Psychological Contracts in Algorithmic Management

Abstract

Algorithmic management makes decisions that humans used to make, changing the employee-employer relationship. A new discipline is emerging to explain whether and how algorithms impact people’s lives in organizations, online platforms, education, and healthcare, among other areas. This paper seeks to contribute to this effort by addressing the question of how algorithmic management influences the employment relationship using a psychological contract perspective. We develop propositions to explicate the mechanisms behind how algorithmic management affects employee psychological contract. Our propositions are built upon two dimensions: (1) the role of the algorithm, such as consistency in decisions and outcomes, constrained social interactions and the level of algorithmic intervention in the psychological contract; and (2) human-centered design features, such as algorithmic fairness, transparency, and participatory involvement that may promote one’s psychological contract. We discuss how these design features will relate to the psychological contract through the mechanisms of perceived justice, sensemaking, and empowerment. We conclude with empirical recommendations and practical implications to encourage research in this direction.