The earliest idea of psychological contract dates back to a study conducted by Argyris in 1960, in which the term “psychological work contract” was used to describe the implicit relationship existing between a foreman and the employees this was in charge of supervising. The concept was later developed by Levinson, Price, Munden, Mandl and Solley (1962), who referred to the term “psychological contract” to outline the set of mutual expectations the two parties involved in the employment relationship might be at best just vaguely aware of, but which exerts a controlling influence on their relationship. Ever since, several definitions of psychological contract have been formulated by many academics and sociologists; amongst these that of Schein (1965) who, drawing from Argyris and Levinson et al studies, stressed the circumstance that this type of contract unrelentingly produces effects throughout the employment relationship.
The reason why the psychological contract has invariably aroused academics keen interest lays in the fact that it is supposed to considerably influence and govern each individual employment relationship. Albeit unwritten, the effects this contract produces are pervasive and profound in that it essentially relies on the employee and employer mutual trust and respect.
The psychological contract is underpinned by a set of obligations and expectations, which are habitually established by employees and employers only once the legal, written contract of employment has been signed and the employee has actually started to work with the new employer. Employees traditionally commenced establishing and raising their expectations, which more strongly influence their behaviour vis-à-vis their obligations, after having gained some experience in the new workplace. As contended by Schein (1965), the psychological contract needs to be constantly renegotiated, but this does not typically happen in the first weeks or months of employment, but rather later on, once individuals become acquainted with the new organizational environment and become fully aware of the practices and culture driving the organization.
Up till a few years ago, individuals chose their employer on the basis of companies’ reputation and, whether possible, according to the information obtained by means of their relatives, friends, acquaintances and eventually media. The material collected thanks to media, nonetheless, more often than not, was mostly financial-related rather than concerned with the businesses working conditions, never mind with the culture and HRM practices fostered and implemented within the organization.
Since it was not difficult for individuals to imagine what their employer expectations and their obligations in the workplace would have most likely been, people essentially joined organizations having a rough idea of the employer side of the psychological contract, but were utterly unable to establish their own expectations before joining an organization.
Things are working considerably differently nowadays. The growing number of social media and professional networks available online enable employers to widely introduce their organizations to potential candidates and talented individuals so as to relatively easily woo and lure them. Social media and social networks like LinkedIn, Glassdoor, Twitter, Google Plus and facebook, just to name a few of them, enable employers to create company pages where these can post videos, photos, stories, interviews and whatever else can help them to effectively promote their employer brand. Glassdoor also enables employees to rate their companies and express their thoughts about literally every aspect and feature of their current or former employer. Potential candidates and applicants can then easily access these reviews, which are clearly very helpful for them to pinpoint which organization may suit them the most and can enable them to achieve their ambitions and aspirations, before eventually applying for a job.
These platforms offer newly graduates seeking their first job and experienced professionals looking for a new challenge much more than just some pieces of information about the companies these are interested in; it can be maintained that in many ways social media provide potential candidates a real taste of what working with a company, actively and effectively promoting its employer brand, might be. Particularly punchy prove to be the videos recorded and the photos shot in the workplace during company, CSR and work well events and initiatives, but even more powerful are the comments posted by former and current employees of an organization. Potential applicants want to listen to real stories told by employees rather than craftily devised statements read by top managers and HR professionals.
Social media definitely offer employers great opportunities in terms of promoting their employer brand; thanks to them organizations can in fact easily reach and attract talented individuals in what can be nowadays regarded as the global labour market. Company pages, and the different options employers choose to build and develop these (videos, pictures, posts, animations, employee interviews and so forth), enable employers to provide potential applicants (and sometimes investors): an overview of the way things are done within their business (that is to say of corporate culture), some details about what employers value the most, an outline of the career and international mobility prospects offered by employers and an overarching view of the businesses premises and offices layout.
The tremendous advantages offered by social media and professional networks to organizations which want to actively promote their employer brand are clearly unparalleled, insofar as a considerable number of companies are nowadays intensely competing in social media and professional networks to attract talented individuals’ attention and hopefully applications. Employer branding can be definitely regarded as a good practice but, whether not properly and most of all honestly and transparently managed, it may also cause employers some considerable drawbacks.
The huge quantity of information collected by means of social media and professional networks, whose power is indeed magnified by the videos and pictures employed by organizations in their company pages so as to more effectively convey the message, ultimately account for individuals creating expectations even before applying for a job. Differently from what it actually occurred in the past, nowadays candidates apply for a job having already established a clear, broad set of expectations. These have learned from company videos that after having entered the organization they will have: great career prospects; the chance to travel around the world, thanks to the company international mobility policy; access to competitive pay rates and significant flexible benefits and perquisites; and the chance to grow and develop so as to meet their ambitions and achieve their full potential.
Individual expectations are created on the basis of the wealth of information gathered online; notwithstanding, it is likely that these expectations will not be the object of specific discussion and agreement with the employer at a later stage, that is, during the talent acquisition phase. As suggested by Armstrong (2009), nonetheless, the main problem with the psychological contract is that, being unwritten, it is essentially based on assumptions and, worse still, on unarticulated assumptions; whether these are not discussed and agreed between employer and employee, the inevitable consequence is a later huge disappointment. When preparing the content of their company pages, employers should hence adopt a cautious approach so as to avert individuals misreading and overestimating their proposition. It is hardly believable, for instance, that an organization may offer to every employee, irrespective of his/her role, career prospects and international mobility opportunities as depicted in the captivating videos posted in its company pages; this clearly depends on a series of requirements that each individual will be expected to meet (role, tenure, seniority, grade, skills, etc.).
The effects produced by an individual perception that the psychological contract has been breached by his/her employer can be very harmful and long-lasting; by reason of their pervasiveness these effects will be evident in every individual action and behaviour. According to Sims (1994), the breach of the psychological contract entails that the parties involved in the employment relationship no longer share, or never indeed shared, an agreed set of values and objectives. More often than not, the breach of the psychological contract is due to the existence of the latter circumstance; this type of contract is in fact essentially based on tacit agreements so that reciprocal expectations, whether not appropriately discussed, are never clearly expressed.
Employees typically create expectations on the basis of what they observe in the workplace and consider fair. When an employee gets a promotion, the colleagues who consider their level of contribution equal or even superior to that of the employee who has been given the promotion establish expectations. Whether the videos posted in a company page should showcase success stories only, this might account for individuals creating excessive career expectations. Employers should take extra care when divulging information about their companies’ practices and value proposition; the risk to raise unrealistic expectations is very high and the consequences they may later suffer severe.
Social media can prove to be a double-edged sword, they can in fact make or break an organization employer brand. Inasmuch as these can effectually help employers luring and attracting the best talent in the labour market, regardless of its geographical boundaries, social media may also play against employers whether the information disseminated are not accurate and do not provide a clear view of the real circumstances. Yet disappointed individuals can indeed use social media to denigrate their former employer and post comments outlining how their initial expectations, created on the basis of the information divulged by the organization in its company pages, vanished into thin air after having joined the business.
When managing their company employer branding activities, HR departments should thus definitely avoid overselling and overstating; for instance, showcasing opportunities and prospects which cannot be offered to everyone as if these are the norm. It can be ultimately argued that by providing an excessively detailed and overarching view of the value proposition and career prospects offered by their organization, HR would essentially outline the best possible scenario; individuals who later join cannot thus expect any better. Focusing more on corporate culture, organizational climate and CSR initiatives, by contrast, would definitely enable employers to still take newcomers unawares and provide them the pleasant feeling that the employer they have joined is even capable to exceed their expectations. Also in this case employees would indeed establish and raise their expectations but if anything by reason of how things really are and safe in the knowledge that to grow and develop within the business they have to fulfil some specific criteria.
Employers should invariably take heed of the psychological contract in that, as suggested by Guest et al (1996), this deeply influences: individual commitment to the organization, employee satisfaction and ultimately employee relations. A positive psychological contract can be regarded as the precondition for individuals going the extra mile, engage in discretionary behaviour and put discretionary effort into their work.
The circumstance nowadays individuals, by virtue of social media, are put in a situation to establish expectations about their employment relationship before actually joining an employer, should prompt HR professionals to take extra care with the process individuals create expectations and the way these change over time.
So as to develop and maintain a positive psychological contract and completely avert later disappointment, HR professionals should discuss and clearly define candidates’ expectations during the acquisition and induction phases. Since individual expectations are due to change with the passing of time, this dialogue should be kept open and embedded in the performance management practices of every organization as a crucial part of it. Yet organization policies and procedures, especially those enabling managers to make decisions affecting their staff, should be extremely clear and transparent (Armstrong, 2009).
The psychological contract is underpinned by tacit assumptions and unwritten expectations so that it can be by nature extremely easily misread. The employer branding activity performed by organizations, thanks to the growing pervasiveness of social media, albeit properly managed, can contribute to make things worse; applicants may in fact misinterpret some of the information provided by employers. To avert individuals creating unrealistic expectations about their employment relationship communication is key (Guest and Conway, 2002). Since the very beginning, that is, during the acquisition and induction phases, employers need to establish an open, transparent two-way communication with individuals about their expectations and clearly state what they can actually promise and what it is expected from them in exchange so as to also be clear about the employer expectations. This communication channel should be left open throughout the employment relationship in that individual expectations are subject to change over time and with these the content of their psychological contract. This clearly is a daunting task for employers and HR, but definitely worth the efforts it entails whether the employer wants to effectually promote its employer brand, attain sustained competitive edge and successfully pursue its strategy by recruiting the appropriate talents and establishing with them a relationship underpinned by a clear reciprocal understanding and trust.