Keywords

Introduction

In the popular press, it is suggested that forced homeworking and quick adaptation to information technology brought on by the COVID-19 pandemic has changed employees’ expectations regarding how, when and where they perform their work (e.g., Caprino, 2020; Edwards, 2021; Kachaner et al., 2020). While homeworking and virtual work are not new to Western organizations, the implementation and use of work-from-home policies before the global pandemic were relatively limited (Van Veldhoven & Van Gelder, 2020). During the pandemic, some employees were negatively affected by homeworking due to a lack of social interaction with colleagues (Van den Eerenbeemt, 2020) or added stress (e.g., Van Ruysseveldt et al., 2021). Yet, preliminary research also shows that for others, perceptions of homeworking became more positive while the pandemic progressed, and a considerable number of employees would like to continue to work from home at least partly in the post-pandemic era (Kimnet, 2020). The difference in the experience of homeworking begs the question whether employees expect homeworking and virtual work to become a (larger) part of their employment relationship with the organization and how such perceptions play a role now that government regulations for enforced homeworking have been lifted.

If organizations provide employees (increased) opportunity for homeworking and virtual work post-pandemic, other key elements of the employment relationship such as communication with managers and colleagues, autonomy, and feelings of inclusiveness may be affected. Several studies suggest that perceptions of autonomy changed during the pandemic (e.g., Van den Heuvel et al., 2021; Zoomer et al., 2021). Anecdotal evidence also points to a potential increase in micro-managing and control by managers (Van der Heijden & Sterk, 2021). Moreover, aspects of inclusion which were less visible pre-COVID-19, such as “personality, abilities, thinking style, values, experiences” (Ferdman, 2018, 2021, p. 6), have become increasingly important during the pandemic. For example, employees who may have been actively involved in face-to-face settings but who are less technologically adept, may feel passed over or excluded in an online setting where they struggle to keep up with technology. Additional questions therefore arise, namely, do employees perceive changes regarding how they communicate with colleagues and managers, the level of autonomy they have, the amount of control imposed by managers and the extent to which they feel included? If so, how do these changing perceptions play a role in their employment relationship?

The popular press also emphasizes that due to the pandemic, individuals have become much more aware of social issues (Kachaner et al., 2020) including diversity and the environment. Due to this increased awareness, individuals expect companies to “integrate environmental concerns into their products, services, and operations to a greater extent than they have in the past” (Kachaner et al., 2020, para 4). Moreover, one in four individuals strongly agreed that they would no longer remain loyal to organizations that they perceived to have acted out of self-interest (Edwards, 2021). Although such social issues may fall outside of the personal entitlements related to being able to work from home, having autonomy, and feeling included, attending to these broader societal concerns is likely to play a key role in post-COVID-19 employment relationships.

The notion of the psychological contract can be used to capture the employment relationship between an individual employee and his or her organization (e.g., Rousseau, 1995). A psychological contract can be defined as “a cognitive schema, or system of beliefs, representing an individual’s perceptions of his or her own and another’s obligations, defined as the duties or responsibilities one feels bound to perform” (Rousseau et al., 2018, p. 1081). Obligations relating to flexibility and autonomy encompass organizational obligations that, when fulfilled, benefit the employee. Obligations to valued causes that reach beyond personal entitlements such as diversity and environmental causes which “are implicitly exchanged at the nexus of the individual-organization relationship” (Thompson & Bunderson, 2003, p. 574) are captured by what scholars refer to as ideological psychological contract obligations (e.g., Coyle-Shapiro et al., 2019; Thompson & Bunderson, 2003).

Albeit limited, a few studies have reflected on implications of the COVID-19 pandemic for the content and evaluation of the psychological contract (e.g., Lopez & Fuiks, 2021; Peterey et al., 2021; Veldsman & van Aarde, 2021). The evaluation of the psychological contract is often captured by the notion of psychological contract breach, which occurs when the employee perceives that while (s)he has upheld his or her part of the deal, the organization has not fulfilled its obligations vis-a-vis the employee (e.g., Morrison & Robinson, 1997). The lack of research is surprising since forced homeworking and self-isolation have had a fundamental impact on how the organization of work is viewed (e.g., Veldsman & van Aarde, 2021). Moreover, despite the increased importance of information technology, knowledge on the role technology plays in the nature and evaluation of the psychological contract is limited. Yet, following the pandemic, we particularly expect that for many organizations worldwide, the further implementation of remote working and virtual work, fostering inclusiveness and contributing to social causes and how this affects the employment relationship provides an urgent challenge. In other words, as indicated by Veldsman and van Aarde (2021),

This period will see dynamic shifts in how organizations think about traditional workplaces, with a rise in “hot desking” (desks assigned to employees as needed) and ‘co-working spaces’ (organizations sharing office space and equipment) (…) Always-connected employees will become the norm, and this period could spell the end of the traditional nine-to-five workplace. (p. 76)

Moreover, we expect that employees will value ideological currency more in psychological contracts post-COVID-19. In fact, prior to the pandemic, Dixon-Fowler et al. (2020) already proposed that fulfillment of ideological obligations will become increasingly important for attracting, retaining and motivating employees.

In this chapter, which is conceptual in nature, we consider the role of leadership behaviour in managing post-COVID-19 psychological contracts. Although previous studies have considered the role of transactional and transformational leadership (McDermott et al., 2013), and leader-member exchange (e.g., Dulac et al., 2008), we propose that these leadership behaviours are less able to manage inclusion, and ideology-infused psychological contract obligations. In this chapter, we specifically focus on inclusive leadership (e.g., Shore et al., 2011) and responsible inclusive leadership (Booysen, 2021). Inclusive leadership refers to leader behaviour that focuses on fostering uniqueness of employees, strengthening belongingness to the team, showing appreciation, and promoting inclusion in the organization (Veli et al., 2022). This type of leadership focuses on internal organizational processes, while responsible inclusive leadership has a wider focus, “emphasizing a broader base of inclusion, by focusing on collaboration between organizations and the communities they serve” (Booysen, 2021, p. 198). In discussing how (responsible) inclusive leadership plays a role in managing post-COVID-19 psychological contracts, we consider the challenges of managing such contracts remotely. We conclude with recommendations for future research and implications for practice.

Psychological Contracts

In existing work on psychological contracts, a distinction between transactional and relational elements has generally been made (e.g., Coyle-Shapiro et al., 2019). Drawing from Blau’s (1964) original work on social exchange theory, which includes economic (i.e., transactional), social (i.e., relational) and ideological exchanges, Thompson and Bunderson (2003) proposed to add ideological obligations as a third type of obligations to the psychological contract framework. Transactional obligations encompass economic terms such as the organization offering training relevant for the job. In return, the employee may offer to be flexible (Coyle-Shapiro et al., 2019). Examples of relational obligations include employee commitment and loyalty in exchange for promotion opportunities (Coyle-Shapiro et al., 2019). According to Thompson and Bunderson (2003), ideological obligations refer to those obligations that aim to fulfil a valued cause that surpasses self-interest. Examples include acting as an advocate for the cause and dedicating both financial and non-financial resources to the cause. From the employee’s side, such obligations encompass addressing the needs of a valued tangible or intangible cause and dedicating personal time to pursuing the cause. In contrast to economic and transactional obligations, fulfilment of ideological obligations affects beneficiaries beyond the dyadic employee-organization relationship (Scheel & Mohr, 2013), whereas fulfilment of obligations in transactional and relational psychological contracts affect the employee (e.g., through promotion and benefits) and the organization (e.g., through increased proactivity and work engagement).

It is also important to note the difference in the theoretical mechanisms underlying transactional and relational psychological contracts and the ideological psychological contract (cf. Dixon-Fowler et al., 2020; Yeung & Shen, 2020). While the former are grounded in social exchange theory and particularly the norm of reciprocity, social identity theory is used to explain the underlying mechanisms of ideological aspects of the psychological contract (e.g., Dixon-Fowler et al., 2020; Yeung & Shen, 2020). According to social exchange theory and the norm of reciprocity, if employees perceive that the organization fails to fulfil its obligations, employees respond in kind by reducing their effort or loyalty to the organization (e.g., Conway & Briner, 2005). Ideological obligations on the other hand are grounded in social identity theory (Dixon-Fowler et al., 2020; Thompson & Bunderson, 2003). This entails that employees are likely to “choose activities congruent with salient aspects of their identities, and they support the institutions embodying those identities” (Ashforth & Mael, 1989, p. 25). Hence an employee may particularly value and be attracted to an organization’s reputation for corporate social responsibility or diversity management. If the employee perceives that the organization does not live up to its reputation and fails to provide the employee with the opportunity to contribute to valued social causes or does not treat employees from minority groups equally, he or she may feel that his or her self-concept (i.e., being party to a meaningful cause) is threatened (Dixon-Fowler et al., 2020; Yeung & Shen, 2020), which, in turn, will guide his or her response to breach. In a recent study, Yeung and Shen (2020) showed that breach of diversity obligations had a stronger effect on outcomes for majority employees, providing support that even when employees are not personally affected, they may react negatively when the organization fails to fulfil commitments to valued causes, thereby negatively affecting third parties (e.g., internal minority stakeholders). Moreover, breach of ideological diversity obligations affected organization-targeted outcomes above and beyond the effects of transactional and relational breach (Yeung & Shen, 2020).

It is important to note that albeit transactional, relational, and ideological elements are distinct, these elements can occur simultaneously within an employee’s psychological contract (e.g., Dixon-Fowler et al., 2020). Yet, as pointed out by Dixon-Fowler et al. (2020), employees may respond differently depending on what type of obligation is perceived to be broken. For example, some employees may remain strongly committed to the organization when the organization fails to provide promised transactional and relational obligations if it upholds its ideological obligations.

Psychological Contracts Amidst and the Post COVID-19 Pandemic

According to Veldsman and van Aarde (2021), global trends including the COVID-19 pandemic will “impact the psychological contract by extending the definition of what employment entails” (p. 81). They propose that what they refer to as “inherent hygiene characteristics” will become trivial. According to Veldsman and van Aarde (2021), such characteristics include offices, benefits, and safe workspaces. Specifically, in the period following the pandemic, these scholars propose that rather than being a privilege, the ability to work remotely will become a ‘basic right.’ Moreover, they propose that organizational obligations related to wellbeing, a sense of belongingness, diversity, the environment, and the involvement of organizations in the public domain will become essential psychological contract terms in the coming years. Some of these suggestions are echoed by Lopez and Fuiks (2021) who also point to the importance of employee wellbeing and inclusiveness (which Veldsman and Van Aarde (2021) refer to as a sense of belongingness). However, Lopez and Fuiks (2021) and Petery et al. (2021) as opposed to Veldsman and van Aarde (2021) point to the critical role of safe working environments. While Veldsman and van Aarde (2021) suggest a safe working environment to be a hygiene aspect of the psychological contract that may become obsolete, Lopez and Fuiks (2021) and Petery et al. (2021) propose that a safe working environment was particularly pertinent during the COVID-19 pandemic (e.g., offering protective gear for those working in healthcare; face mask regulations for students and faculty on campus). The difference in perspective may be a result of the definition of a safe working environment or the context in which the propositions were suggested.

Veldsman and van Aarde (2021) mention the importance of diversity (internal stakeholders), the environment and taking part in the public domain (external stakeholders). Although these scholars do not refer to it as such, such contract terms are related to ideological currency in the psychological contract (e.g., Yeung & Shen, 2020). On the other hand, while Lopez and Fuiks (2021) explicitly refer to ideological contract terms, the examples they provide focus on organization obligations vis-a-vis the employee (e.g., taking care of the employee if one becomes infected; listening to the employee’s concerns) as opposed to obligations related to something outside the dyadic employer–employee exchange such as the wellbeing of minority employees within the organization or outside stakeholders.

Based on the review of the limited literature on psychological contract terms post-COVID-19, we propose that the main elements of psychological contracts, that is, transactional, relational, and ideological dimensions, will likely not change or be extended; however, the specific types of obligations that are offered within each of these dimensions will likely change. For example, within the transactional dimension, obligations related to providing equipment for home offices will become more pertinent. For relational obligations, safe working environments were previously mainly part of psychological contracts of employees working in organizations where dangerous situations are common. Yet, during and following the COVID-19 pandemic, safe work environments will likely become a more prominent part of psychological contracts in other occupations as well (cf. Petery et al., 2021). Moreover, we will likely see a shift in the importance that is attributed to specific contract terms. While flexibility and remote working were part of some existing relational psychological contracts, more employees will likely place emphasis on these contract terms after having worked from home due to government regulations. Moreover, due to social distancing and the willingness to work from home when new variants of the Coronavirus appear, employees will likely place more emphasis on feeling included (cf. Lopez & Fuiks, 2021). Hence, inclusion—“the degree to which employees perceive that he or she is an esteemed member of a work group through experiencing treatment that satisfies his or her needs for belongingness and uniqueness” (Shore et al., 2011, p. 1265)—will become a more important contract term (e.g., Lopez & Fuiks, 2021; Veldsman & van Aarde, 2021). Furthermore, we propose that ideological currency (including diversity and environmental causes), a psychological contract dimension previously identified but generally only considered in relation to volunteer work or employees in the public sector (Yeung & Shen, 2020), will become more important to employees in other sectors and job functions as well (cf. Veldsman & van Aarde, 2021).

(Responsible) Inclusive Leadership

Veli et al. (2022) developed a consolidated conceptualization of inclusive leadership based on an extensive review of the literature, which captured 50 themes underlying four main dimensions of inclusive leadership. The first two dimensions (fostering individuals’ uniqueness and strengthening belongingness in the team) are in line with earlier work (see Shore et al., 2011). The two other dimensions encompass ‘showing appreciation’ and ‘supporting organizational efforts.’

Leadership behaviour focused on fostering uniqueness includes behaviours such as supporting employees as individuals, which is about managers giving attention to employees’ feelings, expectations, and interests, and offering guidance or emotional support (Veli et al., 2022). This dimension of inclusive leadership also includes promoting diversity, which implies that managers recognize individual differences, show openness, value people’s unique characteristics, help individuals to contribute, and listen to individuals’ ideas (Veli et al., 2022). Other behaviours associated with this dimension are empowering employees, enabling individuals to take actions on their own, and fostering employees’ learning and development, which gives employees the opportunity to further develop. Managers employing inclusive leadership are open to individuals’ needs for growth and help employees to create synergy between their own goals and work goals (Veli et al., 2022).

The dimension ‘strengthening belongingness in a team’ refers to behaviours mainly on the team level such as ensuring equity, which can be achieved by showing integrity behaviour, ensuring justice and fairness (Veli et al., 2022). Building relationships is also crucial to strengthening belongingness and requires managers to work on the relationship with the team as a whole and facilitate positive relationships within the team. In addition, sharing decision-making, which entails making decisions collectively with employees to ensure their opinions are included, and building consensus within the team is a part of the dimension strengthening belongingness (Veli et al., 2022).

The third dimension, showing appreciation, refers to managers’ reaction to achievements and efforts and includes behaviours associated with recognizing employees’ efforts and contribution. To do so, managers notice the efforts of employees, show admiration for others’ contributions, and praise achievements (Veli et al., 2022).

The fourth dimension, supporting organizational efforts, includes behaviours that target the organizational level and are related to changing the organizational strategy to be more focused on inclusion, such as being open to organizational change. Managers should be responsive to change, pay attention to new opportunities, contribute to organizational development, and show understanding towards resistance in times of change (Veli et al., 2022). Also a part of this dimension is promoting the organizational mission on inclusion, which is associated with communication on how inclusion is related to the mission and vision of the organization, and aligning organizational initiatives with inclusion, such as HR practices, and creating a more diverse workforce (Veli et al., 2022).

Booysen (2021) proposes that contemporary work environments characterized by volatility, uncertainty, complexity, and ambiguity (VUCA), call for a blend of inclusive and responsible leadership. Inclusive leadership behaviour focuses on processes in the organization, namely behaviours focused at the individual employee, team, and organizational levels. Although inclusive leadership may focus on external stakeholders (e.g., community) through the dimension supporting organizational efforts, the behaviour is largely targeted at those operating within the organization’s boundaries. Responsible leadership on the other hand is largely focused on practices and behaviours targeted at external stakeholders (e.g., Miska & Mendenhall, 2018; Voegtlin et al., 2012). Responsible inclusive leadership is considered to equally stress “the internal organizational and the external macro levels of inclusion on the one hand, and relational, ethical and sustainable practices on the other hand” (Booysen, 2021, p. 208).

Challenges in Employing (Responsible) Inclusive Leadership in Managing Post-COVID-19 Psychological Contracts

It is particularly important that employees, even when working at a distance and not engaging in face-to-face interactions, feel that their unique perspectives and contributions are still acknowledged and that they have the opportunity to contribute while working from their home location. Moreover, it is important that employees feel appreciated and recognized while homeworking. Although managers may have the intention to achieve this goal while employing the two dimensions of inclusive leader behaviour focused on the individual employee (i.e., fostering uniqueness and showing appreciation), several of their behaviours may interfere in their goal to include employees who work remotely. For example, due to a manager’s concern for running a department successfully and being valued oneself, a manager may resort to micromanaging behaviour (cf. Wasserman, 2021) which can reduce perceptions of autonomy. As a result, an employee may feel that while (s)he is allowed to work from home, working remotely will not have a positive outcome for her/him. Inclusion encompasses “interpersonal practices that result in a sense of safety, full belonging, participation and voice” (Ferdman, 2021, p. 7). Yet, when one’s manager is focused too much on controlling and checking one’s work rather than giving an employee the opportunity and ability to be creative in one’s work tasks, an employee may not feel (s)he is equally participating and able to express one’s opinions. In addition to a manager’s assumptions and concerns about one’s own performance and standing in the organization, a manager’s difficulty in trusting employees may also play a role in the manager’s failure to uphold the organization’s end of the psychological contract regarding homeworking (e.g., Kaplan et al., 2018; Wasserman, 2021). If managers do not trust that employees can perform well, or employees first need to prove themselves, managers may be reluctant to allow employees to work from home post-COVID-19 or managers may distinguish between who they allow to work from home or how often employees may work from home. Such decisions will likely negatively affect feelings of inclusion among some employees within the department or team.

Managers may also find it challenging to strengthen belongingness in one’s team while team members work remotely at least part of their workweek. This challenge may particularly arise due to differences between team members in their use of technology and communication skills. When employees work remotely, it might be more difficult to strengthen belongingness within the team as differences between team members such as different beliefs and perceptions towards information technology tools and face-to-face meetings may be less aligned. For example, research has shown that generation Z, also referred to as digital natives, born between 1995 and 2012, are able to consume information more rapidly than previous generations (Deas, 2021). Yet, it has been suggested that this generation lacks critical thinking abilities and face-to-face communication skills (Deas, 2021), which may pose a challenge for managers to strengthen belongingness among employees from different generations and encourage collective decision-making. Moreover, different views and expectations regarding flexibility and leisure time (e.g., Deas, 2021) may hamper the development of a cohesive team. In terms of fulfilling ideological obligations, differences between generations may also pose a challenge. It has been suggested that generation Z employees are particularly concerned with environmental issues (Deas, 2021). Consequently, it is likely they find it particularly important that the organization and their department or team contribute to ideological obligations. Yet, other employees within the team may have different priorities, which can hamper feelings of inclusion and cohesiveness.

The dimension ‘supporting organizational efforts’ also posed a managerial challenge during the pandemic, particularly regarding fulfilling ideological obligations. Based on personal communication between the second author and executive members of different organizations, in the first phase of the pandemic, when the COVID-19-crisis hit organizational functioning, and remote work suddenly became the main way of working and cooperating, many organizations focused on their main goals in providing services or products, while several strategic policy projects (focused on ideological obligations) were put on hold. Since the focus was more on making sure that production or provision of services could continue, managers were particularly challenged in upholding ideological obligations. Yet, since employees find it increasingly important that organizations contribute to environmental and social causes, managers must ensure that post-COVID-19, the organization fulfils such obligations and offers employees the opportunity to contribute to valued causes. We propose responsible inclusive leadership is also particularly pertinent in fulfilling ideological psychological contract obligations. Similar to employing inclusive leadership, managers attempting to employ responsible inclusive leadership may experience challenges related to being in control, having the belief that they need to know the answers, and doing things on one’s own (Booysen, 2021).

Recommendations for Future Research

An important limitation of our chapter is that it is conceptual in nature. We therefore recommend scholars to conduct qualitative research to gain a better understanding of how employees experienced their employment relationship with the organization during and after the pandemic. We propose such qualitative efforts should not only be conducted from the employee’s perspective, but it is also important to gain a better understanding of how organizational representatives perceive the psychological contract with employees and changes or shifts they may expect in the near future.

In the present conceptual chapter, we focused on the role of (responsible) inclusive leadership in managing psychological contracts. We propose that scholars further investigate the role of this type of leadership in shaping the content of psychological contracts. We particularly stress the importance of focusing on how relatively under-researched theoretical perspectives in the psychological contract framework such as social identity theory help explain how employees respond to breaches of ideological psychological contract obligations and what role inclusive leadership plays in the relationship between breach and employee outcomes. Will the use of inclusive leadership be able to reduce negative effects of the organization’s failure to fulfil ideological obligations or might employees perceive betrayal by their managers (cf. Restubog et al., 2010) who aim to foster belongingness yet fail to contribute to key ideological obligations?

We considered inclusiveness obligations as part of an employee’s relational psychological contract, while diversity obligations were considered part of ideological psychological contracts. However, inclusion obligations may also be part of the ideological psychological contract depending on how broadly it is defined, for example, safeguarding “equality among different social identities in the same workplace” (Mousa, 2020, p. 128), while diversity obligations could also be considered as part of the psychological contract between minority employees and their organization, since a breach of such obligations explicitly disregards an employee’s ethnic identity (e.g., Tufan et al., 2019) as opposed to affecting a third party. We encourage scholars to consider these differences in future research on psychological contracts and to further disentangle minority and majority employee responses to breaches of diversity (Yeung & Shen, 2020) and inclusion obligations.

Finally, we urge scholars to further explore how supervisors and human resource managers can foster psychological contracts across generations. Based on previous research, it can be suggested that there are differences in what employees find important in their psychological contract. It is important to explore how such differences may affect belongingness in teams. Moreover, while the present chapter was limited to psychological contracts between an employee and the organization, team-level psychological contracts (e.g., Laulié & Tekleab, 2016) may become increasingly important while employees continue to work remotely at least for a part of their workweek. We therefore encourage more qualitative research to gain a better understanding of the processes involved in team psychological contracts and the role inclusive leadership plays herein.

Recommendations for Practice

Following Wasserman (2021), we propose managers identify key challenges and opportunities for employing inclusive leadership behaviours. Challenges experienced by managers may be a result of underlying assumptions of traditional leadership theories (e.g., Nurcan & Riggio, 2021). As a result, human resource managers could consider redeveloping their leadership and management development programmes to emphasize an inclusive approach (cf. Nurcan & Riggio, 2021). Moreover, while formal programmes and inclusive practices can be helpful, some have proposed that explicitly labelling outcomes for specific groups can further divide social groups within organizations (Atewologun & Harman, 2021). Scholars posit that inclusiveness can be particularly fostered through informal behaviours. In accordance, we propose human resource managers “go beyond a traditional focus on addressing individual stereotypes and assumptions to highlighting and training managers on the differential impact of their everyday actions” (e.g., Atewologun & Harman, 2021, p. 106). This entails facilitating managers in understanding how their behaviours come across to employees. Although formal practices may turn a manager’s attention to inclusiveness, it is important that managers do not (unintentionally) emphasize differences between groups of employees. Instead, managers benefit from informal approaches which show that inclusive behaviour is lived throughout the organization.

An important part of inclusive leadership is creating a sense of belongingness among team members. According to research, there are important differences between generation Z and other generations in the workplace. We propose this may hinder a manager’s ability to create an inclusive team. Managers may want to try interventions such as reverse mentoring (e.g., Gadomska-Lila, 2020) to increase mutual understanding for differences in perspectives and increase employees’ willingness to learn from other generations.