Do You Have a Psychological Contract in Your Organization?

 

In today's fast-changing work environment, organizations worldwide are recognizing the importance of building strong, positive relationships between employers and employees. One key factor in these relationships, though often overlooked, is the psychological contract.

A psychological contract is an unwritten set of expectations and beliefs between employees and employers. It isn’t something that’s written down or legally binding, but it plays a big role in shaping how people feel at work, impacting job satisfaction, performance, and overall commitment to the organization.

Impact of the Psychological Contract

The psychological contract is an invisible but powerful force that shapes how people work together. When both employers and employees meet each other's expectations, it builds trust, respect, loyalty, and a sense of satisfaction in the workplace. Employees who perceive that their psychological contract has been honored are more likely to be engaged, motivated, and loyal to the organization (Robinson & Rousseau, 1994).

On the other hand, when either side feels the contract has been broken—such as when an employee is promised career growth that never happens or when an employer feels an employee isn’t meeting expectations—it can lead to frustration, disengagement, and even turnover. This breach of expectations can cause feelings of betrayal, leading to a decline in productivity and morale (Morrison & Robinson, 1997).

Since the psychological contract goes beyond what’s written in formal agreements, it’s essential for both employers and employees to communicate openly, set realistic expectations, and ensure that promises are kept. This helps prevent misunderstandings and keeps everyone aligned

Psychological Contract in the Sri Lankan Context

In Sri Lanka, the psychological contract—unspoken expectations between employees and employers—is influenced by cultural, social, and economic factors.

Cultural Influence: Sri Lanka values family, community, and harmony, which carries over into the workplace. Employees expect respect, loyalty, and long-term relationships with their employers. They want more than just money; they also seek a sense of belonging and personal growth. Employers expect employees to respect authority and stay committed to the organization.

Economic and Organizational Context: Job security is important to Sri Lankan employees, especially because of economic challenges and high unemployment rates. Employees also expect fair pay, career growth, and a good work-life balance. Employers who offer these things are seen as fulfilling the psychological contract.

Impact of Globalization: As Sri Lanka becomes more connected to the global economy, workplaces are shifting towards performance-based expectations and flexibility. This can sometimes clash with traditional values of job security and hierarchy.

In short, the psychological contract in Sri Lanka is about balancing respect for cultural values with new expectations from globalization. Employers who understand this balance can create stronger, more productive relationships with their employees.

Conclusion

In today’s fast-changing work world, the psychological contract is a key part of how employers and employees connect, even though it’s often not talked about. This invisible agreement between both sides can greatly affect job satisfaction, engagement, and overall performance. When both employers and employees meet each other’s expectations, it creates trust, loyalty, and motivation. But when these expectations aren’t met, it can lead to frustration, disengagement, and even people leaving the company.

In Sri Lanka, cultural values like respect, loyalty, and job security shape the psychological contract in unique ways. As the world becomes more globalized, workplaces are shifting towards new expectations, like flexibility and performance. To succeed, organizations need to find a balance between these evolving demands and the traditional values that matter to employees. By understanding and nurturing this balance, employers can build stronger, more positive relationships with their employees, leading to a healthier, more productive workplace.

References:

• Morrison, E. W., & Robinson, S. P. (1997). When employees feel betrayed: A model of organizational betrayal. The Academy of Management Review, 22(1), 226-256.

• Robinson, S. P., & Rousseau, D. M. (1994). Violating the psychological contract: Not the exception but the norm. Journal of Organizational Behavior, 15(3), 245-259.