Contracts not just on paper

By VICKI JAYNE

A Government department that had developed a very market-focused culture recently took on a new chief executive who proceeded to introduce a strong public-service ethic.

One immediate result was that several key staff quit.

Their employment contracts had not been breached but the unexpected work culture shift left them feeling angry and betrayed.

Such things happen when the so-called "psychological contract" between employer and employee is broken.

Unlike formal work agreements, the psychological contract is usually unstated, often highly subjective, has no legal clout and may become evident only when one party treats it with total disregard.

It is based on the reality that both employer and new employee have a whole set of hopes and expectations.



As with many relationships, such hopes and expectations are often not openly expressed. But when what is thought to be a mutual understanding gets trashed, the reaction can be quite emotional.

"But they promised" is the pained cry likely to accompany its violation. And the outcome for both parties is negative.

Employees who feel they have been somehow betrayed may reduce their work commitment and become less productive. If they don't quit immediately, they will probably start looking elsewhere.

They may bad-mouth their employer or possibly even sabotage the company.

A lot of emotion is involved when people feel they have been let down, says Roy Smollan, a senior lecturer in management and employment relations at AUT.

"How people respond depends on the individual, on the perceived injustice and what people can get away with. It can even boil over into violence."

He makes the distinction between a "breach" of the psychological contract and its violation.

The first may be due to circumstances outside the company or manager's control and tends not to have the same emotional impact; the second is when it is felt there has been a deliberate reneging of some tacit agreement.

For instance, one employee was ropable about his contract termination, not because he had to leave, but because his exit was managed in an unprofessional manner.

Instead of open discussion, he was given a "Hobson's choice" and generally treated with little regard.

Which highlights the fact that while the psychological contract is a somewhat nebulous concept, it is clearly linked to good management practice. And some of that is pretty basic, suggests human resources consultant Crispin Garden-Webster.

"It's important to look at the sort of behaviours that imply [the psychological contract's] existence and in most cases they can be found in Management and Leadership 101 ...

"It has to do with such things as the robustness of the employment contract, the clarity and authenticity of [employer/employee] communications, managers taking the time to check out people's expectations ... "

One recent study of the psychological contract shows that open and honest communication certainly rates highly with employees.

Other highly valued aspects include opportunities for promotion and advancement, trust and respect, fairness, and challenging, interesting work.

A competitive salary and competent, supportive management also make it into the top 10 but "job security" is well down the list. That is a sign of changing times, says Smollan.

"People talk about the 'new' psychological contract because changes in the labour market over the past couple of decades mean that most employees no longer expect to have a job for life."

Garden-Webster also identifies a generational shift. While older workers still have expectations around job security and promotion, the so-called digital generation (18 to mid-20s) do not expect, or want, a single-company career.

But they do expect challenge and development, so the psychological contract has different meanings for different people.

How do people avoid violating perceived promises and unstated understandings? First, by being aware when and how expectations are created, says Smollan.

It could be when a recruitment agency waxes lyrical with the job ad.

A sense of let-down is inevitable if that "challenging role in external communications" turns out to be writing speeches for the boss; the "next step on your career ladder" proves to be slightly lower than the last; or the promised "training and development opportunities" are available only after-hours.

It is also wise to avoid over-promising during interviews and induction.

"Those charged with recruiting, selecting and appointing staff must avoid making rash promises about salary increases, incentive pay or chances of promotion," says Smollan.

Organisational psychologist Dave Winsborough says clashes between perception and reality tend to show up most in performance management or during times of organisational change.

"At performance appraisal time, for instance, an employee might have the expectation that because they've been working longer hours, they'll get acknowledgement for it.

"The company, on the other hand, may see long hours as a given ...

"The art is in making sure that what is tacit and assumed becomes explicit and overt."

The psychological contract, he says, emerges from a wealth of data people have built up around an organisation.

"Which is why I think induction and very clear communications between manager and employee are vital. It is a living contract and changes over time."

It comes back to basic good management, says Winsborough.

"Good managers talk regularly to their staff, so they're up-to-date with what's happening for them and are in tune with their expectations."

* vjayne@iconz.co.nz