(Rousseau 1995 ; Herriot and Pemberton 1995 ). The second is that organizational
change is now so pervasive that sooner or later any deal is in trouble, creating scope
for breach and violation (Morrison and Robinson 1997 ), and making the retention
of employee commitment, even with the best of HR practices, more diYcult to
achieve. The third is the argument that the nature of deal-making is changing from
general deals to more idiosyncratic deals, putting more pressure on local manage-
ment to make and manage them (Rousseau 2001 ).
Before exploring these issues in more detail, we need to deWne the psychological
contract. There are various deWnitions but the one that we will use deWnes the
psychological contract as ‘the perceptions of both parties to the employment rela-
tionship, organization and individual, of the reciprocal promises and obligations
implied in that relationship’ (Herriot and Pemberton 1997 ; Guest and Conway
2002 b). These promises and obligations can range from those that are clear and
explicit and close to components of the formal employment contract, such as more
pay in exchange for better performance; to others that are more informal and
implicit such as a boss–subordinate agreement aboutXexible working hours to
accommodate domestic circumstances. While both parties should be aware of the
exchange, there is scope, particularly in the more informal deals, for misunderstand-
ing and disagreement. It has been suggested elsewhere (Guest 2004 ) that to fully
understand the potential consequences of the psychological contract, it is important
additionally to take into account issues of fairness and trust. This is because the ‘deal’
may have been agreed by a worker but may be judged partly in the context of the deals
made with others. Also, it is possible that promises are being met at present but a
continuing contribution is likely to be based partly on an assessment of whether the
other party to the deal can be trusted to continue to deliver in the future.
The argument about the changing nature of the psychological contract is
sometimes presented in terms of an old and a new deal (Herriot and Pemberton
1995 ). In the context of managerial and professional workers, this can be described
as a shift from an upwardly mobile long-term career with the same organization in
return for loyalty and good performance, to provision of challenging work and
development opportunities in exchange for high performance. The distinctive
changes concern a reduced focus on loyalty and commitment in return for security,
with greater emphasis instead on notions of employability (Bridges 1995 ) and
boundaryless careers (Arthur and Rousseau 1996 ). For non-managerial workers,
the change is away from the old idea of a fair day’s work for a fair day’s pay towards
a greater emphasis on pay related to contribution and an expectation ofXexibility
that canXy in the face of traditional approaches to deWning roles and rewards based
on job analysis and job evaluation. All this implies a more challenging environment
for workers at all levels.
These changes have been deWned within the psychological contract literature
along a number of dimensions of which the best known is the distinction between
transactional and relational contracts. Transactional contracts are those that are
hrm: towards a new psychological contract? 133