The relationship between employer and employee has always involved more than what's written in a contract. Beyond salary and job description lies a set of unwritten expectations, beliefs and perceived commitments that shape how people experience their work. This is the psychological contract, and its importance has grown as traditional employment relationships have fractured. Factors including technological disruption, the rise of gig work, remote and hybrid arrangements, and shifting generational attitudes towards work have fundamentally altered what employees expect from employers, and vice versa. As organisations grapple with retention, engagement and productivity challenges in this changed landscape, understanding these unwritten rules has become less a theoretical curiosity and more a practical necessity.

Denise Rousseau, H.J. Heinz II University Professor of Organisational Behaviour and Public Policy at Carnegie Mellon University, sat down with UNSW Business School Professor Karin Sanders to discuss the evolution of psychological contracts, the importance of evidence-based management, and the future of research that serves both scholars and practitioners. Rousseau, whose work has fundamentally shaped how we understand the unwritten expectations between employers and employees, shared insights from decades of field research and reflected on what it takes to make research relevant to the organisations it aims to serve.

Prof. Sanders: What was the start of your research on psychological contracts?

Prof. Rousseau: The concept has been with me a long time. My father hated his job, and yet he was a hard worker who showed up faithfully. As a child and into adulthood, I listened to him describe his work, and it occurred to me that he could hardly be alone. The subjective experience of people who worked diligently yet still experienced dissatisfaction was probably worth paying attention to.

In the mid-1980s, as organisations were divesting themselves of employees, I taught executives who talked about feelings of violation. I probed on that, and it became clear that these senior leaders tended to believe in some sort of employer commitment or obligation to their employees. They were uncomfortable with the trends they saw and still preferred trying to live up to expectations of reciprocity with their workers. It dawned on me that it sounded like a contract.

I spent several days in Northwestern University’s law library. I had this opportunity to meet Ian McNeil, a law professor there who had written on relational contracts. He explained how that notion of being in a relationship could come to surround a formal agreement. Those experiences were the catalyst for the scholarly notion of a psychological contract.

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Prof. Sanders: Does family background matter when trying to explain workplace behaviour? Does it matter if you come from a family where your parents are managers versus union members?

Prof. Rousseau: That's an observation worth exploring. One of the things I have come to appreciate over time is the notion of the anticipatory psychological contract. These are the a priori beliefs people hold before they join an organisation, or, in younger people, even before they have worked, about what they owe their employer and what they are owed in return.

Living in Western societies, the notion of reciprocity in exchange relationships is fairly common. It is a mechanism for keeping society functioning and threads through both Western beliefs about employment and psychological contract theory. I think there is a taste for reciprocity among people, but the question is whether they believe they can rely on it, and what they think they would owe in return.

Recently, a colleague and I have been working on a review of psychological contract research in South Asia. One point that emerged from this review is that in high-power-distance societies, reciprocity is not taken for granted. People might like reciprocity, but do not generally expect it. Employment is also often hard to come by. So expectation of equitable treatment is less common. Workers often have few opportunities for employment elsewhere and are willing to accept the boss’s demands to keep their jobs. This is self-defence and not our typical notion of how psychological contracts function.

Prof. Sanders: How is the psychological contract influenced by AI and different employment relationships today?

Prof. Rousseau: There's a significant change in employment relationships since I started my research. In the past, we had more paternalistic, longer-term relationships between employees and employers, especially for skilled workers; those positions were characterised by high-value psychological contracts between employers and employees.

We've moved through several iterations of employment changes today. Two patterns are emerging. The first is transactional: short-term, focused on what work you will do today and what the employer pays you, with no guarantees for tomorrow. Unless people stay a while, there is little relationship or attachment to the company.

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The second is transitional or unstable employment. This has become far more common since 2000, when it was rare. We see this in the information technology industry. In the United States, up until the recent administration, we had workers who came from overseas on H-1B visas. They were brought from India or wherever to work in high-tech, but very little was invested in them. The offer was largely the chance to come and work in the United States, but what else was promised in return was unclear. These workers face quite a level of uncertainty and not a lot of inducements beyond being in the States.

This transitional contract also seems more common in industries trying to replace skilled labour with technology and avoid commitments to skilled labour they don’t see as needed going forward.

Regarding AI, I've worked on a project with Dr Ultan Sherman and colleagues on the psychological contract of gig workers when their employer is, ostensibly, an algorithm.

It’s hard to interview an algorithm, but we interviewed people who did gig work. We found a tendency to anthropomorphise the algorithm. People feel they're interacting with a person. When that algorithm makes commitments, if the worker understands them appropriately, they expect those commitments to be honoured. Certainly, the algorithm is designed around transactional employment, but it still offers an arrangement that rewards you for staying committed. The incentives bring you forward if you stay.

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The algorithm-as-employer model means you never talk to a human being representing the organisation if you're at DoorDash or any of these other platforms. Nonetheless, people form what I'm going to call a theory of mind, a sense of how the algorithm is thinking and the ways in which they can interact with it. Gig workers sometimes give the algorithm names. It's been said that, to most people, the only two women who work in, or are known to work in, Silicon Valley are Alexa and Siri. The algorithm is typically not called either of those names. Many women do work in Silicon Valley, but the appreciation of that fact may be limited. But humans want to relate to the employer’s representative, even if that representative is code.

Prof. Sanders: What motivated you to become a champion of evidence-based management?

Prof. Rousseau: Frustration. I recognised early that the use of evidence systematically in organisational decisions was strikingly absent. When I became an organisational psychologist, I believed we were doing research that would be useful and that practitioners would, of course, use it.

I was struck by the fact that, even in the Harvard cases we used in class, executives seldom mentioned scientific evidence in their decision-making. It became clear that a research-practice gap exists. I thought we had all this research, and yet people weren't using it. That became a motivator for me to first try to teach better regarding the use of evidence.

Now fast forward 20 years, and I have come to realise it works the other way too. There is a gap, or a failure to communicat,e between researchers and practitioners. Scholars do not use insights and knowledge from practice well at all. Unless you're working at field sites often and working closely with a company, it's hard to appreciate how organisational decisions are made, what mental models practitioners have, and their decision-making routines and habits.

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Years ago, Sara Rynes and Jean Bartunek analysed articles published in organisational behaviour journals. They observed that the studies with more useful implications for practice in their journal articles were written by researchers who had spent more time in the field.

If you actually had a close relationship with an organisation in your research, and you had, let's say, mingled insights and ideas, when it came time to write up the practice implications of the research, they were much more detailed and targeted. Whereas if people had done lab studies, at an arm's length remove from actual practice – and I'm not trashing lab studies, we need them for a host of reasons – but the ability to recommend what the implications might be of the study and how practice might take up the ideas was much more superficial.

I'm a field researcher, but though I was learning some practical things, it wasn’t until I got into the evidence-based practice space that I came to appreciate how differently practitioners and researchers thought and what sources of information practitioners might find useful.

Prof. Sanders: You've emphasised that academics should research what interests managers, rather than only expecting managers to understand academics. Can you explain this approach to co-creation of research?

Prof. Rousseau: I think there's a lot of insight and deep care on all sides of the scholar-practitioner continuum, but as yet we don’t have good channels for mutual influence. It’s one thing to have interesting ideas. It's another thing to know how to act on them or where to take them. For scholars, a challenge is to frame problems and issues in the language of organisations.

I'm in Pittsburgh now. When you're in Pittsburgh, and you don't want to get on an aeroplane to go study something in another big city or big corporation, you study what's here. I came with teenagers, so I had to stay close to home. Can't outsource that job.

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What I found in Pittsburgh was hospitals. By spending a lot of time in one hospital, going back and forth over a period of years, this opened a door for me to do psychological contract research. But I learned to frame it in terms of the issues that they saw as important.

I learned from working in that setting that how people talked about motivating change was very different from how we discussed it in the research and consulting literature on change management. John Kotter gives very little attention to the “why” of change. As long as the leader decides what ought to be changed, Kotter focuses on creating a sense of urgency and getting people ready to act. The why is not even part of the steps in Kotter's model.

When I spoke with people at this healthcare organisation, I began to realise they had many different opinions about why a complex change in leadership and decision-making was being introduced. When I would bring those opinions back to my contacts at the senior leadership level – I've worked with nurses because they're delightful research partners – they admitted never having told their staff the reasons for introducing the change. I said, 'What do you mean? You never told them that you were doing this for economic reasons or for improved patient care quality?' They said, 'No, we are doing this to advance the nursing skillset.' This was interesting to me because my research found several reasons the nursing staff were attributing to the change I wondered how these reasons came to be understood.

The disconnect between what leadership thought they had communicated and what employees actually understood was substantial. This is the kind of insight you get when you're in the field and can observe the actual communication patterns, not just the intended messages. This helped to shape a study of motivated reasoning in response to organisational change efforts.

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Prof. Sanders: When did you first realise that your research was having an impact?

Prof. Rousseau: I'm still not sure. What is impact? Academics often think that citations are an indicator of impact, and I have decent citations, so I'm happy with that. At least I know that somebody has cited it. Does that mean they've read it? Maybe yes, maybe no.

What I think of as impact is when I'm in an organisation, and someone comes up to me and says, Do you remember when you started working on advancing evidence-based decision-making, and you talked about the families of practice that might help? That put us on the path to evidence-based decision-making, and we began conducting after-action reviews. That's more like impact in my mind.

A humbling thing about being an academic is you set out to accomplish X, but the world tells you you've done Y, and both may be valuable. Sometimes we need to declare victory and say people have told us what they found useful, and that's ok.