Psychological Contracts

by Bob MacKenzie

Seven health warnings

In working with psychological contracts, it helps to bear in mind the following seven health warnings:

1 – Maintaining healthy psychological contracts requires persistence and an alert attitude.

Attempts to develop, maintain or restore robust psychological contracts have not always been successful, and nobody pretends that it’s easy. But the evidence is clear that efforts to do so carry a significant positive ROI, so it’s essential to keep on trying.

2 – Maintaining healthy psychological contracts takes time, effort and resources

Restoring or maintaining the health of psychological contracts is likely to take time and effort. Quite possibly, it will involve you in the development of new behaviours and skills (see the list of relevant topics in the section Want to know more?), but it’s vital that you’re prepared to invest in this process.

3 – Some aspects of the psychological contract will almost always remain invisible and some are always likely to change.

There may also come a point when attempting to make the invisible terms of a psychological contract visible (formalising the informal) becomes counter-productive. As always, it’s a question of balance and exercising your discretion.

4 – Wherever possible, any variations in the psychological contract should be negotiated carefully.

Varying the psychological contract is a delicate task that must be handled carefully. Negotiation is essential, and only in extreme cases should variations be imposed unilaterally (though sometimes this is unavoidable).

5 – The gap between formal employment contracts and informal psychological contracts should be as small as possible.

The boundaries between the formal employment contract and informal psychological contract are not clear-cut. Sometimes, they overlap, sometimes they come together, and sometimes there is a wide gap between them, or they might even be in conflict. Where gaps exist, this has a detrimental effect on performance and business goals. Often (bearing in mind Health warning 3), the written terms of an employment contract will need to be revised in order to formalise an arrangement that has become common practice within the terms of the psychological contract.

6 – Carry out regular but unobtrusive health checks on psychological contracts.


If there is a gap, or something not covered formally, in an employment handbook or written contract of employment, then the psychological contract will expand to embrace it.

There will always be gaps between formal and informal contracts of employment. Such gaps are inevitable. This is partly because fresh and often unanticipated circumstances are developing at work all the time. Formal employment contracts quickly become out-of-date. They cannot possibly cover every eventuality in the complex, ever-changing world of work. Situations that are new are fertile breeding grounds for expansions, assumptions and misunderstandings about the psychological contract. So check the psychological temperature regularly.

7 – You can’t always satisfy people’s expectations from their jobs.

Especially in periods of economic downturn, people are concerned about how they are going to keep their jobs, or find new ones. Try as you will, you may not be able to help everyone to do this, and you mustn’t beat yourself up if you can’t – so long as you’ve done your best within the constraints in which you find yourself.