The Importance of Trust and the Psychological Contract

Leaders must be aware that psychological contracts have a tangible impact on the effectiveness of the organization. Furthermore, the form of psychological contract that is developed will influence employee attitudes and behaviors. Employees with few expectations of their employer—for example, those who expect nothing more than wages—will feel obligated to complete only the explicit requirements of their role. In other words, employees with perceived transactional contracts aren't likely to go above and beyond their specific job requirements. Generally speaking, transactional contracts lead to employees who meet only minimum standards and who have low expectations of the employer.

In contrast, relational contracts have been shown to lead to higher commitment and involvement by employees, as long as employees believe that their employers reciprocate their trust. Leaders who uphold relational contracts based on trust will likely experience employees who perform well, are interested in going above and beyond their prescribed job duties, and are less likely to seek jobs outside of the organization.