New Deal for Old? Exploring the Psychological Contract in a Small Firm Environment

Abstract

The aim of this article is to explore the ways in which small firm size impacts upon psychological contracts in the workplace, from the perspective of the owner-manager.While the study of the psychological contract has attracted much research interest of late, the majority of this research is located within the context of large firms. Debates concerning the impact of the new deal, which have provided the rationale for much contemporary research into the psychological contract, have not questioned the relevance of such changes to small firms and there has been a general failure to consider how the characteristics of small firms and the conditions they face affect the role, content and dynamics of psychological contracts.The research is based on in-depth qualitative interviews with owner-managers of 10 small firms from a variety of sectors.The findings suggest that small firm size affects psychological contracts in a number of significant ways, and that the changes associated with the so-called `new deal' have had little impact on small businesses. The implications of the findings are outlined, first with regard to enhancing understanding of the dynamics of employment relationships within small firms, and second for our further understanding of the psychological contract.