In This Article Psychological Contracts

  • Introduction
  • Research Reviews
  • History of the Psychological Contract Perspective
  • Contract Creation
  • Contract Fulfillment Evaluations (and Referent Others)
  • Outcomes of Contract Fulfillment and Overfulfillment
  • Measuring the Psychological Contract
  • Cross-Cultural Studies of the Psychological Contract

Management Psychological Contracts
by
John Bingham, Hilary M. Hendricks, Glen R. Sanders
  • LAST MODIFIED: 29 June 2015
  • DOI: 10.1093/obo/9780199846740-0046

Introduction

Psychological contracts are the perceptions about obligations, often unwritten and even unspoken, between employees and employers. Based on principles of social exchange and self-regulation, these contracts—as seen through the eyes of the employee—motivate employees’ actions, shape the employment relationship, and have important implications for employees’ behaviors and affective experiences at work. Broadly, psychological contracts comprise an employee’s perception of the contributions he or she provides and the corresponding inducements the employer provides. Researchers of psychological contracts seek to understand the employee’s evaluation of (a) the balance between his or her contributions and the employer’s inducements and (b) whether delivered levels of contributions and inducements match what the employee views as obligatory.

Psychological contracts are said to be fulfilled, according to the employee, when the company meets its obligations; that is, the inducements that are delivered match what the employee believes the company is obligated to provide. Generally, studies of psychological contracts use the term breach to refer to underfulfillment of obligations, or situations when the employee sees a deficiency between what was promised (or otherwise anticipated) and what was delivered. The term overfulfillment, by contrast, refers to situations in which delivered inducements seem to exceed obligations, again from the perspective of the employee. (However, we note that in some recent scholarship and measurement approaches, contracts are said to be breached in two ways: when inducements are deficient of, or when they are in excess of, promised levels.) Several studies describe how contract breach, perceived cognitively, may result in the emotional experience of violation, in which employees feel betrayed, angry, and undervalued. If inducements do not seem to meet obligations, or if inducements do not seem to match employee contributions, employees may adjust their own efforts—as well as their perceptions of either party’s obligations—in an attempt to restore balance to the exchange relationship. The consequences of contract breach have been a major focus of psychological contract research. Compared to the intense reactions that sometimes accompany underfulfillment, contract overfulfillment seems to entail a milder psychological sensemaking process.

Another area of psychological contract research involves employee contributions—the inputs employees believe they owe the company, compared to the inputs they actually deliver. Some scholars believe that employees simultaneously compare their promised and delivered contributions to the company’s promised and delivered inducements while also considering the promised and delivered contributions and inducements they observe in other employees’ work arrangements. Finding ways to access and measure these somewhat subconscious comparisons is a persistent challenge in psychological contract studies. One focus of research is the content of the contracts—the kinds of inducements and contributions that employees believe are owed. Although several typologies of contract content have been proposed, scholars tend to group these obligations, or currencies, into three broad categories: transactional (involving short-term economic exchange); relational (involving longer term social and emotional exchange); and ideological (in which employees view their inputs as contributions to a cause they value, and the organization’s participation in that cause is an important component of the exchange).

In this article, we address the history of psychological contract research, along with what scholars have learned about contract contents and the processes of contract formation and change. We summarize findings related to the outcomes of breach and fulfillment, and we introduce the predominant measurement strategies for accessing contract perceptions among employees. After introducing important cross-cultural findings and their implications, we highlight opportunities for future research to clarify and enhance the psychological contract perspective.

Understanding the content of psychological contracts, as well as their motivational effects, can help managers achieve desired employee outcomes, such as commitment, productivity, and organizational citizenship behavior (OCB). Although no research to date has studied the relationship of psychological contract fulfillment to firm profitability, the links between strong human resource management practices and firm performance are clear. As organizations increasingly experience unsettled employee attachments and a waning emphasis on traditional inducements, the psychological contract perspective offers insights for sustained employee alignment and performance.

Academic Journals

Research on psychological contracts appears mostly in academic journals. Some of the major contributions have been published in general management journals. Beyond these publications, the majority of the work is carried by journals specializing in applied social psychology and organizational behavior. A handful of articles, sometimes written with a practitioner focus, have appeared in specialty topic or trade-oriented publications.

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