Imagine you’ve just hired Tessa. She’s a superstar. She’s ambitious, smart, quick to learn and a great cultural fit. The team loves her, and her manager, Jane, sees leadership potential. For the first 10 months, everything clicks. Tessa is fully engaged and eager to grow.
Suddenly, things shift. Tessa becomes disengaged, does the bare minimum and brings down team morale. When Jane finally checks in, Tessa shares that she expected a promotion and leadership opportunity by now. Jane is stunned. How could she think that after less than a year? She tells Tessa to keep doing great work and opportunities will come. Instead of motivating her, this frustrates Tessa even more. Her negative feelings increase and when the company tries to manage her performance, the relationship breaks down to the point where they feel they have no choice but to let her go.
Stepping back, it’s clear both sides contributed to a sad situation. Jane skipped regular one-on-ones, missing the chance to uncover Tessa’s expectations. And Tessa’s frustration didn’t come out of nowhere because she was once thriving and contributing. Too often, we blame the “bad apple” employee without realizing something deeper is at play.
It can be a misalignment in the psychological contract. This is the set of unwritten, unspoken expectations and beliefs that exist between an employer and an employee. When these don’t match, it creates a disconnect, resulting in tension and unexpected or surprising behaviours.
Most companies are good at creating employment (logistics) contracts outlining the job position, vacation time, rate of pay, benefits and all the legal stuff that protects both parties from painful outcomes. The psychological contract is shaped by mutual perceptions, promises and assumptions about what each side will give and get in return. It’s around things like trust, respect, fairness, recognition and commitment. These things are rarely written down but deeply felt.
Think of the employment contract as the tip of an iceberg. It’s visible and explicit. The psychological contract lies hidden beneath the water and is significantly larger. What’s unseen shapes the culture and fuels expectations that may or may not match. It’s murky, assumed rather than stated and often misaligned, and can cause serious culture damage.
Let’s revisit Tessa’s situation. In her interview, Jane told her she saw huge leadership potential and that she could quickly move onto a management track. To her, “potential” meant that within 18 to 24 months she might be ready. To Tessa, “quickly” meant she’d be on that track within a year. Neither expressed their assumptions, but both silently built them into the psychological contract.
When nothing happened, Tessa felt misled. Jane compounded the issue by skipping regular check-ins and failing to clarify expectations when Tessa started to struggle. Her message of “keep working hard and someday it might happen” only deepened Tessa’s sense of betrayal.
The leadership team didn’t question their role in this breakdown. They labelled Tessa as having an “attitude problem” and moved to let her go rather than explore and clarify the unspoken misunderstandings on both sides.
This is how “under the water” psychological contracts cause problems. It’s in the language we use, the ambiguity we allow and the assumptions that take root when expectations are not made explicit.
When the psychological contract is ignored or left unclear, the impacts ripple through the workplace. Employees who feel their expectations aren’t met often disengage, lose motivation and stop putting in the effort they once did. Trust and commitment erode, creating tension, misunderstandings and resistance to feedback as well as cynicism and low morale. This results in a decline in productivity, creativity and collaboration, as well as an increase in turnover and recruitment costs. Unearthing misaligned psychological contracts can be a game changer in explaining poor performance and toxic cultures.
Where in your organization might you have unspoken or unwritten psychological contracts that may be causing negativity, disengagement or misalignment on your team? If you’re not sure, look at your job postings, job descriptions and onboarding processes and documents. Review your interview questions. Is the language you use to describe culture or work expectations clear or does it leave room for ambiguity and assumptions? Are you regularly having conversations with your team to uncover issues that may be a result of “under the waterline” misalignment?
Tessa could have been a superstar, but the unspoken agreements led to a costly and avoidable missed opportunity to create alignment and develop a loyal, high performer. What do you need to bring your communication above the waterline?
Ingrid Vaughan, principal of My Smart HR and founder of the Smart Leadership Academy, provides HR support and leadership coaching to small-business owners and managers.
