The Employee Experience

CHAPTER 7The Psychological Contract

There is nothing either good or bad, but thinking makes it so.

—WILLIAM SHAKESPEARE, HAMLET, ACT 2, SCENE 2

The Brand Contract and the Transactional Contract address employee expectations that are typically evident and open. They are intentional and purposeful. However, other expectations are often veiled and obscure. Consider our earlier analogy that a Contract is like an iceberg. The visible part above the water is the Brand Contract and the Transactional Contract. The mass lurking below the waterline, hidden from view, is the Psychological Contract. These are the expectations in a relationship that remain largely unstated and implied. The following story illustrates what we mean.

We were discussing with a close friend the differences between two prominent CEOs. Both had built technology companies worth hundreds of millions of dollars. Our friend had worked closely with both leaders, and a question arose: What was the biggest difference between them? The surprising answer had to do with the simple act of walking.

On one occasion, our friend had been walking in New York City with one of the CEOs and his team. As the group walked, the executive unconsciously lined his people up according to rank, with the next most important person in the company walking next to him and the subordinates following behind according to their perceived place in the organization.

Later, our friend found himself in a similar situation in San Francisco, observing ...