Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations)
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When I first joined the workforce, at the ripe old age of 11 with a paper route, I had a very simple understanding of my relationship with my employer, the newspaper. They would deliver the day’s newspapers to my doorstep by 4 a.m., and I would need to have them delivered to the homes on my route by 6:30 a.m., safe and dry. In exchange for doing this daily work, I would receive a monthly wage. If I kept the subscribers happy, the newspaper was happy. It was a simple exchange of labor for wages, and I had no real expectation beyond that. I continued delivering papers for several years until I transitioned to other, more traditional forms of part-time employment and eventually full-time employment.
Fast-forward 30-plus years and my workplace expectations have evolved dramatically. In today’s world of work, I still want a fair and equitable wage for work performed, but I also expect reasonable benefits, autonomy and flexibility in how, where and when I perform my work. I want a positive and healthy workplace culture, and I want to be able to derive meaning and purpose from the work that I do.
This evolution of work expectations illustrates what scholars call the “psychological contract of work,” and, like my mine, most workers' expectations have shifted dramatically over the past several decades.
Defining The Psychological Contract Of Work
The Chartered Institute of Personnel and Development, one of the premier HR professional organizations in the world, points to the 1960s for the origins of the term "psychological contract" and defines it as "Individuals’ expectations, beliefs, ambitions and obligations, as perceived by the employer and the worker." The CIPD goes on to argue that the psychological contract provides a "powerful rationale for employers to pay attention to the ‘human’ side of the employment relationship.” In other words, when employers and workers develop and maintain a positive psychological contract, expectations and values are better aligned, which often results in attracting, retaining and engaging stronger talent to help the organization achieve its objectives, innovate and add consistent value to the market.
The Shifting Psychological Contract
In 1995, professor Jean-Marie Hiltrop explored the human resource implications of the changing psychological contract when employees face increased risk and uncertainty. Cambridge University Press published a timely update in 2021, titled: How COVID-19 is shifting psychological contracts within organizations. In the article, researchers outlined more recent changes as a result of the coronavirus pandemic, showcasing how worker expectations toward their employers and the nature of the work they perform have shifted dramatically since the term was coined nearly six decades ago.
Unlike previous generations, workers in the modern workforce generally desire both autonomy and flexibility while recognizing that most organizations don’t offer much in the way of job security. As the psychological contract of work has shifted, employers’ willingness and ability (or lack thereof) to adapt and meet the ever-evolving needs and expectations of their employees has had a large impact on worker satisfaction, engagement and the overall employee experience. Frankly, most organizations have not paid adequate attention to the shifting psychological contract and overall employee experience during periods of a down economy and tight labor market, as employers could essentially get away with it. However, during the pandemic and the corresponding “Great Reevaluation,” the labor market tightened significantly. Employers have since realized (many far too late) that drivers of employee satisfaction and engagement, as well as the holistic employee experience, are essential if they hope to attract and retain great talent.
Strengthening A Positive Psychological Contract With Your People
So, how can we effectively reorient ourselves, our teams and our organizations around a mutually beneficial psychological contract?
1. Focus on developing and maintaining authentic relationships of mutual accountability and trust.
A big reason for the erosion of the traditional psychological contract is that employers have become less focused on their people while continually ratcheting up workload and performance expectations. Many employees have become cynical and distrustful of leaders and have thus shown diminishing commitment and loyalty toward their employers. When leaders invest in their people, tenaciously advocate for them and foster a culture and environment of mutual accountability and trust, they can strengthen the psychological contract and improve the employee experience. While investing in your people starts with a baseline of paying fair and equitable living wages and benefits, it is more about your commitment to their development through providing ongoing coaching, mentoring and feedback. Moreover, in the knowledge economy, practice top-down authoritative leadership. Leaders need to foster a reciprocal trust that can only emerge and be sustained as they willingly encourage and accept feedback (even strong pushback) from their people.
2. Laser focus on the holistic employee experience to become an employer of choice.
Especially in a tight labor market, leaders need to learn how to clearly and consistently articulate and communicate their employee value proposition to their people and potential new workers. Gone are the days when employers can get away with taking their people for granted. If you have an unhealthy, unsafe and unmotivating workplace, people won’t stay, and negative word will spread. In the ongoing fight for talent, leaders must learn to honor the whole individual—who they are at work and outside of work—create a purpose-driven and invigorating work environment and maintain laser focus on becoming an employer of choice!
The psychological contract of work has shifted dramatically, not just over the past several decades, but particularly over the past several years. This shift has resulted in an increasingly competitive battle to attract and retain great people who can be committed to their organization and continually add value to the market. Whether you are worried about worker turnover or quiet quitting, leaders need to recommit to creating and maintaining a positive psychological contract of work.
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