Leadership style and psychological contract

Abstract

This study explores the relationship between leadership style and psychological contract dimensions. The literature suggests that leaders in general and leadership style in particular can influence the psychological contracts of employees. Currently, there is no research as to how leaders perceive such contracts. This qualitative study presents the interview findings of twenty-three leaders working in public and private sector organisations. Differences were found between neutral and transformational leaders. Neutral leaders had a more transactional psychological contract, whereas the transformational leaders had a more relational psychological contract. This study adds to the literature as there is no current framework that considers the relationship between leadership styles with the psychological contract. Overall, the results indicate differences in psychological contract perceptions for different leadership styles.

Keywords

Leadership psychological contract transformational leadership styles management

Introduction

The aim of this study was to consider psychological contract dimensions from a leadership perspective. In-depth semi-structured interviews were conducted to explore how different leadership characteristics were related to different perceptions of psychological contracts. The study draws upon the model developed by Tomprou and Nikolaou (2011), which considers the elements of the psychological contract as: promises and obligations; individual differences; experiences and contract creation; contract makers; and expectations and monitoring. The overall research framework for this study is presented in Figure 1. Whilst Figure 1 represents the overall research model this paper particularly focuses on the elements of Psychological Contract and Breaches/Adherences and their relationships with leadership styles.

Figure 1.

Psychological contract dimensions (Tomprou & Nikolaou, 2011) and the impact of breaches/adherence on employee engagement outcomes.

Psychological contracts

Sonnenberg, Koene, and Paauwe (2011) stated that psychological contracts are unwritten and perceptual in nature, and they found that the increased utilisation of Human Resource Management (HRM) “practices leads to lower levels of perceived psychological contract violation for individual employees, regardless of individual characteristics” (p. 664). The psychological contract is an exchange of promises and obligations influenced by individual beliefs and emotional reactions. Once the psychological contract is developed, the contract is monitored to validate the reality in the organisational context with the expectations set before commencement and when joining the organisation. As suggested by Chih, Chiu, Lan, and Fang (2017), “a psychological contract comprises elements such as individual expectation of salary, promotion opportunities, job security and personal ability to successfully complete daily work and loyalty” (p. 104).

The psychological contract is influenced by individual differences in personality, values, and beliefs. More proactive personality types tend to adjust more readily in a new work environment and during the process of sensemaking, or establishing personal meaning at work (Tomprou & Nikolaou, 2011), these employees take the initiative and seek out the required information during their orientation process. Individual dispositions are also an important element at the commencement of the employment relationship. An extroverted individual tends to be attracted to the job itself rather than to such things as job security and tenure (Nikolaou, Tomprou, & Vakola, 2007). The level of emotional reaction will also vary during the sensemaking process, especially when there is a conflict between the messages sent during the contract creation stage and the information subsequently provided (Tomprou & Nikolaou, 2011).

Subramanian (2017) stated that the psychological contract assists leaders to understand the needs of their employees and provides more alignment with the organisation’s needs. Leaders can play a significant role in the psychological conditions that influence employee attitudes and performance (Erkutlu & Chafra, 2013; Philipp & Lopez, 2013). Whilst the relationship is important, “no contemporary approach to leadership has explicitly considered using the psychological contract as a framework to fully understand this leader-follower relationship” (Salicru & Chelliah, 2014, p. 39). Leaders can develop a diverse range of relationships with differing degrees of support and perceived trust. According to Conway and Briner (2002) management is “responsible for 28 per cent of all broken promises and for 50 per cent of all exceeded promises” (p. 295). Caldwell and Hasan (2016) proposed that perceived breaches are more typical due to the subjective nature of the psychological contract. Jiang, Chen, Sun, and Yang (2017) suggested that the violation of the psychological contract is the perception that obligations are unmet. In terms of management implications “the psychological contract is a primary source of perception making for the employees” (Ahmad & Zafar, 2018, p. 1011).

Leadership style

Subramanian (2017) stated that the leadership style is what underpins the employment relationship. The literature identifies a range of ways of conceptualising leadership styles. Ronald (2014) undertook a comprehensive review of the leadership literature and developed a leadership model based on the research of Bass and Avolio (1994). Ronald emphasised that envisaging leadership as transformational and or transactional is important to “the evolution of leadership theory” (p. 60). Ronald (2014) acknowledges that whether the leadership style is transformational or transactional, it is a combination of both that produces positive outcomes. Research indicates that transformational leadership aligns with development and understanding personal requirements; whereas transactional leadership is based on an exchange to meet specific performance objectives (Nanjundeswaraswamy & Swamy, 2014). As indicated by Anderson and Sun (2017), there is a prevailing interest in comparing the transformational and transactional leadership styles.

Employees seek alignment between the promises made and the actual experience; that is, the reality. A mismatch can affect job performance and impact on whether employees consider they are valued by the organisation. Leaders contribute to the psychological conditions experienced by employees in the workplace. Salicru and Chelliah (2014) stated that transformational leadership applies a relational contract, whereas transactional leadership focuses on the monetary features of the relationship. A transformational leadership style is focused on the needs of others rather than self-interest, expectations are clearer and the vision is understood (Lee Whittington & Galpin, 2010). A transformational leader engenders trust and interconnection, goal alignment, and commitment (Behery, Paton, & Hussain, 2012). Employee behaviour and attitudes are influenced by the relationship with their leader (McDermott, Conway, Rousseau, & Flood, 2013).

Transformational leadership encompasses role-modelling constructive behaviours, empowering employees to take educated risks based on their knowledge, and achievement of results that are in the best interest of the organisation. The transformational leadership style engenders guidance rather than prohibiting behaviours. Supervisors and managers are a key source of information, and this relationship has been found to have a significant impact on psychological safety (Lee Whittington & Galpin, 2010; Macey & Schneider, 2008; Rothmann & Welsh, 2013).

The literature suggests that leaders in general and leadership style in particular can influence the psychological contracts of employees. Currently, there is no research as to how leaders perceive such contracts. This study addresses this gap and seeks to understand how different leaders perceive psychological contracts. Whilst leaders strive toward trusting interactions, the implied psychological contract might not be completely understood (Caldwell & Hasan, 2016).

Method

Participants

Twenty-three professional leaders were interviewed. Participants were sourced from professional networks and were senior leaders (typically CEO’s or Directors); workplace leaders (General Managers, Operations Managers, or similar), and frontline leaders (other individuals at the workplace who have supervisory responsibilities). Five males and eighteen female leaders were interviewed from different sectors. Eleven participants had in excess of 20 years or greater experience, seven had ten years or greater, and five had less than ten years’ experience. The participants were primarily female with some male. Interviews were conducted in a conversational style that enabled open dialogue and discussion.

To understand participants’ leadership characteristics, they were asked a range of questions (Arnold, 2005; Bass, 1990; Wells & Welty Peachey, 2011), that identified whether their primary leadership style was transformational, transactional, or a combination of both (neutral leadership style). Six participants showed a predisposition toward adopting a neutral leadership style, two were predisposed to a transactional style, and fifteen were transformational. The neutral leaders were from large government entities, were all female and had significant leadership experience. The transactional leaders were also female, working for large government entities with significant leadership experience. The transformational leaders were a cross section of types from various sectors with varying degrees of leadership experience.

Data collection and analysis

Semi-structured interviews were conducted. This is the most common qualitative research method, which enables freedom to alter question timing and pace and enables immediate follow-up by using open ended questions to probe for further detail and to better understand participants’ responses (Qu & Dumay, 2011). The semi-structured interviews took an average of 60 minutes and provided the opportunity to discuss the questions set out in the interview template. A consent form was signed by all participants for the interviews to be recorded. The interview questions/statements were related to: understanding the leadership role, and discussing leadership characteristics to understand if the primary leadership style was transformational or transactional or a mix of both. Questions relating to psychological contract elements were derived from the research by Rousseau (1990). See below:

Careerism (number of times expecting to change careers)

Specific organisation (e.g., participants wanted a job with their organisation)

Expected tenure from commencement

Employer obligations (e.g., career development, promotion)

Employee obligations (e.g., working extra hours)

Stipulations (e.g., obligations upon leaving the organisation).

The information obtained during the interviews was subjected to a standard qualitative thematic coding process (Guest, MacQueen, & Namey, 2012). In addition, the data was analysed using Leximancer to conduct further content analysis focused on confirming the themes and examining the relationships amongst them. Leximancer processes words and identifies relationships from the research questions. In addition, Leximancer provides a concept map that identifies the intensity of concepts and associated themes (Biroscak, Scott, Lindenberger, & Bryant, 2017; Smith & Humphreys, 2006; Tse & Troth, 2013). The clustering of concepts provides a theme that is represented by the circles in the concept map and illustrates the connectivity of each concept (Moscardo & Benckendorff, 2010).

Findings and discussion

In the first stage of analysis, all interview responses were entered into Leximancer to produce a single overall concept map (see Figure 2), which provides an overview of all links the respondents made between leadership and psychological contracts. The results from the manual thematic coding were used to interpret this Leximancer concept map.

Figure 2.

The leadership and psychological contract Leximancer concept map.

The overall Leximancer concept map indicated that the organisation dominates the way respondents think about aspects of both their own and other’s psychological contracts. Not surprisingly, these leaders are influenced by an organisational lens and see the psychological contract through this outlook. The comments indicate an alignment with organisational strategy and goals, consistent with literature suggesting that effective leaders need to have this focus (Daft, 2018).

Most respondents linked their answers to most questions in some way back to the organisation. For example, respondents talked about “expectation of a total commitment to the organisation”, “decisions being made in the best interests of the organisation”, and “performance has remained constant to meet the organisation’s goals and objectives”. Respondents appeared to see themselves as representatives for the organisation when they answered questions about psychological contracts, thus, giving the organisation a large space in the Leximancer concept map. Two other concepts were also important - the team and work. This combination of the organisation, team, and work represents the main three components of any psychological contract.

As would be expected, “work” is a concept that incorporates all the content elements likely to be included in a psychological contract, such as time allocated to tasks and the actual legal contract made between staff and employer. Work was used in a number of different ways, including” work timeframe”, “discussing work in progress”, “working on projects”, “work planning” and “work goals”, but always in the context of discussing their interactions with other staff in their role as a leader/manager.

The performance management of staff is also embedded within the work concept, recognising that this is a major element of the work of the interviewees. Work is also linked to the business goals and organisational expectations, reflecting the importance of leaders and managers as the ones who have to translate organisational and business goals into staff performance requirements. This is consistent with Hackman and Oldham (1980) model of the three psychological states that affect internal work motivation, which includes job characteristics, critical psychological states, and outcomes. Job characteristics include skill variety, task identity, task significance, autonomy, and feedback from the job to address job enrichment. Critical psychological states include meaningfulness of the work, levels of responsibility for work outcomes, and knowledge of the work outcomes.

Several points are noteworthy about the team concept, the third major concept in the Leximancer concept map. The Leximancer identification of team rather than staff as the label for this concept reflects the respondents’ widespread use of team as a way of talking about staff or employees. When asked how many people reported to them, many respondents discussed the size of their team, for example, “I manage a team of administrative staff”, “there are 19 in my team”, and “I lead a team of six”. If leaders see their staff/employees as a collective, it could be that they expect individual staff members to also see themselves as part of a team, and it is possible that this adds an element to the psychological contract that staff might not be aware of. Such an implicit assumption from the leaders could create misalignments between leader and staff expectations.

While virtually all respondents used team in at least one of their answers, few mentioned team aspects or skills in their discussions of how they appraise their staff, and only one reported that their own personal performance reviews focused on their performance within the team. Gibbard et al. (2017) noted a relationship between shared perceptions of psychological contract breach and team performance, and, according to Schreuder, Schalk, and de Jong (2017):

Members do not reciprocate perceived fulfilment of team obligations by adjusting their obligations to the team and fulfilling those obligations. They reciprocate higher levels of team obligations with higher levels of member obligations … When a member perceives that the team obligations are fulfilled, they become more committed to the team (p. 148).

Second, managers are placed in the intersection between the team and the organisation. In a similar fashion, leaders are in the intersection between team and work, and leadership is seen as existing in the intersection between work and organisation. This means that respondents saw themselves, in their roles as managers or leaders, as simultaneously having to represent the team and their interests to the rest of the organisation and the organisation’s expectations and constraints to their team. As stated by Callanan (2004), team-based structures focus on task delivery, making decisions, and solving business problems. For leaders, there are requirements for upward, downward, sideways, and outward relationships (Bourne, 2011). Leaders experience challenges managing the complexity of the interrelationships and meeting the organisational goals.

For some leaders, this can be problematic, and a lack of support for this role was evident in discussions where respondents’ perceived breaches of their own psychological contracts. For example, one respondent reported the difficulties in achieving team goals when higher levels of management made changes, threatened changes, and generally interfered with team positions. Others also reported a lack of higher management support and failure of higher management to live up to promises made to the team as a violation of their psychological contracts. This suggests that the psychological contracts of leaders have elements of both promises made to them as an individual as well as promises made to their teams. This is a dimension of psychological contracts not previously recognised in the literature.

This first overall Leximancer concept map also identified several relationships amongst elements from within and between the three dominant areas (organisation, work, and team). These relationships provided further insight into the characteristics of the leadership styles and the leaders’ perspectives on the psychological contract. Respondents who could be viewed as transformational leaders were connected to the main concepts of the model in a very different way to those respondents who could be considered as neutral or transactional. For example, the conceptual map (Figure 2) shows that there is a nexus bringing “organisation”, “team”, “work”, and “review” together. It is reasonable to say that these relationships are consistent with those of a transformational leader and, thus, this point has been labelled as “transformational leadership characteristics”.

Transformational leaders

Transformational leaders were most likely to place the team at the centre of their discussions and acknowledge the importance of relationships and of providing a good environment for their people. One respondent talked about “building teams” as a major, positive aspect of their leadership role, while another argued that “team contributions needed to be acknowledged” in their personal performance appraisals. These transformational leaders sought to have close relationships with their team. As highlighted in the Leximancer concept map, they talked of “relationship”, “people”, and “others”. To summarise, one respondent stated, “understand people, getting to know them, know the strengths and weaknesses, develop trusting and open relationships”.

Neutral leaders

Neutral leaders are known to be more closely linked to work through business goals and expectations, or through their role as leader and managers within organisations. This characterisation of neutral leaders is reflected in Figure 2 by the nexus of relationships named “neutral leadership characteristics”, where “business”, “work”, and “organisation” are brought together. This finding is supported by the interviews, in which respondents indicated a more compliance-oriented view, with one respondent stating, “measured for compliance” and “99% compliance at the organisational level”. Along with transactional leaders, they were furthest away from the team concept, reflecting a much stronger focus on performance of staff as it related to organisational or business goals and expectations, and aligned to operational and strategic plans; basically, “getting on with business”.

Transactional leaders

Respondents who can be seen as transactional leaders are most likely to highlight the organisation as the central element of psychological contracts. It is expected that for these leaders, psychological contracts are interlinked with management for performance and meeting organisational objectives. An initial review of the themes identified from the transactional leaders indicated that they sought skill alignment and expressed concerns in relation to staff questioning decisions and avoiding discriminatory behaviours. As leaders, they sought support, being valued, and professional development from their own personal psychological contracts.

The transactional leaders also reported facing some challenges maintaining performance levels. These initial results are consistent with Nanjundeswaraswamy and Swamy’s (2014) description of transactional leadership and its focus on specific performance objectives. As there were only two transactional leaders in the sample no further analyses for this leadership style was possible. Given the differences between the different leadership style groups in this first overall mode, it was, however, decided to create and examine Leximancer concept maps separately for the remaining two groups of neutral and transformational leadership styles.

Neutral leaders

The neutral leaders in this study did not indicate a preference for either transformational or transactional leadership styles, but did report a mix of the two characteristics. This combination is evidenced by the number of different elements that appeared in the overall Leximancer concept map (Figure 2) and are also in Figure 3. A close examination of the elements shows that neutral leaders were closely aligned with transactional leaders, with the most notable elements being work, year (time), level (standards, targets, expectations), business, goals, and roles.

Figure 3.

Neutral leaders Leximancer concept map.

These aspects were supported by the interviews. Most of these participants indicated they aspired to be leaders, and all had been appointed, rather than promoted, to their current leadership role. These neutral leaders reported experiences with a range of professional leadership programs, including formal education and programs offered by their employer organisations. Their own personal performance appraisals were mostly annual and bi-annual and included discussions of development, performance targets, and setting measurable goals.

In relation to the performance appraisal discussions, one leader indicated they “discuss goals and objectives”, for another they “identify opportunities for improvement”, “expectations are understood”, and they maintain a “record of conversation to identify positive and negative items”. These aspects indicate a transactional approach to leadership. Similarly, their reported performance appraisal of the staff they were responsible for could be described as more formal and structured in style, suggesting adherence to more transactional psychological contracts, based on Rousseau (1990) description of contracts.

In discussing the development and nature of their own personal psychological contracts, neutral leaders were likely to emphasise the importance of the employer organisation, being committed to its stated values, providing promised flexibility in work arrangements, and giving the leader the autonomy and ability to adapt their role. In turn, neutral leaders believed that they were obligated to meet key performance indicators, project delivery, and resolve staff management issues. These comments indicated that “leadership” was important to these respondents and reflected elements of transactional leadership.

This aspect was further evidenced in discussions of contract violations and breaches, which were focused on the organisation’s failure to meet its obligations as set out above. This was especially the case for situations where participants felt they had met or exceeded performance criteria and reported that they and/or their team had not been paid promised or expected bonuses, had not been recognised for their achievements, and/or had not been promoted; hence, evidencing a more transformational perspective of leadership. In terms of expectations unmet, one respondent indicated “given performance and results expected to be in a HR-GM role”, there was an expectation that continued high levels of performance would result in a promotion.

In relation to perceived breach history, one respondent stated that the “non-delivery of bonus, was important in terms of recognition, [bonus was] only paid twice, [and] unilaterally taken from everyone”, when there was an expectation of the continued delivery of a bonus. These breaches are consistent with a focus by these neutral leaders on the work benefit element of these more transactional psychological contracts. It might be that managers or supervisors who prefered a more transactional style of leadership also preferred transactional psychological contracts. According to Thompson and Bunderson (2003), transactional psychological contracts “involve an exchange of economic currency wherein the organization provides adequate compensation, a safe working environment, and reasonable short-term guarantees of employment in exchange for the employee’s fulfillment of narrow, specified responsibilities” (p.574). Moreover, transactional leaders are specific, static, narrow, and observable (Rousseau, 1990). All of these aspects indicate that a neutral leader’s perspective on the psychological contract is reflective of transactional and transformative leadership styles.

As mentioned, the neutral Leader Concept Map (see Figure 3) indicates a dominance of level, work, and year. The actual role is central to the neutral leader in terms of their perspective of the psychological contract. The respondents indicated a strong connection with the role held to deliver on work, objectives, and goals. In addition, the role held has an interrelationship with business performance and development. The delivery of work takes into account skills and the significance of time frames. There is an inherent understanding of the expectations set in the achievement of business performance.

The “level” concept included reference to the motivation to join and the commencement experience. One respondent indicated that “when appointed … thinking going into a senior … role, when it was only an entry level role. Position description was modified by the agency”. The term “level” was discussed by respondents from a variety of perspectives in relation to the “appraisal of performance at the organisational level”, “level of harassment”, “interest level was high and job was challenging”, and “high levels of commitment working 60 hours per week”.

In relation to goals generally, respondents indicated an interest in understanding business goals and objectives. Due to organisational change for one respondent, organisational performance was “higher because of the goals and objectives in restructuring arrangements”. Conversely, one respondent expressed concern in relation to “managing staff to meet deadlines/goals that are imposed”. According to Wellin (2007) psychological contracts tend to be in a continuous state of change influenced by organisational and business strategies. With the changes in the psychological contract being increasingly influenced by social and economic forces, clarity of the psychological contract is now more important than ever before, for business success.

Through the work itself, neutral leaders sought to understand the skills required, the expectations of the role, the opportunities available for development in the job, and the ability to make a difference. For example, one respondent said that “work itself is making a difference”, and they wanted “to work for a good organisation, role itself was appealing”. Jobs with these dimensions have a sense of meaningfulness, responsibility, and knowledge relating to the work itself (Lee Whittington & Galpin, 2010). Given the amount of time spent in the work environment, meaningfulness in work is an important aspect of working life (Rothmann & Welsh, 2013), and indicative of a more transactional perspective on the psychological contract. Moreover, according to Jackson and Edgar (2019), in the current work context there has been a shift from a relational employment relationship premised on loyalty and respect to a transactional employment relationship focused on an economic exchange.

The conceptual map indicates an interrelationship with time, contract, and term. A review of the responses indicates a medium to long-term focus when joining the organisation. The connection with neutral leaders with the concept “year” encompasses significant items, which relate to the expectations set to achieve business performance outcomes. In relation to the appraisal of others, generally the responses indicated formality in the process, with the process setting out expectations and opportunities for improvement at regular intervals. For example, “every week, follow-up on expectations proactively… discuss achievements and performance”. Development includes “quality statements, objectives that are measurable”, “providing feedback on the job development”, “catch-up weekly, discuss goals and objectives”, and the importance of “making a difference”.

These neutral leaders were focused on role expectations to achieve business performance. The neutral leaders indicated that the “best leaders can instinctively know how to get the best out of people. Important, span of control, and behavioural management”, and “aspired to be a leader; and choose roles with great leaders”. For many of the respondents, their organisations were experiencing change, and as a result of organisational change and modifying roles, the best leadership traits were not demonstrated.

Change in the workplace culminates from a requirement for greater speed, technological change, or new ways of doing work. More broadly organisational restructures stem from a requirement to meet the demands of the business environment. Change creates a conflict between stability, the current state, and the proposed state. The leader’s role is to manage the impacts of change through the communication of values and purpose (Reece, 2017). According to Chih et al. (2017), the transactional psychological contract is based upon “short-term returns and benefits and refers to a time-limited, specific and monetary exchange” (p.104). The nature of a transactional psychological contract is based more on self-interest in terms of the exchange (Thompson & Bunderson, 2003). In the absence of an agreement the psychological contract is based on perceptions (Hart & Thompson, 2007). Overall, the management of organisational change and the inherent instability change causes may be challenging for the neutral leader.

Transformational leaders

While a few of the transformational leaders indicated they had aspired to hold leadership positions, most developed an interest through acting in leadership roles, development opportunities, education, training, and mentoring programs. Most participants had current performance appraisals that were generally focused more on quality than compliance. This group reported more regular performance discussions with a mix of weekly, fortnightly, or scheduled meetings as needed. Most transformational leaders had formal performance plans in place with their employees, which included elements related to team performance, growth and development, establishing behavioural expectations, task delivery, and performance goals. These leaders saw performance plans as being driven by the provision of positive recognition, providing challenges, and reviewing work activities. Transformational leaders “regularly discussed goals and development, constantly developing”, “proactively assists employees”, and “feedback encouraged and support provided”.

The transformational leaders indicated that employer obligations included “long-term security/career development” and the provision of open, honest dialogue relating to the challenges presented. Several leaders discussed the importance of autonomy and accountability. Promise discrepancy for the transformational leaders related to limited autonomy in some instances. Role alignment presented a challenge for some, as their “role is much more hands on than expected”, and an unmanageable workload was mentioned by several leaders.

Another concern was a “lack of systems, lack of investment in core processes and governance”. Non-delivery of expectations related to the expectation of more “quality development opportunities” and support with further education that did not come to fruition. Two specific violations were “organisation was not honest about change in reporting relationship. Trust and respect important” and “experiencing significant gender bias”. Expectation breaches by others related to promotion above capability or a lack of career path. For some leaders, restructure arrangements had resulted in lower levels of trust, disappointed employees, and the “team having no say in decisions made”.

According to Chih et al. (2017), the psychological contract is a “broader, long-term and socio-emotional interactional and includes intangible factors such as personal support and concern for the family” (p. 104). Thompson and Bunderson (2003) stated that relational contracts:

Entail the exchange of socioemotional currency, involving the organisation’s provision of training and professional development, as well as long-term job security, in exchange of the employee’s fulfilment of generalized role obligations (p. 574).

The research suggests transformational leadership aligns to the relational contract and transactional leadership focuses on the monetary features. However, the research also suggests that, if violated, the psychological contract is less relational and more transactional (Thompson & Bunderson, 2003).

For transformational leaders, the organisation and the participant had the strongest relationship with the psychological contract. Figure 4 shows that there was an intercept between the organisation, the people (employees and participants), and the delivery of work (work). In addition, “leadership” took into account the team, work performance, and the relationship with the participant. The interviews extended these findings and indicated that the organisation’s relationship with the participant focused on training and development. Support was provided in the delivery of work.

Figure 4.

Transformational leaders’ Leximancer concept map.

The organisation was discussed by the transformational leaders in terms of in-house development, a sense of belonging, commitment to the organisation’s goals, and wanting to “work for a more progressive organisation that values people”, and the overall organisational fit. Leaders spoke about career choice and lifestyle, opportunities for career growth and personal aspirations. People and the relationship with the organisation were associated with “wanting to help people” and valuing people. Seeking opportunity for the leaders relates to wanting to “build something”, “develop and grow function”, and “design and build the role”.

Leaders discussed training in terms of the support for formal learning by the organisation and a culture that supports professional development through investment in the employees to enable them to continue learning and growing. In terms of difference, leaders discussed “exposure to different skill sets” and “different views on changes in policy”. In addition, they discussed the attainment of different skills and having the opportunity for diverse roles across different organisations. A few leaders experienced the job being different to their expectations. Some were still seeking the opportunity to change organisations to experience a variety of different skills and challenges.

Transformational leaders in this study indicated a motivation to provide training and career development which aligns with the socioemotional currency of relational contracts (Thompson & Bunderson, 2003). Moreover, Rousseau and Tijoriwala (1998) indicated that the culture within an organisation sets the normal patterns of behaviour, and this frames the psychological contract; adhering to these norms can become part of the performance commitment; whereas a psychological contract breach has an adverse impact on performance (Matthijs Bal, Chiaburu, & Jansen, 2010). A perceived unfairness in the appraisal process can result in dissatisfaction and diminished performance (Ali, Mahmood, & Mehreen, 2019).

Overall, these participants were provided with support and development and the organisational training to achieve the required work outputs. They indicated interaction with various people in the organisation prior to their commencement. These leaders discussed regular reviews and the setting of goals and constant development. Whilst one leader indicated that they had “asked the right questions prior to commencement”, for another, they ‘“asked about the system, [but the] panel did not understand what the system could or couldn’t do”. The term “participant” included taking on additional activities, such as writing their own induction, to expertise not being as broad as required for the work activities. While the psychological contract is the congruence between expectations and what is exchanged, this research suggests it has more influence on such factors as job satisfaction and reduced turnover than other types of contract.

Critical psychological states include meaningfulness, responsibility, and knowledge of the work outcomes. The outcomes include work motivation, job satisfaction, and work effectiveness. It is suggested that in well defined jobs that encompass variety, identifiable tasks, autonomy, and feedback, all have a constructive impact on employee engagement (Rothmann & Welsh, 2013). St-Hilaire and de la Robertie (2018) stated “an unexciting and monotonous job dampens motivation and obstructs the acceptance of organizational values and goals” (p.4).

An interest in a leadership role had evolved over time for most of the transformational leaders. For a few, it was an aspiration, for example, “leadership was a 100% aspiration due to leadership traits”, for others it was not an aspiration stating that they “fell into a supervisory role” or “being provided various opportunities”. The transformational leaders had engaged in a variety of internal and external development opportunities. The influence of the leadership style from a positive viewpoint indicates that the “leadership style resonates”. However, from another perspective, there can be a “lack of leadership capability and desire to be good managers”.

In terms of the regularity of the appraisal of others some employees had discussions more regularly than others. There are individual impacts for employees such as “providing employees accountability and responsibility” or managing the concerns raised by employees, such as an “unmanageable workload”. According to Rousseau and Tijoriwala (1998) the culture within an organisation sets the normal patterns of behaviour, which frames the psychological contract, adhering to these norms can become part of the performance commitment. It is beneficial for organisations to support employees and encourage work engagement which increases an employee’s confidence in their ability to perform (Naeem, Channa, Hameed, Akram, & Sarki, 2019).

Last, the transformational leaders indicated that they would work for a variety of different organisations as part of their career path. Several leaders were looking for challenge, other influencing factors included stimulation, complexity, autonomy, growth, and development.

Summary

The literature indicates that transformational leadership aligns with development and understanding personal requirements, whereas transactional leadership is based on an exchange to meet specific performance objectives (Nanjundeswaraswamy & Swamy, 2014). Importantly, McDermott et al. (2013) stated that “leadership styles refer to patterns of actions that influential people use to shape how others behave” (p. 293). This study sought to understand leader’s perspectives on the relationship between leadership styles and the psychological contract (promises, obligations, and expectations) with employees. It found that neutral leaders had a more transactional psychological contract; whereas the transformational leaders had a more relational psychological contract.

Neutral leaders sought commitment to organisational values and transformational leaders sought a supportive environment and high levels of trust. Neutral leaders were focused on role expectations to achieve business performance; whereas the transformational leaders were more focused on the team performance and relationships to deliver results for the organisation. Neutral leaders sought fairness in reward distribution and transformational leaders sought fairness in decisions. For the neutral leaders, there were concerns for job security and imposed deadlines. The transformational leaders expected quality developmental opportunities, process compliance, and more flexibility.

Limitations and suggestions for future studies

The distribution of respondents across different leadership styles, with only two describing themselves as transactional leaders, did limit the extent to which the analysis could explore the links between the full range of leadership styles and their perceptions of psychological contracts. The interviewees were primarily female participants, a broader inclusion of male interviewees could have contributed to further insights. Further research with a wider variety of leadership styles could assist in better understanding the links between leadership and psychological contracts. In addition, subsequent studies could consider the relationship with employee engagement outcomes in relation to leadership dimensions and employee engagement.

Practical implications

This exploratory research provided greater insight into the relationship between leadership styles and psychological contracts by analysing the psychological contract through the lens of the leader, which had not been explicitly considered. The psychological contract is the alignment between the promises made and the actual experience or reality. If there is a mismatch this can affect job performance and impact on whether an employee thinks they are valued by the organisation. Leaders contribute to the psychological conditions experienced by employees in the workplace. The commencement of the employment relationship includes pre-entry experiences, and these should provide clear communication regarding reciprocal obligations to ensure there is limited ambiguity regarding the position and the organisation. Importantly, understanding the psychological contract for leaders can result in increased job satisfaction, increased performance and reduced intention to quit, which are important cost implications for employers. Importantly, a match between expectations and reality can increase the levels of trust and the sense of value to the organisation.

Originality/value

This study identified the neutral and transformational leader’s relationship with the psychological contract and the impact of breaches and adherence. The study adds to the literature as there is no framework that considers the leader’s relationship with the psychological contract. It also confirmed that individual differences influence the psychological contract experience and that leadership characteristics impact psychological contract expectations.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Jane Oorschot

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