Balanced psychological contracts in the small business: The five factor model at work

Abstract A balanced psychological contract is an employer–employee relationship that features an expectation of career advancement in exchange for high performance on work assignments. The major purpose of this study was to establish an extended theoretical framework for this hybrid type of contract and quantitatively examine its nomological network. Specifically, the primary goal was to examine in a multilevel study the relationship between balanced contracts and managerial personality, using the Five Factor Model. A secondary goal was to examine whether the interaction between personality and balanced contracts predicts employees' satisfaction with their work. The sample data were collected from 48 small business leaders and 244 of their employees in Canada. Multilevel analysis showed that managers' conscientiousness and openness to experience were the strongest predictors of balanced contracts. In addition, the interaction between openness to experience and balanced contracts was significantly related to employee job satisfaction. We conclude by discussing potential limitations, possible future research avenues, and practical implications.