Psychological Contract: The Bond between Employee and Employer, written by Aaron Jones

This week’s post is about an article I read, concerning the psychological contract titled, “an ‘employee value proposition’ mindset might just fix employee engagement” by Forbes. The article discusses the realities of employee engagement in the present organisational context, arguing that employee engagement has deteriorated the overall goal that it derives. Leading to the present, where hierarchy and external consultants are using surveys as a weapon against employees, rather than to serve and improve the organisational culture. In the talent market, the author suggests that ‘employee value proposition’ should be used to harness the psychological contract between employee and employer. Through asking the ‘why’ of an employee’s prerogative to work within a particular company, the company may better understand its goal of attracting and retaining talented individuals. The author goes on to suggest that taking a targeted approach like that described, enables an employee centric approach to bond both talent acquisition and the psychological contract.


Employee and employer suggestively have a written down contract of what is and isn’t expected. Beneath the physical contract, is the psychological contract, where social norms, culture, and expectations of the employee and employer come into play. McShane, et al. (2016) describe the psychological contract as either transactional or relational belief about the terms and conditions between the employee and employer. Therefore, the perception of what to expect may be shaped from attraction, through retention, and attrition. Some leading companies and startups are believed to attain the ‘right fit’ within their organisational culture and subculture within which the employee will work. However, other models such as socialisation, may suggest, to some degree, that employees will undoubtedly go through a form of assimilation. 


The author uses the ‘employee value proposition’ as a marketing term to attract and retain talent. Suggesting a company asks itself “why would an employee of x talent, want to work here, and stay here long-term?” The author depicts that doing so aims to provide employees with the ultimate employee engagement, which is happiness. Through an employee-centric approach, employers are better able to understand and deliver meaningful experiences, which harnesses the psychological contract in retaining the right people. Therefore, the employee value proposition may be described as more of a strategic approach to a company’s long-term growth.


The employee value proposition is a long-term strategy to leverage the psychological contract between employees and their employer. However, in short to medium term, it produces a significant challenge to supervisors and managers, who may not necessarily be able to vary the job description. However, one way that leaders may be able to provide meaningful experiences to their team is to delegate in a way that challenges and empowers individuals to produce a high standard of work, and inherit accountability in the process. Further, creating a cohesive team, through inclusive decision making, and constructive conflict management, can be healthy ways to encourage a stronger sense of employee engagement and the psychological contract.


Recommendations for the employer:


1.    Know your current culture, and how you want to shape it. The right person, with the right attitude, has the capacity to make or break your company. Use the ‘A team’ mentality, looking for other players like yourself. When you’ve built the team to a good size, you’ll soon start to see that A team players only want to work with other A team players and the company will start to build itself.


2.    Actively listen to the answers to your questions. Observe a person’s body language and listen to what they are really saying behind the words.How does the person act when they speak, is it with absolute confidence? If it is, make sure the answer is correct. If it isn’t, why isn’t it? Figuring out what a person is conveying will tell you more about the person, then the information itself.


3.    Work out what motivates your employees, thinking about what challenges the team to go beyond the current expectations. Ask the same questions around this subject during interviews. You’ll soon see through the fog and work out who you want in your team. Use this to your advantage in the psychological contract, reiterating the company vision for the future.


Recommendations for the prospective employee:


1.    Tap into your networks to establish connections prior to the interview and do your research about the target company. Talk to some of the people from the inside to get a feel for what the culture is like. If you’ve made the interview, generally employers are looking for ‘the right fit’ for the culture they’re fostering. Cohesive teams tend to work better, and the sooner you fit the bill, the more likely the people hiring you will see the benefits.


2.    Know your ‘why’ – know exactly what you want out of your career, what motivates you and what drives you. Aligning your career goals with that of the company vision will only get you so far. While harnessing ‘the right fit’ will get your foot in the door, you need to set yourself apart from the other applicants.


3.    Be firm with your value proposition and know what you’re worth. Ensuring that you are firm with how you value yourself going into an interview shows your employer that you are worth the investment to their overall growth. Rehearsing your value proposition prior to the interview will maximise the chances of success.



McShane, S., Olekalns, M., Newman, A., & Travaglione, T. (2016). Organisational behaviour: Emerging knowledge, global insights. (5th ed). North Ryde, N.SW: McGraw-Hill


Wagner, R. (2017). An ‘employee value proposition’ mindset might just fix employee engagement. Forbes. Retrieved from: https://www.forbes.com/sites/roddwagner/2017/01/23/an-employee-value-proposition-mindset-just-might-fix-employee-engagement/#230dabf44c3d


About the Author

Aaron Jones is an Aviation Safety Consultant with Muru Management Consulting currently working with the RAAF in implementing a system safety and cultural reform project to drastically improve risk management and safety related behaviours across its entire workforce. Aaron is a technician by trade, with qualifications in Project Management, Engineering and Aviation Management, bringing a strong sense of best practice and technical knowledge to the aviation industry.