How Breaching the Psychological Contract Can Ruin Employee Engagement

Employees sitting at a table looking bored
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Engagement is probably one of the most critical yet elusive factors in the workplace. It’s hard to describe, but we certainly all know it when we feel it or see it. People go from totally pumped and engaged to seriously deflated and disengaged because of a breach of the psychological contract.

A psychological contract is a person’s belief about the mutual obligations that exist between an employer and an employee – some stated and tangible (like you give me pay and benefits, and I’ll give you work output, time, and hours) and some unstated and intangible (like you will provide me with a positive work culture and opportunity, and I’ll give you commitment, loyalty, and effort). This contract obviously evolves both ways as expectations develop and as we start melding into the culture.

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How Does Disengagement Happen?

Disengagement often happens, though, when there is a breach of this contract. And these breaches, as I’m sure some of us have experienced, come about for a variety of reasons like violations of trust, actions that reveal a lack of honesty and integrity, behaviors that violate ethics or the law, promises that get broken, assignments that intrude on personal time, job descriptions and expectations that are ill-defined, environments that are difficult and depressing, and leaders who drastically alter the deal.

These breaches that lead to disengagement are critical because research has consistently shown that disengagement can lead to a decline in productivity, performance, workplace safety, loyalty and retention, organizational citizenship behaviors, and, overall, the bottom line.

Some research has even found that contractual breaches influence different age groups differently. Younger employees lose their sense of trust and commitment; older ones lose their sense of job satisfaction. Regardless of what it impacts, research has shown that when an employee is disengaged, their disengagement can negatively impact the team and, ultimately, negatively impact customer engagement and retention.

The Power of Emotional Contagion

The reason why this occurs is a phenomenon called Emotional Contagion, which is a very simple concept: if you smile and are positive around someone, they will feel good and most likely carry that positivity to the next place they go, which can create a ripple effect, and is pretty amazing when you realize how powerful a small positive gesture can be. The same ripple effect can, of course, occur when projecting negativity. Don’t believe me? Take a moment and think about whether you feel good or bad around a positive person and/or a negative person. It doesn’t take a brain surgeon to figure this one out.

Sigal Barsade, a professor at Wharton Business School, studied emotional contagion and observed that people are walking mood inductors – people are continuously influencing the moods and then the judgments and behaviors of others. In her research, she has found that when participants are exposed to someone acting cheerfully in a group, the group behaves more cheerfully. When participants were exposed to someone acting in an angry way, the group became angrier. Positive emotions created more cooperation; negative emotions increased conflict and decreased cooperative decision-making. The effect occurs in every type of organization, in every industry, and in every large and small workgroup.

This research confirms that disengagement, often caused by a breach of the psychological contract, can have incredibly significant, unintended consequences. Often, a broken psychological contract is left unrepaired, which only worsens the impact and consequences. Acknowledging the breach and making attempts to repair it is critical to regaining engagement and interrupting the effects of emotional contagion. It’s a no-brainer.

Headshot of Nicole Lipkin
Dr. Nicole Lipkin

Dr. Nicole Lipkin is an internationally recognized leadership expert, speaker, and the author of the two popular business books What Keeps Leaders Up At Night: Recognizing and Resolving Your Most Troubling Management Issues and Y In the Workplace: Managing the “Me First” GenerationAs a business psychologist, her goal is to help companies develop resonant, motivational, and powerful leaders.

After years in corporate America developing and implementing leadership programming and training, Nicole founded Equilibria Leadership Consulting in 2007. This is an international firm based in the US focused on helping companies, leaders, and teams improve management and leadership skills, strengthen the leadership pipeline, and develop behaviors and practices that help increase organizational resilience and sustainability. She also founded Equilibria Psychological and Consultation Services in 2004, a mid-sized group psychology practice located in Philadelphia, Pennsylvania.

Nicole is a regular contributor to the broadcast community and has been featured on NPR, NBC, CBS, Fox Business News,,,, New York Times Magazine, and numerous other media outlets both nationally and internationally.

Connect with Nicole on LinkedIn.

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Managing the Cost of Disengagement

Join subject matter expert Dr. Nicole Lipkin for this webinar to learn the cost of disengagement to your organization and what you can do to mitigate it.

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