The Psychological Contract 

{Solomon & Van Coller-Peters, 2019. How coaching aligns the psychological contract between the young millennial professional and the organization. SA Journal of Human Resource Management, 17(0), a1146.}

The psychological contract (PC)

The PC is defined as individual beliefs regarding the terms of an exchange agreement between individuals and their organization. Employees are motivated to reciprocate what they believe to be commitments fulfilled by their organization and promised inducements. Beliefs become contractual, where employees believe they are obliged to perform or behave in a particular way and that the employer has particular obligations towards them.

The work-related expectations of millennials are embodied in their PCs.

PC fulfillment and its suggested business benefits are more likely to materialize if the parties agree about their obligations towards each other. A salient characteristic of PCs is the individual’s perception that the understanding regarding reciprocal obligations is mutual. With PCs operating on the perception of agreement, the key challenge for PCs is creating and maintaining mutuality between the parties.

Coaching enhances the psychological contract between young millennial professionals (YMPs) and their organizations, particularly concerning career development. Alignment in expectations regarding career development results in improved performance, enhanced affective commitment, and lower turnover.

Millennials’ work-related preferences and expectations can result in misalignment in the psychological contract between organizations and young professionals, negatively affecting their engagement, performance, and tenure.

Psychological contract mutuality

Shared understanding aligns behavior, reduces insecurities, and encourages reliance on anticipated future exchanges.

The absence of mutuality in PCs results in assumptions that promises are unfulfilled, of PC breach and violation, influencing employee attitudes and performance outcomes. Employment relationships are easier to sustain with mutuality in place.

Mutuality is fostered where information relevant to the exchange context is shared openly and frequently between the parties, leading to collective frames of reference. Psychological contracts require sense-making in the working environment as they are premised on perceptions, expectations, and emotions. A further challenge is motivating employees to share their knowledge to produce mutuality, as individual and contextual factors influence motivation.

The formation, maintenance, and change of psychological contracts

Psychological contracts are a form of schemata. A schema is constructed from experience, subsequently influencing how information is processed and organized later. As later schemas, PCs are initially incomplete and require fleshing out over time. Psychological contracts often become more complex and implicit as the employment relationship develops. As PCs achieve completeness, these schemas become relatively stable and resistant to change. Experiences are subsequently viewed through the lens of the existing schema.

Content of psychological contracts

With a distinction between transactional and relational contracts, several dimensions of a workplace psychological contract include focus, time frame, stability, scope, and tangibility; other relevant content dimensions are job content, reward, and security.

Coaching outcomes contributing to aligning client PC with their organization

Enhanced awareness, improved confidence, increased ability and motivation to handle tough conversations.

Where YMP coaching clients achieve certain internal outcomes from a coaching process, they may be motivated to take up behaviors that contribute towards cultivating mutuality in the PC between themselves and their organization.

Adapting Leedham’s (2005) Coaching Benefits Pyramid model to formulate what the literature suggests how coaching can viably contribute to the alignment of the PC between the YMP and their organization, we may state:

The coaching scorecard is a holistic approach to evaluating the benefits of business coaching and suggests that realizing inner personal benefits from coaching, such as clarity and improved confidence, lays the foundation for achieving outer personal benefits, such as a change in behaviors, or enhanced knowledge, skills, and understanding, ultimately leading to business benefits.

The alignment in PC may be initiated via the realization of inner personal benefits for the client from the coaching through gains in enhanced awareness of who they are (strengths, personality, and values) and what they want from life and work. Clients can articulate their development needs and direction more clearly. They become more aware of their responsibility to raise their PC beliefs with the organization. They gain a more accurate view of their value to the organization, translating into more credible discussions regarding reciprocal obligations. The enhanced personal insight creates improved confidence.

The perceived outer benefits, building on improved confidence, are observed in skills such as their ability to have tough conversations and behaviors such as speaking up more credibly about their strengths and contributions and holding conversations that contribute towards clarifying the organization’s expectations of them, and what they expected in return. Another behavior would be the client’s action concerning her development and career management.

Perceived fulfillment of their PC in career development would encourage the YMPs to adopt a higher engagement with what they saw as their obligations to the organization in terms of their current and future roles, thus positively influencing their performance. In addition, affective commitment is enhanced, resulting in a strong emotional attachment to the organization and their work, identification with the organization’s goals and values, and meeting their need for meaningful work and a sense of purpose. Higher affective commitment is positively associated with actual performance and lower turnover.

Practical implications

Coaching promotes more robust and credible discussions between managers and YMPs regarding their reciprocal obligations in the employer-employee relationship.

YMPs who have been coached realize the benefits of coaching, such as enhanced self-awareness, improved confidence, and ability (and motivation) to have tough and productive conversations with their managers and other agents of the organization earlier on in their careers, boosting their leadership development as well as their organizational effectiveness.

Coaching is a viable strategy for organizations to cultivate PC alignment with their YMPs, either implicitly or explicitly, particularly in the psychological contract dimension of career development.

Positioning coaching as an investment in the client is the first step towards PC fulfillment in the content dimension of career development, reward (which includes recognition), and tenure.

Enhanced awareness

Enhanced awareness is experienced in three distinct areas: deeper self-awareness, a growing awareness of self-responsibility, and a more realistic sense of the value they bring to the organization.

Deeper Self-awareness is gained in these aspects: their personality, their thinking, and assumptions; exploration of their values, recognition of their strengths and areas of development; appreciation of their behaviors and how these behaviors influence their interactions in the organization; and understanding of what they want from life and work based on knowing who they are (clearer sense of identity and self-appreciation).

Coaching is focused on active and self-directed learning, and clients recognize through coaching that it is their responsibility to pursue their goals regarding their development and career progression, deliberately and intentionally, with personal accountability.

First, acknowledging self-responsibility through coaching helps YMPs grasp that they must take the first step to raise awareness of their PC beliefs with their organization, especially where they perceive differences in understanding the obligations.

Coaching raises awareness about individuals’ contributions to their work and value in the organization. Perspective-taking is a further benefit of self-awareness. A more accurate view of the value they bring moderates YMPs’ beliefs concerning the reciprocal obligations between themselves and the organization, enabling more credible PC discussions between the employee and employer.

Improved confidence: Finding a voice

Enhanced self-awareness flows into growing confidence in the areas of speaking up and taking action regarding their development; asking for help and challenging situations that feel ambiguous and compromising; raising awareness of themselves, their abilities, and their beliefs regarding elements of their PCs with their organization; finding a voice and having honest conversations with the organization regarding their expectations.

These all enhance the potential for PC alignment and fulfillment.

Individuals’ efficacy and motivation to handle tough conversations

Increased motivation follows enhanced capability. Coaching improves skills to address tough and productive conversations with more effective and open communications in dialogue. The business benefit is that productive conversations are held more regularly and frequently, enhancing the potential for PC alignment and fulfillment.

Psychological contract content dimensions where alignment was enhanced through coaching

Alignment of values, fit within the organization, and career development are the areas enhancing the mutuality in the PC.

Taking responsibility for their career development and speaking up about their development needs, they expect help and support from the organization to achieve their objectives. Receiving career management support encourages them to step up to what they believe to be their obligations to the organization in terms of their current and future roles. Perceived employer fulfillment of their obligations creates an obligation on employees to reciprocate, taking the form of a cognitive upward adjustment in employees’ obligations to their employer.

PC fulfillment links to affective commitment, the millennials’ need for meaningful work, and a sense of purpose with actual performance and lower turnover implications.

Receiving coaching is perceived as a key aspect of the organization fulfilling their PC beliefs regarding career development. Feeling the company appreciates and cares for them, invests in them, and acknowledges their potential plants a seed for future personal development. Coaching contributes to the fulfillment of the YMPs’ PCs by meeting their needs for growth and development in a supportive, nurturing work environment, as well as their need for recognition and appreciation.

A more fulfilled PC leads to suggested outcomes such as improved performance, job satisfaction, and organizational commitment.