When Scaling or Selling Quietly Breaks the Psychological Contract

Does something feel “off”?

As startups grow, founders often sense a subtle shift in their team. People still show up. The work gets done. But something feels different. There’s less challenge in meetings. Less ownership of the whole. More caution. More “Tell me what you want me to do." From a founder’s perspective, this can be puzzling. Structures are clearer. Roles are better defined. The business is more stable. On paper, things are improving. 

Yet beneath the surface, team members are wrestling with something harder to name: a growing sense that the unwritten deal they signed up for has quietly changed. This shift can occur during rapid growth, but it can also surface when a founder begins preparing for an exit, such as by bringing in investors or selling the business altogether.

Breaking the psychological contract

Most employment relationships operate with two contracts. The formal contract is explicit: role, responsibilities, pay and reporting lines. And the psychological contract, which is implicit: expectations about influence, belonging, growth and how success happens. In early-stage startups, the psychological contract is often rich and compelling:

• I’m close to the founder

• I shape direction, not just execution

• Breadth, initiative and hustle are valued

• We’re building this together

As organisations scale—or prepare for an acquisition —the formal contract becomes clearer. But the psychological contract often changes without being acknowledged. Decision-making centralises. Roles narrow. Expertise replaces generalists. Influence becomes more indirect. External stakeholders begin to shape priorities. When this shift happens silently, people don’t experience it as progress. They experience it as a loss.

One way to understand the transition

This is not resistance to change. It’s a psychological transition. Early employees aren’t just being asked to work differently. They’re being asked to let go of an identity that once made them feel competent, valued and successful. In the context of a sale or acquisition, this can be even more pronounced: Who am I in this organisation now? What does loyalty mean? What does success look like under new ownership?

Without language for this transition, people often respond in predictable ways:

• Pulling back rather than leaning in

• Becoming more cautious or compliant

• Protecting their position rather than experimenting

• Interpreting reduced influence as reduced trust

From the system’s perspective, this can look like disengagement. From the individual’s perspective, it feels like the ground has shifted beneath them. The issue isn’t that the contract changed. It’s that no one named it.

A few questions to reflect on…

If your organisation is growing, preparing for investment or moving towards an exit, these questions can help surface what may be unspoken:

• What did early success mean for people here, and how has that changed?

• What parts of the original psychological contract no longer hold true?

• Where might people be grieving something they haven’t been given permission to name?

• What assumptions am I making about resistance that might be about loss?

• Have we explicitly talked about what it now means to be successful in this organisation, now or post-sale?

These conversations are often uncomfortable. Avoiding them is usually more costly.

One thing to notice this month…

Rather than pushing people to “move on”, experiment with creating space for an ending. This could be as simple as:

• Naming openly how roles, influence and expectations have changed

• Acknowledging what early employees have had to let go of

• Inviting people to reflect on how they want to contribute in the next phase, whether that’s growth, transition or life after a founder exit

The aim isn’t nostalgia. It’s integration — helping people carry forward what still matters while letting go of what no longer fits. Psychological transitions move faster when endings are acknowledged rather than bypassed.

A closing thought

Scaling a company — or selling one — doesn’t just change systems and structures. It changes who people are allowed to be inside the organisation.

Founders who navigate this well don’t pretend continuity where it no longer exists. They help people make sense of the shift. They name what’s ending, clarify what’s emerging and support the re-authoring of identity in a more complex system.

The psychological contract will change as a business grows or transitions. That’s inevitable. Whether it fractures trust or strengthens commitment depends on whether leaders are willing to lead the transition, not just the structure.

Finding a better way often begins with one overlooked question: What are people being asked to let go of — and have we helped them do that well?

About Andrew 

Andrew Sherman is an executive coach who works with founders and leaders in media, tech, and founder-led businesses. His work focuses on helping leaders find better ways to lead as growth, pressure and transition change what’s required.

If this article reflects challenges you’re navigating right now, you’re welcome to get in touch or follow along for future editions of Find a Better Way.