Table of Contents
The Psychological Contract
Organizational Culture & Structure
Group Dynamics and Leadership
Managers Get the Staff They Deserve
In today’s ultra-competitive global economy, organizations must take every action necessary to ensure they are as competitive as possible. Although advancements in technology, over the last few decades, has meant that oftentimes organizations have focused their efforts on the technological aspect of their business, those that have neglected their human resources have struggled despite technology. (Gutteridge, 2004) Today, employees drive productivity, customer satisfaction, and profitability. (Harter, Schmidt, & Hayes, 2002, in Stajkovic & Luthans, 2003)
With this in mind, businesses across a variety of industries have come to realize the important part their employees play in their continued success. Hiring and retaining the best employees equals greater efficiency and efficacy. This increase in efficiency and efficacy equates to greater company profitability, which leads to increased market share and industry success. As such, hiring and retaining quality employees has never been more important than in today’s business world.
The question then arises, why do some companies, divisions, or even managers seem to be able to consistently hire and retain the cream of the crop, while others fail to do so? Do managers truly get the staff they deserve? By analyzing the psychological contract between employee and employer, the impact of organizational structure and culture, group dynamics and leadership, motivation, and performance management, this paper will show that indeed managers do get the staff they deserve.
The Psychological Contract:
The term ‘psychological contract’ was coined in the 1960s. (“Psychological”, n.d.) Argyris used this term to refer to the mutual obligations, values, expectations, and aspiration between an employer and employee that go beyond the formal employment contracts. (Smithson & Lewis, 2003) It is an unwritten and unspoken agreement between employee and employer in which both parties surmise certain expectations and obligations.
The common misperception is that money is the most powerful motivator on the psychological contract list. This is simply not true. (Eglin, 2004) For employees, these expectations can include a variety of non-monetary factors, including
- Safe and hygienic working conditions
- Job security
- Challenging and satisfying work
- Unbiased personnel policies and procedures
- Personal and professional development opportunities
- Respectful and considerate treatment
While for employers, this psychological contract may include:
- Employee’s acceptance of the organization’s ideology
- Diligent work by employee to accomplish organizational goals
- Not to misuse management’s goodwill
- To maintain the organization’s image
- To demonstrate loyalty and uphold positions of trust
- To maintain dress and appearance in a reasonable and acceptable fashion.
This psychological contract is a powerful tool for motivating and retaining staff. When the expectations of each party’s contract are fulfilled, both are satisfied with their relationship. When the expectations are not being met, however, one or both parties become dissatisfied, and as such challenges occur with facets such as productivity and employee retention. Each psychological contract is unique dependent on the individual, even if the positions of two employees are very similar within the organization. These individuals develop their unique expectations of an organization early on, sometimes even prior to entering the recruitment phase of hiring. (Robinson & Rousseay, 1994, in Marques, 2002)
In addition, the psychological contract changes over the course of employment. When an employee first starts with a firm their expectations are formed on very little actual information about the company. It is mostly formed on conjecture. This is true too of the employer’s contract, as they have little information on what to really expect from their new hire. However, as their relationship progresses and they become familiar with each other, their expectations naturally change. Perhaps an employee now realizes that there is much more opportunity for career growth with their employer than they had originally hoped. Or perhaps an employer realizes that the employee will not be able to progress as quickly as they had hoped.
These changes must be evaluated periodically. To continually employ and retain the best staff possible, a manager must find out from the employee what is included in their psychological contract’s list of expectations, in the beginning of the relationship and throughout it as well. In addition, the manager must discover whether or not the employee feels these expectations are being met. If not, they need to be analyzed further. Are the employee’s expectations unrealistic? If so, to ensure employee satisfaction, the manager must show the employee this, and perhaps create a new, more realistic, expectation in this particular area.
If the employee’s expectations aren’t being met but are realistic, then the manager should take the steps needed to help fulfill this contract. By doing so, he will create happier, more productive employees, that will stay with his organization longer than if they were dissatisfied.
Bernard Cooke, leader of OPP’s change consultancy team, notes that employers oftentimes have misconceptions about their employees’ psychological contracts. (Maitland, 2004) If managers misjudge what is in an employee’s psychological contract, this will increase the employee’s dissatisfaction with the job and cause them to either be less productive, or leave the organization completely.
On the opposite side, managers must share their expectations with their employees, both as new hires, and as they change over the course of their developing relationship. If a manager has expectations that the employee will be instrumental in achieving an organizational goal, this should be expressed to the employee. If an employee is not living up to an expectation, this also should be expressed so that the employee has the chance to make the changes necessary to fulfill the employer’s psychological contract. The literature agrees that only through understanding of both sides of the psychological contract can managers hope to attract and retain the best staff.
Safeway, a food retailer in the United Kingdom, is an excellent example of how to utilize psychological contracts to retain employees, even in times where most would be heading out the door. In December 2003, a takeover battle for the company developed. In most situations, such as this, organizations find themselves with numerous employees leaving due to perceived job and organization instability. However, Safeway’s management focused on the psychological contracts between the organization and the staff and maintained an open dialogue. The end result was employee retention that exceeded expectations and increased morale across the organization. (“Psychological”, n.d.)
Organizational Culture & Structure:
McLean (1993) describes organizational culture as a collection of traditions, values, policies, beliefs and attitudes that drives how members think and act within an organization. Motivation and commitment from organization members can be encouraged or discouraged due to organizational culture. (Stam & Sodano, 1991, Schneider, Gunnarson, & Niles-Jolly, 1994, and Stetzer & Morgeson, 1997, in Adams & Bianey, 2003) Kontoghiorghes (2003) noted that organizational culture is one of the facets that affects employee productivity, innovation, adaptability to change, and acceptance of new technology. These aspects critically affect an organization’s competitive advantage in comparison to other organizations within their industry.