Every manager wants a powerful team, with excellent communication and delivering excellent results. However, these don’t happen by accident. There are conditions that destroy motivation and productivity and there are those that encourage them.  In this article, you will learn about the Psychological Contract (PC) and how you can build people’s motivation and make them deliver more without giving them more pressure.

Everybody understands a work contract – a document in which your duties and responsibilities are listed, terms and conditions of the agreement and of the breach, monthly/hourly pay, etc.  A psychological contract is an unwritten agreement between the employer and the employed, containing all the mutual expectations – informal arrangements, beliefs, and common sense between two parties. To demonstrate its importance I will tell you a real-life story.

It was the 26th of December and Anna came to the office 20 minutes late because her bus hadn’t arrived and she had to walk to reach the office. Her boss came to her saying: “Why are you so late today?”. She told him the truth but he answered that he did not care about her transport issues and that at least she could have messaged him. She said she was sorry and that next time she will do. It was her first day on a permanent contract, the office was almost empty because of Christmas vacation and her manager openly said that he “didn’t care”. Her mood dropped. In her expectations, exact office hours did not matter as long she did her job. She was ready to do skip lunch, do extra hours if needed, and be available any time. She expected that she could manage her attendance on her own and would do her work without being controlled, but her boss broke this expectation by showing no compassion and no trust. Besides, her late arrival wasn’t her own fault so she also felt it was unfair. That day she could not find any motivation to work. In the following months, she got a few more warnings about her “discipline”; she also asked to modify her strict lunch hours but was refused.

Obviously, her boss’s expectations were broken too, because he wanted his employees to respect the 9 to 5 schedule at all costs. More than that, he expected everybody to stay after 5 because this is how he thought people work seriously and demonstrate commitment.

Days and months passed, but Anna no longer wanted to invest herself in her job, feeling to be constantly controlled and distrusted by her boss. She was doing her duties, respected the schedule, looked forward to weekends, and eventually found another job.

This is a perfect example of the psychological contract broken with a dramatic outcome: mutual dissatisfaction, loss of commitment, and trust leading to low engagement and performance and the final quit. Anna made a mistake to behave as she would naturally would, without noticing her employer’s obsession with discipline. He made a mistake saying he “didn’t care” and creating the environment in which he pays people to come and do their work, and not the relationship of being on a mission together and making a great team with a relationship of trust.  

The PC is a powerful instrument of building relationships and driving performance at work. This is how you can manage it to avoid broken expectations and build an environment in which people would give their best:


Whether you know it or not, you already have a PC in your workplace. Think what your general assumptions are, how you see the relationship between you and your employee, and whether you feel it to be respected or sometimes you feel it being breached. If you don’t feel right about your PC, you can change or improve it through communication (point 3).


Discuss the unwritten expectations from the start. When hiring people, tell them what you expect in terms of their attitude, lifestyle, behavior and values. Let them explain theirs. Talking not only about official duties and responsibilities but also about your organizational culture will make you both understand whether you are a good fit and avoid future misunderstandings.


PC is not a static but a dynamic agreement and it is constantly evolving throughout the communication. Maybe you had unrealistic expectations or maybe your employee got something wrong. Do not hesitate and clear it in a one-to-one conversation, seeking to understand and then be understood. Communication is critical to maintain a positive PC, build loyalty, and strengthen employee-manager relationship.


The psychological contract is the relationship between the employer and the employee based on mutual expectations and unwritten assumptions. As any other contract, it implies the responsibility of two parties. Both should be reviewing it and preventing it from being breached through regular two-way communication. In the digital age, with an increasing need for meaning and purpose at work, with distributed teams, open spaces and remote working its importance grows even more.



  1. https://www.iris.xyz/ideas/innovation/why-the-psychological-contract-in-business-is-key
  2. https://www.hrexchangenetwork.com/hr-learning-development/articles/the-psychological-contract-relevance-for-our-every