Leadership, human resource management and the content of the psychological contract

Abstract

This paper argues that, in combination, management leadership styles (transactional versus relational) and human resource management practices (flexibility versus commitment) play an important role in formulating the orientation and content of the psychological contract. The paper presents a theoretical framework of how this occurs, drawing upon and integrating prior research to develop a typology of psychological contract obligations based on a two-by-two matrix, with leadership style and HRM systems on opposing axes. The resultant obligations are termed as partnership, paternalistic, market-based and dynamic. Implications are discussed from the viewpoint of both individuals and organizations. Crucially, the paper posits that a failure to match leadership styles and human resource (HR) practices may lead to mismatched expectations between employees and employers. This may have negative consequences for an organization’s performance as, under the psychological contract, a breach of perceived obligations to employees by employers can have consequences for employee attitudes and behaviors