http://www.businessballs.com/psychological-contracts-theory.htm

The Psychological Contract is a model and a philosophy which can guide us in the way we structure and manage organizations, and deal with employees within them.

At a basic level it helps us understand more about the 'give and take' that characterises working for an organization, and particularly leading an organization.

It is very useful in understanding why employees are 'difficult to motivate', or 'difficult to manage' - especially when this is an ongoing or widespread challenge.

The Psychological Contract helps leaders understand better how to align their people's needs with those of the organization, which is a very elusive notion.

The concept also offers a powerful way to expand thinking and possibilities for people and work, in some distinctly separate and important ways:

• individual employee motivation and management
• motivation and management of workgroups and departments
• entire workforce motivation and management
• review of grading, management hierarchy, succession
• recruitment and selection and induction
• training and development
• assessment of leadership - vision, style, capability
• assessment of traditional workplace terms and conditions, contracts, etc
• organizational communications
• organizational philosophy and culture
• fundamental organizational purpose, constitutional rules and ownership
• new business purpose and legal structure
• markets and societies - types of organizations that will work best in the future