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COVID-19 & The Psychological Contract

When COVID-19 hit, some leaders felt they needed to put up a good front to reassure their teams and boost morale.  In an effort to maintain a positive environment, they withheld information and bent the truth.  I remember sitting in a town hall where the company president said, “We’re doing better than ever and we’re not making any layoffs!” I sighed a breath of relief for myself and for my team. No more than 5 minutes later, however, I got a call from my director. He listed off individuals who were being “let go” due to their current performance. I was confused and I was hurt. Although these weren’t technically layoffs, I could connect the dots – and it broke my trust in the organization. I wasn’t the only manager who got that call.  And, as the news spread throughout the company, confidence in our leadership team plummeted. Our psychological contract had been breached. 

As early as the interview, individuals begin to construct an implicit set of rules with their organization known as a psychological contract. This psychological contract is represented by a set of mutual beliefs, perceptions, and informal obligations between an organization and its talent (HRZone). In simple terms, if someone does “this”, then they know their organization will do “that”. This contract isn’t formally documented and it can be different for everyone, but it’s a key component to building trust at work. 

Trust can directly influence an individual’s and team’s behaviors, feelings, and attitudes at work. A consistent, predictable order of events supports a high level of trust. Higher levels of trust support consistent behavioral inputs and team engagement, therefore resulting in a stronger psychological contract. 

In an interview with Worth, Marcus Gillam, CEO of a Toronto-based construction management firm, explained how their psychological contracts remained steady throughout COVID-19. Gillam said “I was straight with our team, I didn’t try to sugarcoat anything. We did have to make temporary layoffs, but we continued to hold town hall meetings with everyone. As difficult as it was, there was a lot of positive feedback and a lot of support. It was very encouraging.”

With COVID-19 lingering, companies have to be more cognizant of their psychological contracts than ever before. Whether your organization started off strong or incited a breach, there is always an opportunity to reinforce the psychological contract with your team.  Here’s how.


1.  Communication is key

Maintain a steady cadence of communication with your team and let them know when changes are around the corner. Take time out of your day to talk directly with them through video calls or over the phone so they feel confident about the messages they are receiving.

2.  Show what’s behind the door

Strive for transparency and communicate the why behind the organization’s decision-making process. Whether it’s letting someone go or promoting them, your team needs to understand the reason for the change.

3.  There is no such thing as too much feedback

The easiest way to build a connection between a wanted (or unwanted) behavior and an outcome is to provide feedback related to that outcome. Your team won’t know which inputs lead to which outputs unless you tell them what’s working and what isn’t.

4.  Sign on the line

As a leader, you need to understand your impact on your team’s psychological contracts and be committed to upholding your end of the bargain. Ask your team what they need from you to strengthen their understanding and do it, even if times get tough.


COVID-19 forced leaders to make decisions they never thought they would have to. Some, in trying to protect their people, unwittingly broke organizational trust. Clearly, these breaches weren’t caused by malicious intent, but the effect was nevertheless damaging. Creating a transparent, shared understanding of reality in a complex time isn’t easy, but it’s the best way to move forward, mend the psychological contract, and build a culture of trust.


Catherine Germinario


Over the past few years, Catherine gained experience ranging from human resources and program administration to the heart of any business, sales, and marketing. She quickly moved into multiple training and management roles, creating training material, building processes, and spearheading women-in-sales focus groups. At Optify, she focuses her efforts on business development and marketing campaigns as a thought leader to continue to expand outreach.

Catherine holds a Masters of Arts in Industrial and Organizational Psychology from the University of North Carolina at Charlotte. She earned her B.A. in Psychology from Christopher Newport University with minors in Leadership and Communications. Catherine was also an avid member of the President’s Leadership Program and recipient of the Joann S. Squires Award for Industrial and Organizational Psychology in 2018.