Psychologycal Contracts - a Key to Motivating Staff

Psychological Contracts – A Key to Motivating Staff

Raising motivation levels and ensuring commitment are two of the key success factors

when managing people at work. Increasingly managers, whether consciously or not, are

turning to the psychological contract as a way to retain and motivate key staff. In a

recent CIPD survey, 9 out of 10 HR managers agreed it was a useful tool when managing

and recruiting staff, while over one third said they used the concept of the psychological

contract in their everyday work.

What exactly is the psychological contract? It is basically the unspoken contract between

the organisation and the job holder. It encapsulates the expectations of both sides as to

what each expects the employment contract to deliver. Although informal and often

unspoken of directly, the matching of expectations at this level will often lead to an

increased sense of happiness among employees as well as delivering real results. The

psychological contract is something which begins at the recruitment phase, with

expectations being delivered on or not following this. As recruiting and retaining high

quality employees is a key function of management, over promising and under delivering

on the psychological contract can be a vital source of demotivation among the workforce.

These early experiences in an organisation can have a major effect on how the employee

perceives the organisation they have joined. When the experience is positive, job

satisfaction levels, commitment and morale are all boosted, thus leading to a greater

sense of loyalty to the organisation. Also, employees who are given an effective

induction become more productive more quickly as well as being more creative within

their role. Therefore, the first impressions created by an employer form a lasting

impression on any new recruit, particularly in terms of how they evaluate how their

expectations are being matched by their employer.

Some of the questions which employers might consider in establishing a psychological

contract with a new employee include:

What are your expectations from me as your manager?

What do you see as your role in relation to those you will interact with in your job?

What do you think will give you the greatest sense of meaning in your role?

Do you understand our culture and how does this fit with your values?

What would it take for you to walk the extra mile for your employer?

What elements of work give you the greatest satisfaction?

The literature differentiates between two elements of the psychological contract which

include transactional and relational parts. The transactional element equates most closely

to the formal, written contract, specifying a rate of pay and possible bonuses for services

provided. The relational element however relates to the emotional and social exchange

between both parties. Relational elements centre around trust, loyalty and the

interpersonal exchange between manager and staff. In a changing working environment,

where job security and a stable environment are more difficult to sustain, it is this aspect

of the psychological contract which is the most challenging to manage. Research in the

United States now suggests that the psychological contract has changed in terms of it’s

relational element, whereby it’s importance, particularly in terms of perceptions of

fairness and job satisfaction, has risen. Employees