Essential HR – All in the mind

An effective contract is more than just a piece of paper. Pam Henderson looks at the psychological contract between employees and their employers.

In my last article (issue 118), I looked at how managers can use Human Resources (HR) policies and practices to get high performance  getting people to go the extra mile. As well as policies and practices, there is another vital factor that influences the performance of the people you manage: the psychological contract.

The psychological contract is basically the deal, often unspoken and always unwritten, between the staff member and their employer. As an employee, it is the picture of what you expect the job and the organisation to be like. It starts from your first experience of the organisation  the recruitment ad, the phone call  and continues to build as your contact with the organisation increases. For the employer, it is about their employer brand  and all employers have one whether they choose to manage it actively or not.

The written legal contract is fairly limited, and the staff member usually has little input. The psychological contract, in contrast, includes the perceptions of both the employee and the employer  all the mutual obligations, expectations and perceived promises. Key issues include: satisfaction, motivation, fairness, trust, job security, loyalty, worklife balance and commitment.

First principles

Grace, the director of a city art gallery, had head-hunted Tristan. She very much wanted him to head up the exhibitions team. Tristan liked the contemporary, challenging identity of the gallery. During the selection process, Tristan understood from Grace that he would have a free hand in terms of curatorial work. However, during his first three months at the gallery this was not Tristans perception at all. He experienced Grace as a command-and-control director who wanted to approve all his artistic decisions. Tristan left before his probationary period ended. Two of the three exhibition team-members left within the following six months, and it was almost eight months before another Head of Exhibitions was in post.

There are a few things about the psychological contract worth noting here. First, it breaks when a staff member believes that an employer is not keeping their promises  and that break can be irrevocable if the promise is around the fundamentals of the job. Second, the repercussions can be long-term and widespread  Grace lost three members of staff through her poor management plus incalculable levels of commitment and goodwill. Third, people tend to leave their bosses, and not organisations. The gallerys marketing team worked hard to develop a brand with a fresh and cutting-edge feel. The employer brand  how people actually experience working in the organisation  did not match this. If your organisation is going to have a positive psychological contract with its staff, line managers need to have the interpersonal skills to make it happen.

Negative to positive

Clearly, it is preferable to avoid a breach in the first place, rather than trying to repair the damage afterwards. However, like most things to do with managing others, it is usually possible to turn things around if you are prepared to put in the effort.

Ruth started as the new Executive Director of a regional theatre eighteen months ago. She was shocked to realise that below the senior management team (SMT), excluding casuals, the level of staff turnover was around 25%. She expected it to be between 10% and 15%. She found it difficult to build meaningful relationships with more junior staff  they either didnt seem to want to talk to her, or their managers tried to shield them from her.

Ruth decided to assess the organisations psychological contract by undertaking a staff survey to evaluate staff attitudes and staff perceptions of the organisations people-management practices. The survey asked staff how much they trusted and valued their managers; how secure they felt; how much control they had over their work, and how interesting they found their jobs. Suffice it to say, the results were suitably dire.

Over the following 18 months Ruth worked with a coach to improve the management skills of her SMT. The coach and Ruth also worked together to improve the HR policies and practices across the organisation. It was extremely difficult but, 12 months on, the turnover rate below the SMT had gone down to just under 17% and the repeat survey results were much more positive. Ruth will be repeating the survey in six months time and hopes to have her best results to date, and turnover down to 11%.

Top tips for managers

While this second case study is fairly self-explanatory, it is worth emphasising again that managers, particularly front-line managers, lie at the heart of a positive psychological contract. They embody the organisations values and culture. So what are the keys to success?

” Understand your employer brand
It is useful to review the extent to which your organisations HR policies and practices reflect the values of your organisation. You may want to use an attitude survey to get an informed view of how people feel about working in the organisation  staff frequently do not share the Chief Executives view of reality.
” Deliver on your promises
You can use the recruitment and appraisal processes to ensure that you and your staff have on-going, shared expectations regarding the psychological contract. You can also use regular review meetings to monitor the psychological contract and renegotiate if circumstances dictate. If you cannot keep a promise, then take the time to explain why and work through the implications with the staff member.
” Train your managers in people-management skills
The psychological contract is largely played out in the relationship between the staff member and their manager. Managers need to be able to develop a trusting relationship with their staff, and have the interpersonal skills to engage hearts and minds.

Pam Henderson is a Director of the Henderson Aplin Partnership. She works with managers in the cultural sector to help them get high performance from their staff.
t: 01223 520293; e: [email protected]