Employment relationships have never been more complex or challenging for today’s leaders post the GFC. Earlier this decade generational differences highlighted the need to match messages to the target audience. Individuals were lumped into generational stereotypes such as gen X, Y and baby boomers. While this was somewhat useful in understanding grouped employee expectations it did not adequately explain differences between individuals or provide practical help to lead, engage and retain talent and over generalised motivators.
The concept of Psychological Contracts (PCs), spawned by Argyris in the sixties, remerged in the early 2000s as the ‘War for Talent’, coined by McKinsey, gained momentum. Today the role of psychological contracts has found significance and value again in understanding the key dynamics of nurturing healthy employment relationship post the GFC.
Rousseau defines Psychological Contracts as ‘the beliefs individuals hold regarding the terms and conditions of the exchange agreement between themselves and their organisation’
Rousseau, a prolific researcher in this field, defines Psychological Contracts as ‘the beliefs individuals hold regarding the terms and conditions of the exchange agreement between themselves and their organisation’. In other words the PC is the stated and implied set of expectations, obligations and understandings, operating between workers and their employer. It is not a legal document as such, but nevertheless is real in the minds of both parties and is a broader and deeper concept than a standard employment agreement.
Further, if the old paternalistic pre 2000s employment deal that offered job security, remuneration and career development in return for loyalty, commitment and service was killed off in the 1990s, then what replaced it? The answer was the emergence of a new post 2000 deal. This was characterised by an expectation of a more mature form of commitment to vision, values and goals as opposed to blind loyalty, more meaning and a recognition and deeper understanding of the continually changing needs of both parties.
delivery of the ‘deal’ plus trust and fairness in the workplace leads to a positive psychological contract
Guest, another academic in this field, points out that delivery of the ‘deal’ (rewards and recognition, security and safety, growth and support) plus trust and fairness in the workplace leads to a positive psychological contract with higher job satisfaction, higher organisational commitment, higher reported motivation and lower intention to quit.
In today’s fast changing, post GFC world, where employees are seeking increased job satisfaction and employers are craving employee engagement and retention, a healthy psychological contract makes sense, as does the model. It has never been more important to provide effective leadership that builds trust among individuals and teams. Moreover, research has shown trust is the great enabler of learning, and if there is no trust in the organisation then you can expect little sharing of knowledge and no organisational learning.
If there is no trust in the organisation then you can expect little sharing of knowledge and no organisational learning
Whatever the catalyst, developing healthy employment relationships has the potential to drive win-win outcomes and a mature form of commitment both ways. This is one of the keys to attracting, developing and retaining the ‘stars’.
The red alert message is that leaders must be cautious to not ‘over promise’ in the recruitment process and once on board, to prioritise the employees’ development and overall delivery of the ‘deal’. Of course this cuts both ways where employees provide reciprocated commitment. Where this is happens research points to win–win outcomes.