The psychological contract challenges managers.

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A psychological contract (PC) exists regardless of how positively or negatively the parties involved concern themselves with it. In general, management, by its actions, whether intentional or not, sets the tone for the substance of the PC. It defines the parameters of the job description and job duties for the employee by:

* directing the work force;

* establishing the reward system (in a nonunion setting);

* providing fringe benefits;

* communicating with employees;

* developing the formal and informal performance evaluation procedure;

* selecting supervisors and creating the organizational climate.

It is important for the organization to take positive steps to develop a PC whose substance maximizes a positive and constructive relationship between management and the employees.

It is relatively simple to state that'managers' expectations play an important role in developing a positive PC," but the concept is often overlooked. in general, it seems that the managers' attitudes toward employees tend to be self-fulfilling in that the employee will most likely fulfill management expectations.

An effective manager expects subordinates to complete work only to discover that faith in an individual often must precede the justification for it, and expecting the best is the most effective way to bring out the best in an individual. This M of manager expects high standards of performance and goes about creating an environment for superior performance.

In contrast, the less-effective manager expects subordinates to perform poorly and, therefore, attempts to see that no employee deviates from a prescribed role; this type of manager is control-oriented and views employees as lazy, indolent or inept, believing control equates to performance.

Unfortunately, the less-effective manager is far too common. The prevailing attitude among them is that: * most employees do not like to work;

some kind of control is needed to

make sure that they do work; * employees want to be told what do

rather than to think for themselves.

The result is obvious and has a negative impact on the substance of the PC. it is difficult to define one approach-one cure-all-that will bring about effective management and an optimal PC. Human nature is a complex phenomenon defying easy interpretation. Dramatic and potent changes are constantly impacting on organizations and have significant implications for the substance of the PC. Some PC Principles

Despite some bleak spots, a few general principles make a strong case in support of the PC.

First, the manager must be flexible and willing to change. Continually, efforts must be made to know and understand the needs of subordinates, the ever-changing workplace and the tasks to be done. Managers must learn how to use this information to realize organizational goals and objectives. Each individual has intimate perceptions and expectations of the substance of the PC; therefore, there are a number of discrete Pcs in the workplace. To be effective, the manager must learn and be willing to continually renew, change or modify these contracts as individuals, situations and organizational goals change.

Second, the manager must have a concern and respect for subordinates. Without this, there will be no impetus to find the time and energy necessary to understand people and situations in order to come up with an optimal PC. Neither will it be possible to carry out the substance of the PC and to make necessary adjustments that demonstrate the sincerity and integrity required to make the contract credible.

Third, the manager must also believe in the goals of the organization to honestly and effectively manage subordinates. A manager's lack of belief in the organization spills over into his attitude towards subordinates, eroding the credibility of the PC and making a mockery of sincerity and integrity. The manager must scruntinize the goals, motives and objectives of the organization to make certain that no personal conflict exists. Should there be conflict, it is important to assess the depth of differences and, if possible, make compromises in ways that maintain integrity without undermining the objectives of the organization. For management to be effective and efficient, there must be congruence between the goals, motives and objectives of the organization and the values and goals of its managers.

Recognition of the PC underscores that the individual employee has a heart and a head as well as hands-facts too long overlooked by organizations that have hired the hands while ignoring the heart and the head. Loyalty, commitment, creativity, trust and cooperation are intellectual matters. increased emphasis on the whole employee improves work quality and productivity. The result is achieving a universal goal-improving the competitive position of America, both at home and abroad.