The psychological contract within employer branding

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Dr Graham Dietz examines how the current trend for employer branding can work both for and against the 'psychological contract' that exists between employer and employee.

In the past decade, the 'war for employee talent' has seen organisations expend enormous amounts of time, energy and financial resources in promoting their 'employer brand'. Glossy brochures and media ads, interactive recruitment portals on the corporate website, college visits and open days, even CD-ROM games, all form part of these corporate employer branding campaigns.

Expensive employer branding exercises are often justified by the intense competition among firms to recruit that apparently rare breed, the talented and committed worker. For many firms, having an enticing employer brand is seen as only a 'table stake': the bare minimum needed to even have a chance of attracting the brightest and the best. Without one, they argue, they are not even noticed.

"Employer branding may have become the HR department's equivalent of the old joke, 'marketing promises what operations cannot deliver'."

The problem with this is that, as the war for talent intensifies, the table stake seems to be getting higher and higher. Employers must offer more to differentiate themselves from their rivals. So the employer brands get glossier, the promises they make get bolder, and of course the expectations they raise become ever greater – and, logic dictates, harder to fulfil. Employer branding may have become the HR department's equivalent of the old joke, 'marketing promises what operations cannot deliver'.

If employer branding is a table stake, how can employers build upon it as an investment, rather than write it off as wasted unavoidable cost?

Sets of expectations

Using the established psychological contract model offers employers a framework for getting the best out of their employer branding. At Durham Business School we have been using this model to help our executive education clients do just that. Here's how it works.

You will be familiar with the 'psychological contract' model. Put simply, it is about the sets of expectations held by employer and employee about each party's mutual obligations toward each other, and it is about the conduct of the relationship between them.

It is 'psychological' in that it consists of everything that is not part of the legal contract, but which nevertheless may be part of an implicit agreement between the two parties. For employees, it covers their expectations on fair treatment, on training and development, on career progression, on the organisation's ethical standards, the working culture, etc. For the employer, it encompasses expectations on effort and commitment.

"Research has shown how employees whose expectations are met by their employer are happier at work and they reciprocate in kind. They demonstrate higher levels of commitment, they are more willing to 'go the extra mile' in their work."

Managing these mutual expectations into an attractive and sustainable 'contract' makes sense for both parties. Research has shown how employees whose expectations are met by their employer are happier at work and they reciprocate in kind. They demonstrate higher levels of commitment, they are more willing to 'go the extra mile' in their work, and they are less likely to be tempted away by rivals.

Should this mutually beneficial state of affairs last, employees can form an emotional bond with their employer based on trust, with profound effects on levels of engagement, motivation and loyalty. In other words, employees start to 'live the brand' – to embody what the organisation wants the customer to experience – and, crucially, they do so in a genuine, rather than compliant, fashion.

This latter phenomenon is known as 'employee branding'. Organisations with engaged employees serving customers well and winning their loyalty can expect higher sales and repeat sales, and hence higher profits. In this respect, employer branding and employee branding are interdependent projects - if the promises of the former are not realised, the credibility of the latter effort will be undermined.

Get it wrong, pay the price

By contrast, get the psychological contract wrong and the costs can be huge. Studies have found that violations of the psychological contract (broken promises and confounded expectations, especially if these expectations were deliberately fostered by the employer) can lead to withdrawal of co-operation, lower performance levels and commitment, absenteeism and employee turnover, even sabotage.

Not only can this render any investment in an employer branding campaign a waste, but firms can face high unwanted employee turnover as disillusioned new recruits leave early. Reputation may suffer, too, as many will badmouth the offending organisation to their friends and colleagues. Meanwhile, cynicism and low commitment festers among those who remain.

"Employer branding may solve the recruitment problem – getting people to apply – but as it does it can sow troublesome seeds for later, and not just for your employees but for your poorly-served customers, too."

The link between employer branding and the psychological contract is this: the branding campaign is the earliest opportunity employers have within their full control to create the differentiating first impressions that might initially attract potential recruits. But, these first impressions also form the vital foundational expectations of the psychological contract. Meet them and the relationship can flourish; fail to meet them or – worse - deliberately create false expectations in the first place, and contract violation becomes almost inevitable, with all the negative repercussions detailed above.

Employer branding may solve the recruitment problem – getting people to apply – but as it does it can sow troublesome seeds for later, and not just for your employees but for your poorly-served customers, too. A paradox of many HR professionals' predilection for producing wildly improbable employer branding campaigns is that they should also know that realistic job previews, setting reasonable and achievable expectations, tend to be very good predictors of higher employee job satisfaction and low intention to quit.

The insight from the model is that a deliverable and accurate psychological contract is critical if new recruits are not to join under false pretences and then leave, disillusioned and bitter, when their carefully created expectations are dashed in the first few months.

So, for the effort invested in employer branding to be worth it, it must genuinely reflect the reality of working inside the organisation. It certainly should not present a wilfully distorted image. Far too many employer branding campaigns seem to do just that.

The conclusion is simple: invest in HR to ensure that you do deliver on the promise of your employer brand (in other words, get the HR basics right). Do this, and your employees' satisfaction should deliver satisfaction for your customers.

Dr Graham Dietz is a lecturer in HR management at Durham Business School.

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16th May 2008 15:17

I wholeheartedly agree with the point made in this article.
It may be useful to think about Employer Branding differently.
The Employer Branding concept was, very early on, hijacked by the recruitment community and so it has come to mean promoting the employment propostion. This of course means that many organisations put the cart before the horse and sell the product before it can live up to the promise; hence the rhetoric reality gap.
The employer brand has to be built from the inside-out based on the employment experience. As such it is a systemic issue and not a single intervention.
I have worked in this area since 1995 and I think my original hypothesis may be a more useful framework from which to start:
"Employer Branding is the process of creating the identity and managing the image of an organisation in its role as an employer. Unlike corporate identity and branding which relies heavily on nomenclature, graphic symbolism and external promotion; Employer Branding is the sum of the values, systems, policies and behaviours deployed by the organisation in pursuit of its objectives through its people."
Getting that right will allow organisations to apply the graphics and straplines with a degree of confidence - and indeed with engaged employees.

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