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How Managers May Reinforce or Break the Psychological Contract

How Managers May Reinforce or Break the Psychological Contract in their Interactions with

I am studying Management Fundamentals as part of the MBA programme at Melbourne.
This assignment is a group assignment. I am tasked with the following specific named above as the topic
within the broader group task relating to the psychological contract. It is essential that the writer is aware
of the core text books for the subject and relates the assignment to the work of Robert Owen at New
Lanark together with several of the other theorists studied. The Subject learning guide and the group task

is attached. Any queries please ask as soon as possible

How Managers May Reinforce or Break the Psychological Contract in their Interactions with

their Subordinates



In the workplace, psychological contracts refer to a set or series of expectations that are
held by workers concerning what they will contribute to organizations, and what these
organizations will provide to them in return. Psychological contract happens to be an
increasingly relevant element of wider human behavior and workplace relationships. In the last
decade, psychological contracts have undergone significant changes. Employers provide limited
security but more benefits, while workers provide less loyalty but are always willing to perform
their tasks for longer hours alongside assuming more responsibilities (Dejours, 2014). Methods
that managers employ in their interactions with their subordinates play a vital role in determining
whether the psychological contract in the workplace can be reinforced or broken. When
psychological contracts are broken employees’ motivation is often lowered leading to high cases
of grievances, turnover and absenteeism. On the other hand, the reinforcement of a psychological
contract often leads to low levels of absenteeism, grievances and turnover in workplaces. In
relation to this, managers can employ several mechanisms in reinforcing or breaking the
psychological contract as they interact with their subordinates as seen in cases of theorists such
as Owen, Taylor, Weber and Karutilya. These methods include focusing on the welfare of
workers, leading by example, improving incentives and breaking down tasks.

Focusing on the Well-being of Employees

As managers interact with their employees, they should ensure that they focus on the
well-being of workers who report to them, and draft action plans for improving such needs. This
approach is significant in ensuring that managers are placed in a suitable position in relation to
determining various that affect the social, economic, and political lives of their employees.
Different employees often have different expectations, interests and needs. Karutilya managed to

demonstrate this aspect by focusing on the wellbeing of people as his view was based on the
industrialization origins of psychological contract and trust (Wren & Bedeian, 2011). Trust acts a
suitable mechanism of reinforcing the psychological contract between managers and
subordinates. When leaders focus on the well-being of their juniors they can manage to establish
high levels of trust between them and their juniors. As such, addressing the issues affecting
employees’ lives is significant in granting leaders a competitive advantage in terms of
reinforcing psychological contracts. Moreover, this strategy is vital in the identification of the
goals that each subordinates has. On the other hand, managers who do not pay attention to the
welfare of their subordinates can contribute significantly to the breaking of psychological
contract in their workplaces. Such managers often face problems identifying suitable methods of
responding effectively to various needs and expectations of employees, thereby eroding the trust
that workers have in them. As a result, the psychological contract between such leaders and their
juniors is always broken.
Outstanding leaders are often associated with a high potential to establish effective
interpersonal communication techniques, which adapt to the diverse working style, needs and
culture of subordinates. Leadership and management happen to be two distinct functions.
However, for one to become a good manager, his or her leadership technique needs to take into
consideration the strengths involved in various skills and personalities within the workforce.
This leadership style helps in ensuring that managers reinforce psychological contracts in a
successful way during their interaction with their subordinates. Effective managers always work
towards the adoption of leadership techniques that prioritize the needs and expectations of all
employees. Attending to the needs and interests of subordinates acts a significant step towards
the realization of psychological contract between managers and employees (Sayer et al, 2011).

According to the Maslow’s Hierarchy of needs framework, individuals have various needs that
they often try to satisfy or address in their work. Lower needs should be addressed prior to
satisfying higher level needs. As such, managers should focus on satisfying the lower needs of
their subordinates before they embark on addressing higher level needs of these workers, which
is significant in demonstrating their concern for workers. Moreover, the argument of the two-
factor theory is that when basic hygiene needs or wants are not satisfied, employees usually
become dissatisfied (Sayer et al, 2011). As such, managers should aim at satisfying such needs as
ignoring them always lead to the breaking of psychological contracts in the workplace.
Leading by Example
According to the behavior theory, individuals should play a role in the realization of
motivation. Subordinates always perform their tasks better when they have the feeling that their
management is concerned with them. As such, the reinforcement of psychological contracts in
workplaces can be enhanced when leaders demonstrate appropriate behaviors that indicate their
concern for their juniors. Managers are often expected to act as role models to their juniors.
Therefore, managers should ensure that the portray actions and behaviors as subordinate often
tend to emulate their leaders’ actions. In relation to this, mangers should ensure that they
demonstrate positive attitudes towards work, honesty and empathy among other traits (Wren &
Bedeian, 2011). Employees’ expectations, trust and loyalty are realized in working environments
in which leaders empathize with their workers’ feelings and situations, express concern and love
for their work and act in an honest manner. Such actions help in building the confidence of
subordinates in their leaders, which in turn encourage such employees to work hard towards the
realization of a firm’s overall goal. In this manner, psychological contract between leaders and
subordinates is often established in a successful manner (Sayer et al, 2011). On the contrary, who

do not lead their juniors by example often lead to the breakdown of psychological contract as
was in the case of Owen. Despite Owen caring for the concern of his workers he failed to lead
by example, which led to him breaking down the psychological contract. Leaders who express
little concern for their subordinates alongside lacking the aspect of transparency usually lead to
the breaking of the aspect of psychological contract in their workplaces. Lack of transparency
and concern for the needs and interests of workers usually lead to the erosion of the confidence
that employees have in their leaders. Employees in such working environments always develop
the tendency to mistrust their leaders or management in relation to the ability of such
managements to fulfill their needs or meet their expectations. As a result, the motivation of
employee is often lowered, thereby leading to issues such as absenteeism, lack of commitment to
work and low productivity on the part of workers.
When workplace professionalism transforms into a standard procedure, the performance
of employees often improves as the workforce is proud of the way which they execute their
duties and interact with external and internal consumers. Subordinates are usually placed at a
suitable position of exceeding their job expectations when they have a high sense of pride and
satisfaction in their work. This aspect can be accomplished when mangers demonstrate behaviors
and actions that instill confidence, trust and pride in their employees (Sayer et al, 2011).
Managers should also ensure that they praise their juniors for the jobs well done and efforts such
employees put in accomplishing their tasks. In addition, managers should ensure that they are
involved in the provision of constant feedback to their subordinates as such an undertaking it
significant in the realization of an effective leadership, which is essential for the establishment of
psychological contract in workplaces.
Rewards or Improved Incentives

Managers need to ensure that they reward subordinates whose performances exceed
expectations. Besides, leaders should establish performance improvement programs or plans for
subordinates whose performances are below expectations. Integration of efficient reward systems
in the workplaces acts an appropriate mechanism of reinforcing psychological contract. Taylor
played a vital role in revealing the significance of improved incentives in enhancing the
motivation of workers and reinforcing the psychological contract between managers and
employees. When workers are rewarded for their efforts in work, such workers often strive to
increase their productivity as they feel appreciated. According to the expectancy theory,
individuals often work hard when they expect to the rewarded for their efforts in an effective
manner (Jaclyn et al, 2010). In contrast, employees who do not expect to be rewarded adequately
for their efforts in work cannot demonstrate hard work, which contributes t the disintegration of
psychological contract in workplaces. Managers can reinforce psychological contracts by
engaging their subordinates in the establishment of plans or programs that will enhance their
worker’s skill sets. Investing the energy and time in establishing the workforce is associated with
significant returns. This leadership activity also demonstrates to subordinates that the manager
has vested interest in them, which translates into robust psychological contract. As a result, the
employees can experience high levels of job satisfaction, thereby raising the standards of job
satisfaction among workers (Ng & Fieldman, 2009). On the contrary, job satisfaction, which is a
suitable indicator of a robust psychological contract, cannot be accomplished when managers do
not express or demonstrate to subordinates that they have vested interests in such employees by
employing mechanisms such as rewards. This aspect was evident in the case of Max Weber
whose theory of hunter and gather disabled him from reinforcing the psychological contract as it

was not founded on merit. As such, workers had no source of motivation despite their efforts in
work, thereby making most of these employees to lack commitment to work.
Communication and task management
Taylor embraced the aspect of effective communication, which advocates for leaders to
be consultants as well. Effective communication has been noted to be significant contributor to
the realization of psychological contracts in workplaces. As such, managers should ensure that
they are involved in constant communication with their subordinates. Leaders should always
ensure that their juniors are aware of issues such as organizational change, job expectations and
work policies. When subordinates have the feeling of being valued by the management, they
often tend to register high levels of performance (Wren & Bedeian, 2011). Besides, such workers
always work well in a cohesive and collegial way. In the absence of leadership communication,
workers can feel devalued and unimportant even when the absence of communication is
unintentional. This aspect can lead to the disintegration of psychological contract in workplaces.
As such, managers should ensure that they share all the relevant information about their
organizations with their subordinates. This undertaking is also vital in enhancing workers’
understanding of their role or duty in the overall objectives of the business. Taylor demonstrated
that the element of effective communication can be employed in obtaining views of workers,
which contributed significantly to his assigning of different tasks to various employees based on
the workers’ levels of skills. When tasks are broken down into various portions, the efficiency of
work is often improved. As a result, workers always feel empowered, thereby leading to
increased productivity. In addition, this approach is significant in ensuring that there is a fluid
exchange of opinions between the manager and subordinates. Effective communication ensures
that managers are involved in managing their subordinates by focusing on objectives, employee

participation and empowerment (Wren & Bedeian, 2011). These approaches are vital in ensuring
that manager reinforce psychological contract in their workplaces as they increase the level of
employee involvement and commitment in the organizational workforce.


Psychological contract acts as a significant element in organizations as it has a direct
effect on the performance of employees. Reinforcement of psychological contract in
organizations leads to high motivation on the part of workers, which increases the productivity of
the company. On the other side, breaking psychological contract leads to low motivation on the
part of workers, thereby decreasing a firm’s productivity. Managers can reinforce psychological
contract during their interaction with their subordinates by leading by example, rewarding
hardworking employees, focusing on the well-being of workers, breaking down tasks and
communicating with their subordinates in effective manner. When managers do not focus on
welfare of employees, reward hardworking ones, communicate with their juniors in an effective
manner, and lead by example, they can lead to the breaking of psychological contracts in their


Dejours, C. (2014). “Work and Self-Development,” Critical Horizons, 15(2), pp. 115-130.
Sayer, et al. (2011). “When Employees Engage in Workplace Incivility: The Interactive Effect of
Psychological Contract Violation and Organizational Justice,” Employee Responsibilities
& Rights Journal, 23(4), pp. 269-283.
Jaclyn, et al. (2010). “Psychological Contracts and Counterproductive Work Behaviors:
Employee Responses to Transactional and Relational Breach,” Journal of Business &
Psychology, 25(4), pp. 555-568.
Ng, H & Fieldman, C. (2009). “Age, Work, Experience, and the Psychological Contract,”
Journal of Organizational Behavior, 30(8), pp. 1053-1075.
Wren, D & Bedeian, A. (2011). “The Evolution of Management Thought.” Hoboken, New
Jersey: Wiley

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