PROMISES TO EMPLOYEES Employee- Employer Relationship: A Psychological Contract Dr. Samantha D. Montes (Assistant Professor, Rotman School of Management, University of Toronto) talks about using emotional as well as economic promises to promote strong employee-employer relationships in organisations |
 The employee-employer relationship is driven fundamentally by reciprocal exchange. The organisation provides employees with various benefits and experiences in exchange for employees’ valuable contributions. HR specialists are highly familiar with how the formal employment contract guides this exchange. What might be equally, if not more, important is the informal psychological contract. Psychological contracts exist not on paper, but rather, in the minds of employees. They are idiosyncratic, reflecting each employee’s beliefs regarding the benefits and experiences the organisation has promised in exchange for their contributions. Development of this contract is most active during the early stages of employment, but it continues to develop throughout employees’ tenure. Unlike the promises in the formal employment contract, the promises in the psychological contract are not necessarily objective. Rather, psychological contracts are subjective interpretations of explicit and implicit promises that employees believe the organisation has made. These perceptions might arise from subtle suggestions raised in discussions with organisational agents (HR personnel, recruiters, supervisors), from organisational practices or policies, or from other employer actions. In any case, perceived promises set the standard for what employees expect from the organisation and, therefore, are believed to influence the extent of contributions employees will make as well as how they will react to the experiences the organisation actually delivers. Decades of research have been devoted to helping organisations better understand and manage employees’ psychological contracts. The bulk of it suggests that organisations should pay careful attention to what they promise and ensure that all perceived promises are fulfilled or over-fulfilled. However, recent research calls this advice into question. Drawing on past work and more recent advancements, this article will discuss some of the key issues that are relevant to HR personnel as they work on behalf of the organisation to maintain positive employee relations. Relational And Transactional Promises Organisations promise a variety of benefits and experiences in an effort to attract and retain valuable human resources. These ‘inducements’ have been classified into two categories reflecting two distinct elements of psychological contracts. Relational contracts are described as relationship-oriented, relatively long-lasting, and requiring a great deal of emotional investment. They include promises for intangible and highly subjective inducements such as developmental opportunities, fair and respectful treatment, interesting job tasks, favourable work conditions, and support. In contrast, transactional contracts tend to involve more short-term, monetisable exchanges that require little, if any, emotional investment. These contracts include promises for inducements that are more economic in nature, specific, and observable, including things like high pay, bonuses, health benefits, and promotions. |
 Although this distinction between relational and transactional contracts exists, the psychological contracts of most employees contain both in varying amounts. What ratio of relational to transactional promises is preferable? Well, research has shown that employees of all sorts (for example, full-time, part-time, temporary) tend to view a highly relational contract more favourably. Promising to offer things like support with personal problems, flexible work arrangements, training workshops, and the like, signal to employees that the organisation cares about them. In turn, employees reciprocate by pledging to show concern for the organisation through hard work and loyalty. This is not to say that employees do not care about money. Although individuals may appear to downplay the importance of money, when asked to rate how important a high salary is to them on anonymous surveys, most people admit that money is extremely important. In short, organisations should promise economic inducements that will be deemed attractive by employees while also promising to provide a variety of relational inducements to show employees that the organisation values them.Promising A Lot vs. Very Little Recognising that employees have a tendency to want to maximise their outcomes, one approach to ensuring positive employee-employer relations is to promise a great deal to employees during recruitment and the early stages of employment. This has the effect of making the organisation appear highly attractive and, therefore, strengthens its ability to secure and retain top talent. Further, offering to provide employees with high levels of valuable benefits and experiences is likely to be reciprocated in terms of the contributions employees promise in return. However, decisions regarding the amount of valuable benefits to promise must be made within the context of what the organisation can actually deliver. Indeed, my colleague, David Zweig (University of Toronto) and I have found that what organisations actually give to employees matters far more than what they promise to provide. At some point, most employers find themselves in situations wherein they either cannot or will not fulfill their promises to employees. This is true particularly when they make grandiose promises. Common sense and a wealth of supporting scientific evidence suggest that such situations be avoided. When employees perceive that the organisation has broken its promises, they feel violated, lose trust in the organisation, and reciprocate by choosing to withhold their contributions to the company. In fact, psychological contract breach has been associated with a host of negative employee reactions such as decreased organisational commitment, satisfaction, performance, and citizenship behaviours, as well as increased intentions to quit. Collectively, the direct and indirect costs associated with these negative reactions can far exceed the costs of fulfilling the original promises. The majority of research on psychological contracts suggests that organisations can avoid the negative consequences of breach by minimising the number of things that they promise (either directly or indirectly) to employees. This should ensure that, later down the road, they will be able to fulfill and, possibly even, over-fulfill employees’ psychological contracts. On the surface, this seems logical. Employees should at least be content when the organisation fulfills its promises. Moreover, if employees actually get more than what was originally promised to them (that is, over-fulfillment), they should be elated and may even boost their contributions in return. However, recent advances in the study of psychological contracts suggest that this might not be the case. |
