APMG-International Exam Change-Management-Foundation Topic 1 Question 14 Discussion

The psychological contract is the unwritten and implicit agreement between an organization and its employees, which defines their mutual expectations and obligations. The psychological contract can be broken when either party fails to fulfill their promises or obligations, such as changing the terms and conditions of employment, reducing the benefits or rewards, or violating the trust or respect. When the psychological contract is broken, it can have negative effects on the organization, such as lower employee engagement, commitment, and loyalty; higher turnover, absenteeism, and grievances; and lower productivity, quality, and innovation. Therefore, one of the effects of breaking the psychological contract is that the likelihood of achieving performance targets reduces. The other options are not effects of breaking the psychological contract, but rather causes or consequences of other factors.