The impact of leadership on psychological contracts : an exploratory study of the National Treasury

Abstract

This research investigates the relationship between different leadership styles and different types of psychological contracts. This stems from the need that many organisations have, to manage and retain talented employees who possess skills that are critical to the sustained success of the organisation. Leaders in particular tend to be at the centre of managing and influencing the employee’s experience and as such it is of great necessity that they understand how different leadership approaches impact on the unwritten, yet critical expectations and experiences of employees.The literature provided discusses psychological contracts and leadership. There are various instruments in the literature that were used to compile the questionnaire to gather data for analysis. The dependent variable, psychological contract, was measured mainly using Millward and Hopkins’s (1998) transactional and relational psychological contract instrument with some enhancement adapted from work done by Rousseau (2000). Bass and Avolio’s (1997) theory of Full Range Leadership Development was then the basis of the Multifactor Leadership Questionnaire tool which was used to measure Leadership as the independent variable.The study presents findings from 151 National Treasury employees, of which 33% were managers and 67% were non-management. Data obtained from these research instruments was statistically analysed. Overall, the findings from this study suggest that although the relationship that exists between relational psychological contracts and transformational leadership is not very strong, there is a positive association. It appears that transactional and transformational leadership do play a role in the kind of commitment employees make with the organisation. Lastly, an unanticipated outcome in relation to tenure within an organisation provided insight into the importance of understanding the context within which psychological contracts develop.