Authentic Leadership and Its Role in Building Psychological Contracts

The concept of psychological contract has been gaining importance in the recent times along with the theory of authentic leadership. It is the prerogative of the leaders to understand the psychological contract between themselves and their employees as it provides them with a competitive advantage in creating a motivational work environment where equity is valued. Four companies, namely, Costco, PwC, Southwest Airlines and Aravind Eye Hospital were selected for case study analysis in this study with respect to impact of authentic leadership on the building of psychological contracts. It was found that the leadership style does have a significant positive impact on building of psychological contracts between the employer and employee in an organization.