Understanding Psychological Contracts

  • 10 Pages
  • Published On: 27-11-2023
Psychological Contracts

Coyle-Shapiro et al (2019) defined psychological contracts as a set of undocumented expectations between an employee and employer. They are distinct from the formal employment contracts in the senses that they are codified and implied rather than expressly/explicitly stated (Parzefall & Coyle‐Shapiro, 2011). Nonetheless, just like formal contracts, psychological contracts also define the employee-employer relationship. Some of the most significant elements of psychological contracts include the mutual beliefs, perceptions, informal arrangements and a good working ground for both parties (Rousseau, 2004). That said, one of their distinct nature is that they evolve and develop with the availability or lack of communication between both parties, and for example, they may even include implied promises for salary increment (Coyle-Shapiro et al., 2019).


Rousseau (2004) argued that psychological contracts thrive when employers manage employees’ expectations so that they do not give accidental perceptions or expectations that may not come to fruition. Conversely, employees also have the responsibility of managing their expectations so that managers do not read deviance in case any employee personal circumstances affect their productivity (Parzefall & Coyle‐Shapiro, 2011). That said, one of the significant importance of psychological contracts, over formal contracts, is that they focus on the individual, and therefore each employee within an organization has their own version. However, Coyle-Shapiro et al (2019) remarked that despite being individual-focused, psychological contracts can highly be affected by diversity. Therefore, employers must not ignore the impact of diversity on such contracts, considering that employees with diverse backgrounds have diverse expectations within the contexts of their careers, and life in general.

Just like the formal contracts, psychological contracts between an employer and employee can be breached. According to Rousseau (2004), a breach of psychological contracts occur when one party perceives the other as failing to fulfil their promises. For instance, an employee may perceive a breach of psychological contract when they do not get a promotion at the expected time, when they fail to receive an expected training, or when an expected salary increment is not fulfilled (Coyle-Shapiro et al, 2019).

A breach of psychological contract is detrimental to both the employee and the organization because it damages the relationship between employers and employees. Consequently, employees may experience reduced productivity, disengagement and sometimes workplace deviance (Rousseau, 2004). according to Coyle-Shapiro et al (2019), employees may also display negative emotions such as sadness, anger and distress. More, unfortunately, employees may develop disrespect and lack of trust for other members of the organization, especially those in managerial positions.

The Role Congruity Theory

Existing research in the field of human resource management reveals that in corporate, military, political and other sectors of management, leadership positions are dominated by men (Eagly & Karau, 2002; Elsesser & Lever, 2011). Despite increasingly gaining access to supervisory roles in the middle levels of management, women remain as quite a rare gender in the elite executives and top leadership positions (Hoobler et al, 2009). Thus, from time immemorial, researchers have used the role congruity theory to explain the underrepresentation of female gender in leadership. Ideally, according to Ibarra et al (2013), the role congruity theory posits that the perceived incongruity between the female gender and leadership roles contributes to two forms of prejudices namely, (i) the proception of women as being less favorable than men in the occupation of leadership positions, and (ii) the leadership roles being less favorably prescribed when a female occupies the leadership position.

Consequently, according to Rudman & Glick (2001), people hold lesser positive attitudes towards female leaders than they hold towards male leaders. Moreover, it becomes more difficult for female leaders to achieve success in their leadership positions. Evidence of these consequences is revealed in the existence of heightened perceptions of incongruity between the role of the female gender and the role of leaders (Eagly & Karau, 2002). Both social and organizational researchers and women in leadership positions have had a consensus that there is a cultural expectation that the prerequisite qualities of leaders are male (Ibarra et al, 2013). Furthermore, according to Elsesser & Lever (2011), gender stereotypic roles and social roles of men and women in most societies (i.e the social role theory) promote this unequal distribution of, progression to, and access to leadership positions.

The role congruity theory is fundamentally based on how the social role theory treats the content of gender roles and theory and how they promote gender behavior differentials (Rudman & Glick 2001). However, according to Elsesser & Lever (2011), the role congruity theory supersedes the social role theory to consider the congruity between other roles and gender roles (e.g. leadership roles), key processes and factors influencing congruity perceptions and how these perceptions influence prejudice. Thus, according to the role congruity theory, the potential for discrimination against women leaders inherent in female gender role majorly emanates from the differences in expectations people have about leaders (Eagly & Karau, 2002). Gender discrimination in leadership positions, therefore, occurs when women are judged as potential or actual occupants of leadership positions due to the inconsistencies between the communal qualities that people associate with women and the agentic qualities that one need to succeed as a leader (Elsesser & Lever, 2011).

Stress and employee performance

The impact of stress on employee job performance is founded on the premise that employees have a psychological structure that is directly reflected in their career lives and the jobs they hold. Therefore, according to Mark & Smith (2008), a stressful staff translates into a generally stressful environment (Glaser et al, 1999). All the negative impacts of stress negatively impact the business relations and business stress by directly affecting the performance of individual employees through negative relationships, positive relationships and the existence of no relationships at all.

Regarding negative relationships, Hunter et al (2007) assert that stress and employee performance are inversely related, whereby employee performance will decrease with an increase in stress levels. For example, employees who seek to reduce their stress can do so by engaging in unwanted behaviors. On the other hand, the positive relationship assumption holds that as stress levels increases within the organization, employee job performance levels increase (Liu et al, 2013). The competitive environment, challenges, and concerns that cause stress in the organization can motivate employees to develop a constructive attitude towards their jobs thereby improving their performance (Penney & Spector, 2005). In short, high levels of stress implies high competitiveness, leading to high performance. In the no relationship model, Podskoff et al (2007) argue that whereas both the organization and the employee are in a psychological agreement, a relationship does not exist between performance and stress. This model argues that the only thing that might affect employee performance is an assurance of or uncertainty with salary (Sidle, 2008).

However, Spector & O’Connell (1994) observed that employees perform bests at a positive optimum stress level. In positive stress levels, the employee’s ability to endure time pressure, make speedy decisions, contribution to performance and motivation increases. However, in a situation when an employee is unable to endure environmental and personal dangers, positive stress changes into negative stress, increasing their inability to adapt to the work environment and inability to transfer their energy into their work (Mark & Smith, 2008). Because the psychological structures of employees reflect in the work they do, their stressful mental condition will affect their health, productivity, satisfaction and consequently, their job performance. These assertions are supported by Sidle (2008), who found a significant relationship between employees’ performance levels and stress levels and that some stress levels can affect an employee’s productivity due to the psychological structures inherent in humans.

Perceptions of organizational justice

Businesses exchange monetary benefits with employee performance of the tasks they are assigned (Coyle-Shapiro & Dhensa-Kahlon, 2007). However, this relationship is mostly imperfect in the sense that, for example, merit pay might be ineffective or downsizing might have a long-term negative effect on the organization. Upon sensing the possibilities of these problems, organizations have turned to corollary sense of duty, also termed as organizational justice. According to Cropanzano et al (2007), organizational justice refers to a strategy or operation modalities of an organization that helps in gaining employee’s trust and commitment at the workplace. It involves the creation of organizational justice through an environment that is perceived by employees to be having a fair workplace interaction, procedures and outcomes (Coyle-Shapiro & Dhensa-Kahlon, 2007). Therefore, employees can experience a sense of distributive, procedural and interactional justice within the working environment.

The perception of distributive justice among employees occurs when they see outcomes being distributed in equitable proportions. According to Jafari & Bidarian (2012), distributive justice is perceived to be in existence when they see outcomes such as wages, workloads, workloads and promotions are fairly distributed among employees. According to Inoue et al (2009), this requires that managers must distribute the outcomes based on the priority of need, equity and fairness thus creating a sense of organizational justice among each employee.

Procedural justice refers to the procedure of allocating outcomes rather than the outcomes themselves. According to Gillet et al (2013), a sense of procedural justice is created among employees when they see a fair procedure used to distribute the outcomes at the workplace. These procedures should be consistent, unbiased, representative, correlational and ethical. Jafari & Bidarian (2012) found that when employees have a sense of distributive justice, they tend to develop positive, affective, behavioral, and cognitive reactions within the workplace, enhancing their psychological well-being and promoting their satisfaction. Similarly, according to Jafari & Bidarian (2012), procedural justice promotes employees’ commitment to their jobs and enhances the general performance of the organization, especially when they develop that notion right from when they join the organization.

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Lastly, interactional justice occurs when employees are treated with sensitivity and respect while explaining to them the rationale for major decisions (Inoue et al, 2009). Therefore, interactional justice refers to how the employees are treated during the decision-making process. But interactional justice has two main components namely informational justice and interpersonal justice. According to Jafari & Bidarian (2012), informational justice occurs when one provides accurate and truthful justifications when things go wrong while interpersonal justice occurs when employees are treated with respect and dignity, both of which makes employees feel involved and developed a relentless commitment to the organization.


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