Great expectations: Does the psychological contract still work?by
Shifting expectations of employees and cultural change within organisations may have broken the old psychological contract. But what does this mean? And what can HR leaders do about it?
The pandemic has impacted almost every element of our lives with one of the most visible shifts being the way we interact with our employer.
As remote workers tentatively start to return to shared working environments, we will begin to see the real impact lockdown has had on organisation culture and whether there has been a significant change in the expectations employees have of their employer (and vice-versa).
A shift in culture and expectations
When the majority of employees work in the same location, they share joint experiences which reinforces a common culture. They physically work alongside one another, share stories and build community activities which all goes towards increasing cultural capital.
Those invaluable ‘watercooler’ chats were replaced with conversations with family members and housemates or, for people living alone, they may not have happened at all
However, over the course of Covid lockdowns, remote workers were distanced from the day-to-day informal interactions with colleagues. They were, in the main, replaced by more formal and transactional VC calls and one-to-one phone calls.
In addition, those invaluable ‘watercooler’ chats were replaced with conversations with family members and housemates or, for people living alone, they may not have happened at all. Essentially people outside of the organisational culture became the new sounding board for employees.
When these employees return to work, they will have a new cultural model in their mind. A model which has inevitably changed from the one they had on the last day before lockdown and is now slightly different from each of their colleagues – shaped by unique experiences over lockdown.
They will also return with changed expectations of where, when, and how they will work. As many surveys are beginning to show, being able to work in a hybrid pattern is a way of working that the majority of employee are looking to continue i.e., a mixture of working from home and in a shared environment.
With changes to the organisation culture and shifting expectations of employees there is a risk that the psychological contract will be broken. But what does this mean? And what can HR leaders do about it?
Why might the psychological contract be broken?
Firstly, what is a ‘psychological contract’? A psychological contract goes beyond the formal written contract between employer and employee. It consists of the unwritten, informal and intangible agreements that make the exchange of effort and commitment in return for a salary and development a deal that both parties can honour.
Organisations and employees have never been in this situation before. With so little information to guide us, the hybrid approach that organisations implement is unlikely to be right first time. This is especially true with the psychological contract as so much of it is unarticulated and people may not even realise what their expectations are - until they are not met.
The informal expectations such as the degree of flexibility around when and how those days are worked may not be as aligned or clearly communicated
While talking to our clients about the risks and opportunities of hybrid working, three consistent themes emerged that are key elements of a psychological contract:
Working from home
Surveys show that over lockdown many employees enjoyed a positive change to their work-life balance and there is an expectation that this will continue going forwards. However, from an employer’s perspective there are activities that benefit from the energy and immediacy of people being in the same space: collaboration, creativity, critical decision making and culture.
The transactional/formal elements of hybrid working, such as the number of days spent in each location, can be clearly articulated. However, the informal expectations such as the degree of flexibility around when and how those days are worked may not be as aligned or clearly communicated.
While employment contracts often do not explicitly state promotion pathways, people will have certain expectations about career progress. Promotion decisions are not only based on what a person does, but also how they do it e.g., do they exhibit behaviours that reflect the organisation’s values?
In a hybrid working pattern, there is a risk that the stakeholders involved in promotion will not spend sufficient time together for this behavioural element to be observed. As a result, employee expectations may not be met.
This relates to the promotion issue above. Employees have expectations of the development opportunities they have in an organisation such as the chance to undertake new and innovative projects – which are not usually specified in their contract.
If the psychological contract is unwritten and intangible, how can it be re-negotiated
In Managing visibility for career sustainability: a study of remote workers in the Handbook of Research on Sustainable Careers (2015), researchers Julia Richardson and Clare Kelliher have shown the continuing importance of face-to-face interaction and physical presence for maintaining professional networks.
These contacts lead to an increased visibility and understanding of an employee’s capabilities which can lead to development opportunities. With the reduced physical interaction, development may be negatively impacted.
A new psychological contract for a new hybrid culture?
The lockdowns and remote working have had an impact on the expectations of employees about how, when and where they work. There will also be changes in the culture of the organisation which will be exposed when people continue to return to shared working environments.
Together these will affect the psychological contract that exists between employees and employers so now is the time to review whether it is still fit-for-purpose. But if the psychological contract is unwritten and intangible, how can it be re-negotiated? Leaders and managers can gain an understanding of what constitutes the key elements of the deal for employees and use that as the basis of a new contract.
If the expectations cannot be met, explain why with a clear statement of the business reasons
Start by talking to your employees to understand their expectations and consider what the organisation can deliver. Asking questions about how they are feeling about work, their development, where they see themselves in the future. By seeking to understand the mindset of employees their expectations can be elicited.
If the expectations cannot be met, explain why with a clear statement of the business reasons – ensure that they are valid and not a hang-over from pre-pandemic ways of working. Propose and negotiate a new psychological contract with your employees and widely communicate it.
Implement the new psychological contract in the language used in the interactions with employees and actions by following up on what has been promised. Finally, continue to review the culture needed within the organisation and supporting psychological contract as hybrid working is implemented and evolves.
Interested in this topic? Read The psychology of an office return.
Julie is a highly experienced Principal Consultant working in OE Cam’s Organisation Development practice.
As a Business Psychologist, Julie leads projects to help clients improve the effectiveness of individuals, teams and organisations through re-designing, implementing and evaluating new target operating models – considering the...