Define Psychological Contract Theory

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Psychological contract theory refers to the notion that when people enter into work arrangements, they have certain expectations of what they will receive from their employers, and what they will be expected to contribute in return. These expectations are not always explicitly communicated, but they nonetheless play a crucial role in shaping the nature of the relationship between the worker and the organization.

To understand psychological contract theory, it`s important to start with the concept of a “psychological contract.” This term was first introduced in the 1960s by organizational psychologist Chris Argyris, who used it to describe the implicit agreements that exist between workers and their employers. These agreements go beyond the formal, written contract that outlines the terms of employment, and instead capture the informal expectations and obligations that arise through interactions between the worker and the organization.

For example, a worker may expect that they will receive certain benefits or perks in exchange for their loyalty and hard work, even if these benefits are not explicitly stated in their employment contract. Similarly, an organization may expect that its employees will demonstrate a certain level of commitment and enthusiasm, even if this is not explicitly required by their job description.

The psychological contract is important because it shapes how workers and employers view each other and their relationship. If workers feel that their organization is not living up to its implicit promises, they may become disengaged or even hostile. Conversely, if an organization feels that its workers are not meeting their implicit obligations, it may become less invested in their success and well-being.

Psychological contract theory has been applied in a wide variety of contexts, from traditional workplaces to the gig economy to the relationship between students and their universities. It has been used to understand issues such as employee turnover, burnout, and job satisfaction, and has also been used to inform HR policies and practices.

In conclusion, psychological contract theory is a key concept in organizational psychology that refers to the implicit agreements that exist between workers and their employers. By understanding and managing these expectations, organizations can create a more positive and productive work environment for everyone involved.