Psychological Contract Case Solution & Answer

Psychological Contract Case Solution

According to the definition of Edgar Schein, the Psychological Contract is a traditional belief that all the senior managers operate in the organization among the numerous employees at any time.

According to Armstrong’s handbook, Psychological Contract is based on the perfect relationship of the workers and employers. He believed that the link between the both parties is based on unique combination of trust and beliefs whichthey expectfrom each other.

The concept of Psychological Contract is open to everyone, and it represents diverseobjective and dimensions. However, it is also true that the implementation of this contract isquite challenging and unique which is sometimes highlighted out of the outcome. The following challenging dimension of Psychological Contract is discussed as under:

  • The Psychological Contract has a chain of shared responsibilities on both sides.
  • This contract focuses on the relationship between the employer (the one hand) and employee or employees on another side. Both the parties havethe formal agreement between each other.
  • All the rules and regulations of Psychological Contract areimposed on both the parties. Sometimes these rules create complexities for both the parties as the observation of the people changes time to time. Therefore, changing behavior, needs, feelings and attitude create complications among the parties which logically not possible to resolve.
  • The nature of Psychological Contract is also changeable as emotional, social and potential influences affect the nature of the contracts.
  • This contract is never in the form of written document. Due to its unwritten nature, the organization does not get the expect results from the activities and always faces management issues which also affects the relationship of the leaders and employers.

Psychological Contract Models(Venn diagram)


Symbol identification:


VC stands for visible contract


PC stands for Psychological Contract

R stands for relationship reference


The above Psychological Contract model shows the relationship between employees, employer and the market. The Venn diagram illustrates the difference between the open contract and Psychological Contract. The link between the two is discussed as under:

  • Visible contract (VC): It is a written agreement which is made between the two parties under which all the contractual obligations are written. Under this contract, the organization mentions the rules and regulations regarding the work safety and in return the company provides salaries to itsemployees. In this document, all the job description, salary packages, the duty of care and rights are provided.
  • Psychological Contract (PC): As compared to visible contract, the Psychological Contract is in the form of unwritten, hidden and unspoken contract which is made between the two parties such as employee and market. This agreement also takes account of the relationship references ® among market and employee, which involve external factors. On the other hand, the Venn diagram also shows the reference relationship ® of the employer with the market and the open contract. The sessions which include the VC element whichis aclear and written agreement and those in which PC element is showing are; private, imaginary and perception contract.

Psychological Contract Iceberg Model

The iceberg model is a very useful tool in the psychological contract theory. The companies use this model for illustrating the influences and challenging concepts within the PC theory. Moreover, this tool is also useful for the team leaders, employers, and trainers and through that all the individuals clearly understand the thoughts of each other. This tool is used for exploring and understanding the concepts of the people.

According to the Iceberg model, 90% of the information is hidden under water, and the organization only knows 10% of the information of employees. Moreover, the team believes that the iceberg model is very useful for Psychological Contract in which all the information regarding the psychological and physiological element is hidden and invisible…………….

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