Attracting and retaining competent staff is vital for companies to stay
competitive. Ans De Vos and Dirk Buyens report on how to take the uncertainties
out of employment contracts to benefit both parties
When an individual and an organisation sign an employment contract, it
involves uncertainties for both parties. In this sense, the psychological
contract is like a ‘blind date’. ‘Blind’ because both parties, even with the
existence of sophisticated selection procedures, can never fully predict the
future or the behaviour of the other party. For this blind date to result in a
satisfying employment relationship that is characterised by reciprocal
commitments, more attention has to be paid to the expectations that newcomers
approach their new employer.
What’s the psychological contract?
This is based on explicit and implicit promises made by organisational
agents to the employee (recruiter, sup-ervisor, and colleagues, for example,) and
by the employee to these organisational agents. The psychological contract is
conceived as an employee’s mental model about the contributions he or she is
expected to make to the organisation and the inducements he or she can expect
of the organisation in return.
The psychological contract is an important motivator for employees. Numerous
studies have shown that employees who believe they have a positive
psychological contract with their organisation are willing to invest more of
themselves and are less inclined to leave the company. In contrast, employees
who experience their psychological contract negatively (for example, the
perception that promises have not been met or that there is an imbalance
between personal contributions and inducements received) are more likely to
leave the organisation and reduce their contributions.
The psychological contract also comprises the promises employees believe to
have made to their employer relating to their own contributions. More
specifically, we consider the following types of employee promises:
performance, flexibility, respect, loyalty, and employability. The dimensions
of the psychological contract are:
Employer promises
– Job content – a challenging and interesting job (a job in which employees
can use their capacities; challenging tasks)
– Career development (possibilities for development or promotion within the
organisation)
– Social atmosphere – an agreeable and co-operative work environment (good
communication with colleagues)
– Financial rewards – an attractive wage package – being rewarded for what
you realise; wage increases in function of your performance
– Work-life balance – respect for the personal situation of the employee
(flexibility in working hours, understanding for personal circumstances)
Employee promises
– Performance – to perform well and to do one’s best for the organisation
(do a good job in terms of quality and quantity; get along with your
colleagues)
– Flexibility – to be flexible depending on the job that has to be done
(working extra hours, taking work home)
– Loyalty – to stay with the organisation for a longer time period (not to
accept other job offers, stay with the organisation for at least a couple of
years)
– Respect – to behave in an ethical way towards the organisation (not
communicate confidential information; use resources in an honest way)
– Employability – keep your own employability up to date (take initiative to
follow additional training)
Since the psychological contract affects employees’ attitudes and behaviours,
it is important for organisations to facilitate the development of a positive
psychological contract with their employees. In order to realise this,
organisations should pay attention to the psychological contract during the
recruitment process. It is at this stage that employees’ first expectations
about the organisation are formed.
During selection interviews, both parties generally share their most
important expectations for the first time. Often, an elaborate psychological
contract is formed at this stage, based on only some minimal interactions.
After organisational entry, the first year of employment is crucial for the
further development of the psychological contract.
The Vlerick Leuven Gent Management School studied the psychological contract
formation among organisational newcomers. This study took place within eight
international organisations, representing four sectors: consulting;
telecommunication; electronics; and banking and insurance. In those
organisations, more than 1,000 newcomers were followed, starting on the day of
their new job.
In five written surveys – which were spread over the first year of the
newcomer’s employment – participants were asked about their expectations,
perceptions and evaluations relating to the conditions of their employment
relationship. The results presented here refer to the first six months of the
newcomers’ employment in their new job.
During these six months, the integration of the newcomer into his or her new
work environment evolves throughout three major socialisation stages.
A good socialisation process should result in a newcomer who is integrated
into the organisation and who behaves in correspondence with organisational
norms.
The socialisation process plays a crucial role in the development of the
psychological contract. During this process, the newcomer develops a clearer
picture of what they can expect of the organisation and what the organisation
expects of them.
Although most organisations limit their formal socialisation activities to
the first months or weeks after entry, it generally takes about 12 months
before a newcomer is fully integrated into the organisation. In this respect,
three stages are discerned, which cover the first year of employment:
anticipation, participation and adaptation. In our research we have studied
psychological contract development during these three stages.
Stage 1: Anticipation: development of an ‘anticipatory psychological
contract’ as a first frame of reference
Before individuals enter the organisation, a preliminary deal between the
individual and the organisation is already developed based on what is learned
during the recruitment process and from third parties.
When employees enter their organisation with high expectations already, it
is likely that they will evaluate their organisation on these criteria and
that, in the long run, they will take these as criteria in their decision to
stay with the organisation.
Individual differences
The study highlights some interesting differences between newcomers,
depending on the sector in which they work, their educational level, and
previous work experience.
First we see that newcomers in consulting organisations in general have much
higher expectations concerning their career development possibilities, while
they perceive fewer promises relating to work-life balance. On the other hand,
consulting employees tend to make more promises to their employer. This holds
more specifically for promises relating to flexibility, performance and
respect.
The anticipatory contract is also affected by the employee’s educational
level. Higher educated employees generally have stronger expectations towards
their organisation concerning the rather hard promises (job content, career
development and financial rewards), while they clearly have fewer expectations
about the ‘soft’ promises (social atmosphere and work-life balance). On the
other hand, higher educated employees believe to have made fewer promises about
their own contribution.
More experienced newcomers have more moderate expectations than graduate
recruits. The former believe more promises have been made relating to the job
content, but fewer promises relating to the other types of organisational
inducements. On the other hand, graduate recruits not only score higher on
their expectations towards the organisation, but also with respect to their own
contribution.
Stage 2: participation phase: development of a realistic psychological
contract based on concrete experiences
During the participation phase, newcomers experience the real demands and
rewards at work. In this stage, the psychological contract is actively
developed and newcomers make a first evaluation of their deal with the
organisation. This evaluation will be an important base for the subsequent
development of the psychological contract.
The less realistic the initial expectations are, the more likely it is that
there will be a clash with actual experiences. The interaction with other
employees – supervisor, colleagues and other new hires – will have a strong
influence on psychological contract development during this stage.
About one in five newcomers has talked with others about their career
development opportunities during the first three months. More attention is paid
to expectations relating to the job content: two-thirds of the newcomers talked
regularly with others about this category of employer inducements. The
frequency with which newcomers talk with others about what the organisation
expects of their contributions is even lower. Most attention is paid to what is
expected about their employability and their performance. Looking at the
different people in the organisation who are consulted by newcomers, we see
that more experienced colleagues are the most important information source,
followed by other new hires. The direct supervisor and mentor only come at the
third and fourth place, while HR professionals are consulted the least
frequently.
Stage 3: adaptation stage: integration of expectations and experiences in
a more stable psychological contract
The adaptation stage is characterised by a process of mutual adaptation
between newcomer and organisation. During this stage, newcomers will further
develop their psychological contract and will pay further attention to the
evaluation of perceived promises.
A successful socialisation is characterised by a mutual acceptance of the
psychological contract. The socialisation period ends here, but this does not
imply that the psychological contract is stable for the remainder of the
employment relationship.
The process of psychological contract development will continue as long as
the employment relationship goes on. But the picture that newcomers have formed
during these first months will continue to serve as an important frame of
reference for interpreting and evaluating further experiences.
After six months newcomers generally believe they have made more promises to
their employer than they believed was the case when they joined the organisation.
This evolution can be due to their rather positive evaluation of the
fulfilment of organisational promises. Depending on their experiences in the
organisation, newcomers will probably increase their own engagement, which
results in more perceived promises about their contributions. This increase in
promises is most significant for promises relating to loyalty.
Conclusions
The socialisation period is important to integrate the newcomer into the
organisational culture and for acquiring organisationally-relevant behaviours,
attitudes and knowledge, which are necessary for becoming a successful
organisational member. The formation of the psychological contract is also an
important issue during this period.
The results indicate that newcomers already have a clear picture of the
inducements they expect of their organisation and, although to a lesser extent,
also of the contributions they think their organisation expects of them. This
is remarkable since the exchange of expectations concerning the psychological
contract generally receives only limited attention during the recruitment
process.
For organisations, this implies that it is important to take into account
these subjective beliefs during recruitment. In this way, organisations will be
able to take into account employees’ expectations towards their employment
relationship better and to adjust these expectations to the reality of
organisational life as much as possible. This should reduce the risks of
frustrations due to unmet expectations afterwards.
Further analysis tells us that the evaluation of the psychological contract
plays an important role in newcomers’ general satisfaction and in their
intention to stay with the organisation. Also, employees’ perceptions of their
own promises – as an indication of their commitment towards the organisation –
will change depending on their evaluation of fulfilment of organisational
promises.
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Another remarkable finding is that there are only few changes in the
perception of organisational promises during the first six months. This implies
even more that it is important for organisations to pay attention to these
expectations from the beginning of the employment relationship.
Only the perspective of the employee on the psychological contract. It is
also necessary to take into account the organisation’s perspective. Only by an
active exchange of expectations and permanent communication between both
parties, the blind date newcomer and organisation initially engage in, will
result in a balanced psychological contract that is satisfying for both
parties.
