Breaching Psychological Contracts

With unemployment hovering around 10 percent, I am having many conversations with people at all organizational levels who have recently been laid off, terminated, downsized, underemployed, or outplaced (pick a label).

A common theme I am hearing is that most of these folks are genuinely hurt by their situation. I’m not referring to the obvious stress and fear that comes with losing a job and one’s source of income, but to the emotional hurt similar to the mourning that one goes through with the loss of a loved one.

In my experience, most boards of directors and business leaders don’t fully comprehend the huge emotional impact that organizational downsizing has on both the outplaced employees and those who remain within the organization. They don’t realize that they are breaking an invisible psychological contract that grows between an employer and its employees.

Building Trust

During the recruitment process, the employer and the job candidate discuss the “hard elements” of the job, including responsibilities, salary, benefits, training, career pathways, et cetera. When an agreement is reached, a formal written employment contract is signed and the interviewee becomes an employee.

Then clarification of all the other “soft elements” starts. The unspoken expectations and the reality of rights and duties emerge and form an unwritten psychological contract between the employee and the employer.

Employees promise to work hard while employers promise to provide pay commensurate with performance. Employees promise to be punctual and to meet attendance requirements; employers promise training and development. Employees promise to work extra hours when required; employers promise opportunities for promotion and recognition. Employees promise to be loyal, flexible, and to learn new skills; employers promise reasonable job security, a career path, and an attractive benefits package. Employees promise to be honest, ethical, and courteous; employers promise to be ethical and provide a pleasant and safe working environment. Employees promise to bring forth new ideas; employers promise recognition for innovation.