - management 3.0