03: psychological contracts (how unspoken expectations define our work lives)
My first academic publication, exploring the psychology behind workplace commitments. How understanding these hidden expectations can transform the way we think about our relationship with work.
Understanding the nature of values is helpful not only for personal decisions but also for navigating professional settings. In value-driven fields, where shared ideals often form the foundation of collaboration (e.g. nonprofits, some government work, most startups), conflicts inevitably arise—both within individuals and between individuals and their organizations. These tensions can have profound effects on both personal motivation and systemic dynamics.
This is where Psychological Contract (PC) research offers a compelling framework for making sense of these internal conflicts in professional environments. PC examines the implicit agreements we form about what we will give and receive in a work relationship. When these unspoken “contracts” are breached—whether due to shifting goals, competing commitments, or misaligned values—it can lead to frustration, disengagement, and cognitive dissonance.
For example, an employee who values transparency might find themselves in an organization where open communication is not prioritized. Initially, they might rationalize the mismatch, but over time, the tension can become unbearable, impacting their effectiveness and sense of belonging. This misalignment mirrors the internal conflicts many of us face when our values come into tension with the demands of a situation.
I learned about Psychological Contracts while doing research at the Henderson Institute
I first discovered PC while researching collaboration in the workplace during my time at BCG, while I was a research assistant (“ambassador”) at the BCG Henderson Institute (BHI). What struck me most was its recognition of BOTH the subjectivity and the impact of these implicit agreements. It acknowledges that the promises made between employers and employees are often unspoken and may not align with formal agreements—but their impact is real. These “contracts” are rarely written or formalized, but when breached, their effects are deeply felt. This framework resonated with my own experience in a research group that I discussed in “Internal Ruptures” a few weeks ago, where my expectations for the collaboration—though never explicitly stated—shaped how I interpreted and responded to the group’s goals.
Absolutely intrigued, I reached out to one of the researchers studying this Sam Hansen, who invited me to virtually attend The Biennial Psychological Contract Small Group Meeting, held in Bordeaux, France, where we explored how values and expectations play out in workplace contexts.
The paper we published after the meeting, In Pursuit of Impact: How Psychological Contract Research Can Make the Work-World a Better Place (2023), explores these dynamics further and examines how organizations can create “sustainable workplaces” by being more aware of employees’ implicit contracts and how they evolve over time.
What is a Psychological Contract?
A psychological contract refers to the unspoken, informal agreements and expectations between employees and their organizations. Unlike formal contracts that outline explicit duties and benefits, psychological contracts are shaped by mutual perceptions of what each party owes the other—such as trust, loyalty, respect, or opportunities for growth. These implicit understandings can significantly influence how employees experience their roles and relationships at work.
In professional settings, value misalignment is often unavoidable. Employees bring their personal value systems to work, while organizations operate under their own frameworks. These differing perspectives can lead to breaches of psychological contracts, creating tension and, at times, existential crises for employees.
Consider the options employees face when this happens: they can renegotiate their commitments internally, attempt to repair the breach through dialogue, or ultimately decide to leave. Each path requires navigating the delicate balance between upholding personal values and adapting to organizational constraints.
Leaders, too, face challenges when these conflicts arise. They must decide how to address breaches in ways that preserve organizational integrity while respecting the diverse values of their workforce. Missteps in this balancing act risk alienating employees and damaging trust. Transparent communication and a willingness to engage with these tensions are essential for building credibility and fostering alignment.
I’ve included below a sketch of what might be at the psychological contract negotiation table including values and value-adjacent things like “sacrifice/tolerance”, “risk/investment” (as employee inputs) and “life-balance/well-being”, “status/respect” (as employer “rewards”).
Value misalignments at scale
I'd like to add an additional layer of complexity here. What happens when you're making choices that impact people who hold different values from your own?
This scenario plays out in almost every organizational context, where the company has its own set of values, principles, or virtues; however, employees—each bringing their unique moral frameworks and personal values—may not always align with them.
Consider what happens during a breach of a psychological contract (PC). When employees feel their personal principles have been compromised by the organization, the result is often internal conflict and, in some cases, an existential crisis regarding their role and identity within the organization. There are limited paths forward: the employee can internally renegotiate their commitments, try to repair the breach through dialogue with leadership, or ultimately, choose to exit the organization. The resolution of this misalignment isn’t as simple as making one “right” decision—it’s about navigating the fine line between upholding one’s integrity and adapting to organizational constraints.
The role organizational leaders play in resolving contract breaches
Leaders, on the other hand, face a different kind of moral quandary. They must decide how to address these breaches in a way that maintains organizational integrity while also acknowledging the diverse value systems of their employees. This requires delicate decision making: taking a stance without coming across as hypocritical or out of touch. Leaders who fail to smoothly and consistently navigate this delicate interplay risk alienating their workforce and damaging the organization’s credibility.
The complexity of this situation highlights the multi-layered nature of value conflicts in professional settings. It's not just a matter of personal ethics or moral deliberation. It’s an intricate dance of individual ethics, organizational principles, and the implicit psychological contracts that bind them together. This intersection of personal and professional values creates a fertile ground for epistemic ruptures, challenging our understanding of loyalty, integrity, and the limits of moral flexibility in the workplace.
Moreover, this scenario underscores the importance of transparent communication and ethical leadership in organizations. When leaders are faced with decisions that may breach the psychological contracts of their employees, they must navigate maintaining organizational integrity while also respecting the diverse value systems of their workforce.
In conclusion…
Ultimately, these situations of misaligned values and potential PC breaches serve as crucibles for both individual and organizational growth. They force us to confront the malleability of our moral frameworks and the extent to which we're willing to adapt our principles in service of larger goals or communities. While the process may be uncomfortable, even painful, it's through these experiences that we develop more robust, nuanced ethical compasses capable of navigating the complex moral landscape of modern professional life. For organizations, it’s when their true colors show. Can they walk the talk? and when they realize they can’t, do they change their walk, do they change their talk? or do they find new ways to hide their walk-talk abyss?