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) e r g a m o n
0263-2373(95)000194
uropean Management Journal Vol. 13, No. 3, p p. 286-294, 1995
Copyright © 1995 ElsevierScienceLtd
Printed in Grea t Britain. All rights reserved
0263-2373/95 9.50+0.00
T he hanging P sycho logical
Contract:
The H um an Resource
Challenge o f the 199 s
JEAN-MARIE HILTROP
Pro fessor o f H um an Resource M anagement I M D L ausanne
T h e p s y c h o l o g i c a l c o n t r a c t - - w h a t e m p l o y e e s a n d
e m p l o y e r s w a n t a n d e x p e c t f r o m e a c h o t h e r - - h a s
b e e n c h a n g i n g d r a m a t i c a l l y i n r e c e n t y e a r s . A s a
r e s u l t o f a ll s o r ts o f p r e s s u r e s a n d t r e n d s o n b o t h
s i d e s , s u c h c h a r a c te r i st i cs o f c o r p o r a t e e m p l o y m e n t
a s s t a b i l it y , p e r m a n e n c e , p r e d i c t a b i l i ty , f a i r n e s s ,
t r a d it i o n a n d m u t u a l
r e s p e c t a r e
o u t . I n ,
a r e t h e
n e w f e a t u r e s o f s e l f - r e l i a n c e , f l e x i b i l i t y a n d
a d a p t a b i l i t y .
J e a n -M a r i e H i l t r o p e x a m i n e s th e h u m a n
r e s o u r c e
i m p l i c a t i o n s o f t h e c h a n g i n g p s y c h o l o g i c a l c o n tr a c t,
s p e c i f ic a l l y , h o w o r g a n i s a t i o n s u n d e r p r e s s u r e f r o m
g r e a t e r c o m p e t i t i o n , i n t e r n a t i o n a l i s a t i o n , a n d
i n t e g r at i o n o f f u n c ti o n s c a n m a n a g e e m p l o y e e s n o w
f a c i n g i n c r e a s e d p r o f e s s i o n a l r i s k a n d u n c e r t a i n t y .
A n u m b e r o f s u g g e s t i o n s a r e m a d e f o r c h a n g i n g
o r g a n i s a t i o n a n d m a n a g e m e n t p r a c t i c e s i n o r d e r t o
b u i l d r e a l c o m m i t m e n t f r o m e m p l o y e e s i n t h e n e w
s o c i o - e c o n o m i c e n v i r o n m e n t .
I n t r o d u c t i o n
T h e e c o n o m i c c o n t e x t i n w h i c h o r g a n i s a t io n s o p e r a t e
h a s b e e n c h a n g i n g a t a r e m a r k a b l e r a t e d u r i n g t h e l a st
t w o d e c a d e s . I n c r e a s i n g i n t e r n a t i o n a l c o m p e t i t i o n ,
d e r e g u l a t i o n a n d g l o b a l i s a t i o n o f m a r k e t s h a v e
d e m a n d e d g r e a t e r f le x i bi li t y a n d p r o d u c t i v i t y o f
o r g a n i s a t i o n s , a s w e l l a s n e w s t r a t e g i e s f o c u s e d o n
s p e e d , r e s p o n s i v e n e s s t o c h a n g i n g m a r k e t c o n d i t io n s
a n d i n n o v a t i o n . T h e s e e c o n o m i c c h a n g e s , i n c o n -
j u n c t i o n w i t h d r a s t i c c o r p o r a t e r e s t r u c tu r i n g i n m u c h
o f t h e p r i v a te a n d p u b l i c s e ct o rs , h a v e i n d u c e d m a n y
o r g a n i s a t i o n s t o e l i m i n a t e j o b s n o t j u s t o n t h e f a c t o r y
f l o o r , a s s o o f t e n i n t h e p a s t , b u t a l s o a m o n g t h o s e w h o
h a v e t r a d i ti o n a l l y b e e n o f f e r e d a l o n g - t e r m c a r e e r w i t h i n
the o rg an i s a t ion , a s m i l l ions o f job le s s p ro fe s s ion a l s and
m a n a g e r s c a n t e st i fy . C o n s e q u e n t l y , t h e p s y c h o lo g i c a l
c o n t r a c t t h a t g a v e s e c u r i t y , s t a b i l it y a n d p r e d i c t a b i l i ty
t o t h e r e la t i o n s h ip b e t w e e n e m p l o y e e s a n d e m p l o y e r s
h a s d r a m a t i c al l y a l t er e d d u r i n g t h e p a s t t w o d e c a d e s .
T h i s a r t i c l e e x a m i n e s s o m e o f t h e s e c h a n g e s a n d
c o n s i d e r s t h e i r i m p l i c a t i o n s f o r t h e m a n a g e m e n t o f
h u m a n r e s o u r c e s . T h r e e s p e ci f ic q u e s t i o n s a r e
a d d r e s s e d :
1 . W h a t i s t h e n e w ' p s c h o l o g i c a l c o n t r a c t ' b e t w e e n
e m p l o y e e s a n d o r g a n i s a t i o n s ?
2 . W h y a n d h o w is t h i s c o n t r ac t c h a n g i n g ?
3 . W h a t a r e t h e i m p l i c at i o n s f o r h u m a n r e so u r c e
m a n a g e m e n t t o d a y a n d i n th e n e a r f u t u re ?
286 E UR OPE AN M A NAG E M E NT J OUR N AL Vol 13 No 3 Sep tem be r 1995
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T H E C H A N G I N G P S Y CH O L O G IC A L C O N T R AC T
Th e han ging Psychological
ontract
P s y c h o l o g ic a l c o n tr a c t s o f e m p l o y m e n t a r e d e f i n e d a s
t h e u n d e r s t a n d i n g s p e o p l e h a v e r e g a r d i n g t h e c o m m i t-
m e n t s m a d e b e t w e e n t h e m s e l v e s a n d t h e ir o r g a n is a t io n
( R o u s s e a u , 1 99 4) . O r ig i n a ll y e m p l o y e d b y t h e a u t h o r s
Argyr i s and Lev i nson i n t he 1960s t o charac t e r i se t he
s u b j e c t iv e n a t u r e o f t h e e m p l o y m e n t r e l a ti o n s h ip , t h e
p r e s e n t u s e o f th i s t e rm f o c u s e s u p o n a n i n d i v i d u a l 's
be l i e f i n and i n t e rp re t a t i on o f a p romi sso ry con t r ac t ,
w h e t h e r w r i t t e n o r u n w r i t te n . P s y c h o l o g ic a l c o n t r a c ts
a c c o m p l i s h t w o t a s k s : d e f i n e t h e e m p l o y m e n t r e l a ti o n -
s h i p a n d m a n a g e m u t u a l e x p e c t a ti o n s. E m p l o y e r s w a n t
t o k n o w i n a d v a n c e t h e k i n d o f o u t p u t s t h e y w i l l g e t
f r o m e m p l o y e e s . I n t u rn , e m p l o y e e s w a n t t o k n o w w h a t
k i nd o f r ewards t hey wi l l ge t f rom i nves t i ng t he i r t i me
and ef fo r t i n an o rgan i sa t i on . S i nce psycho l og i ca l
con t r ac t s a r e , by def i n it i on , vo l un t ary , sub j ec t i ve ,
dyna mi c and i n fo rmal , i t is v i rt ua l l y i mposs i b l e t o spe l l
ou t a l l de t a i l s a t t he t i me a con t r ac t i s c r ea t ed . The
d y n a m i c c h a r a c t e r o f t h e p s y c h o l o g i c a l c o n t r a c t m e a n s
that individual and organisat ional expectat ions mutual ly
i n f l uence one ano t her . Peop l e f i l l i n t he b l anks a l ong
t h e w a y , a n d t h e y s o m e t i m e s d o s o i n c o n s i s t e n t l y
(Rousse au , 1994). Yet t hese ' add i t i ons ' a r e a r ea l it y t ha t
h a s m a n y i m p l ic a t io n s f o r t h e s u c c e s s o f t h e o r g a n i sa -
t i on . As Ko l b e t a l ., ( 1991) po i n t ou t , ' a co m pany s t a f fed
b y c h e a t e d i n d iv i d u a ls w h o e x p e c t f a r m o r e t h a n th e y
g e t i s h e a d e d f o r t r o u b l e ' .
There i s cons i derab le ev i dence t o sugge s t t ha t t he na t u re
o f t h e p s y c h o l o g i c a l c o n t r a c t h a s c h a n g e d d r a m a t ic a l ly
i n r e c e n t y e a r s. P e r h a p s t h e m o s t i m p o r t a n t c h a n g e h a s
b e e n a v a s t d r o p i n jo b s e c u r i ty o f f e r e d to e m p l o y e e s .
In t he 1950s , and 1960s mos t peop l e were a f fo rded a
s e n s e o f s ta b i li ty a n d p e r m a n e n c e w i t h i n t h e o r g a n is a -
t ion . N o t on l y was t he o rgan i sa t iona l s t ruc t u re dear , bu t
s o w a s e a c h p e r s o n ' s c u r r e n t a n d f u t u r e p l a c e in i t n o w
and i n t he fu t u re . Th i s c l a r i t y c r ea t ed a g rea t dea l o f
p red i c t ab i l it y and secu r i t y fo r em pl oye es , and p ro bab l y
f o s t e r e d t h e ir l o y a l t y a n d c o m m i t m e n t t o t h e o r g a n is a -
t i on . In add i t i on , t he p rom i se o f j ob secu r it y , unwr i t t en
t h o u g h p o w e r f u l , p r o b a b l y l e d e m p l o y e e s t o s e e t h e ir
o w n l o n g - t e r m i n t e r e s t s a s i n t i m a t e l y b o u n d u p w i t h
t he l ong - t e rm fo r t une s o f t he o rgan i sa t i on . I t i s l i ke ly
t h a t t h i s e n c o u r a g e d t h e m t o i n v e s t t i m e a n d e f f o r t
acqu i r i ng kno wl e dge a bou t t he i r o rgan i sa t i on ' s spec if ic
p r o d u c t s , m a r k e t s , t e c h n o l o g y a n d c u s t o m e r s , o n t h e
a s s u m p t i o n t h a t k n o w l e d g e w o u l d b e u s e f u l t o t h e m ,
as wel l as t he i r company , i n t he fu t u re . In r e t u rn fo r
t h i s l o y a l t y a n d c o m m i t m e n t , t h e e m p l o y e r w o u l d
p r o v i d e a ' s u i ta b l e j o b ' w i t h ' g o o d p a y ' , o f f er r e g u l a r
a d v a n c e m e n t o p p o r t u n i t i e s , p r o v i d e a n n u a l w a g e
i n c r e as e s , r e w a r d o u t s t a n d i n g o r l o y a l e m p l o y e e s w i t h
h i g h e r - p a i d p o s t s , p r o v i d e b e n e f it s , a n d i n v e s t m o n e y
i n th e e d u c a t i o n a n d d e v e l o p m e n t o f e m p l o y e e s , b e i n g
reasonab l y con f i den t t ha t t he i r newl y acqu i r ed sk i l l s
w o u l d n o t b e i m m e d i a t e l y lo s t t o a n o t h e r c o m p a n y . I n
o t h e r w o r d s , t h e c o r p o ra t e k n o t b e t w e e n e m p l o y e r a n d
e m p l o y e e w a s w e l l t i e d . T h e e m p l o y e e r e c e i v e d j o b
secu r i t y and t he empl oyer , i n t u rn , acqu i r ed a s t ab l e
w o r k f o r c e f o r m a n a g e r i a l s u c c e s s i o n a n d b u s i n e s s
con t i nu i t y . Th i s s t ab i l i t y may exp l a i n why l a rge
J a p a n e s e f i r m s , i n c o n t r a s t t o m a n y W e s t e r n c o m -
pet i t o r s , a r e c l i ng ing wi t h su ch t enac i t y t o t he i r sys t em
o f 'l if e ti m e e m p l o y m e n t ' , d e s p i t e i n t e n s e d e m o g r a p h i c
a n d e c o n o m i c p r e s s u r e s t o a b a n d o n i t .
S i nce t he 1970s , however , t he t i e t ha t b i nds empl oyer s
a n d e m p l o y e e s h a s b e c o m e s e v e r e ly s tr a in e d ( D e M e u s e
a n d T o r n o w , 1 9 9 0 ) . C o n f r o n t e d w i t h t h e n e e d t o c u t
cos t s and i m prove p roduct i v it y , even t he w or l d ' s l a rges t
o rgan i sa t i ons have i ncreas i ng ly r educ ed t he i r work fo rce
a n d r e m o v e d s o m e o f t h e e n t i t l e m e n t s ( j o b s e c u r i t y ,
r egu l ar p rom ot i on up t he co rpo ra t e l adder , annual w age
i ncreases , c heap mor t ag es , e t c . ) o f f e red as a ru l e t o
em pl oy ees i n t he ear li e r decad es ( see Exh i b i t s I and 2 ) .
The f lex ib le , d e l ayered , s l i mmer o rgan i sa t i on cons t an t l y
chan g i ng t o su i t i t s vo l a t i le and sh i f t ing m arke t s c an no
l onger o f f e r t he se cu re career p rog re ss i on o f t r ad i ti ona l
s t r u c t u r e s . P u b l i c c o m p a n i e s o f f e r s o m e r e s p i t e , b u t
e v e n g o v e r n m e n t a g e n c i e s n o l o n g e r p r o m i s e t o o f f e r
j o b s fo r l if e a n d p r o v i d e g e n e r o u s t e r m s t o t h o s e w h o
wi sh t o move on . F o r com pan i es l ess wel l p ro tec t ed , and
w i t h m o r e v o la t il e m a r k e t s , a p e r m a n e n t r e d u n d a n c y
p o l ic y -- w h e r e e m p l o y e e s c a n s e e a t a n y t im e w h a t t h e y
wo u l d be o f f e red t o l eave - - i s becom i ng a r ea l it y (Les te r,
1994).
I t i s no t su rp r i s i ng , t herefo re , t ha t many peop l e
exper i ence a sense o f r es t lessness i n s i de t hem sel ves and
i n r e l a t i o n t o t h e i r e m p l o y e r s . C o n f r o n t e d w i t h
i n c r e a s e d u n c e r t a i n ty , f e w e r b e n e f i ts , a n d v e r y o f t e n
i n c r e a se d w o r k l o a d s a n d r e s p on s i bi li ti e s , m a n y p e o p l e
f e e l t h e p s y c h o l o g i c a l c o n t r a c t m a d e b e t w e e n t h e m -
s e l v e s a n d t h e i r o r g a n i s a t i o n h a s b e e n b r o k e n . O l d e r
empl oyees i n par t i cu l a r a r e l i ke l y t o f ee l t ha t t he
u n w r i t t e n b u t i m p o r t a n t p s y c h o l o g i c a l c o n t r a c t t h e y
h a v e w i t h t h e o r g a n i s a t i o n h a s b e e n v i o l a t e d . J o e
G a l e r n e a u , a m a n a g e r a t A T & T, w h o s e w o r k f o r c e h a s
b e e n c u t b y 2 0 p e r c e n t i n t h e p a s t d e c a d e , t h i n k s h i s
f i rm i s t yp i ca l . As he pu t i t : ' I n t he pas t we sa i d t o
e m p l o y e e s ' D o a s y o u ' r e t o l d a n d y o u h a v e a j o b f o r
l i f e ' . T h e n w e b e t r a y e d t h e m . T r u s t l e v e l s w e r e
d e v a s t a t e d ' .
Th e Economist,
S e p t e m b e r 1 99 4)
A t t h e s a m e t i m e , n e w v a l u e t r e n d s a n d c h a n g i n g
w o r k f o r c e d e m o g r a p h i c s h a v e r e s u l t e d i n r e v i s e d
e x p e c t a t i o n s f r o m t h e e m p l o y e e s t h e m s e l v e s . K e y
t r e n d s s e e m t o b e a s i g n i f i c a n t s h i f t i n e m p l o y e e
a t t i t u d e s a n d v a l u e s r e l a t i n g t o c a r e e r m a n a g e m e n t ,
l e a d e r s h i p s t y l e , r e w a r d s a n d m o t i v a t i o n , w o r k i n g
hour s , an d so fo r t h (Spar row a nd H i l t rop , 1994) . Som e
e x p e r t s s u g g e s t t h a t w o r k h a s b e c o m e a le s s i m p o r t a n t
aspec t o f peop l e ' s l i f e . Accord i ng t o Hammet t (1984) ,
t h e n e w g e n e r a t i o n o f h i g h l y e d u c a t e d w o r k e r s w a n t
m o r e o p p o r t u n i t i e s f o r d e v e l o p m e n t , a u t o n o m y ,
f lex ib il it y and mean i ng fu l w ork exper i ences . Th ey wa n t
t o par t i c i pa t e fu l l y i n t he work env i ronmen t , r eac t
a d v e r s e l y t o ri g id h i e r a r c h ie s a n d d e n o u n c e a la c k o f
i nvo l veme n t i n dec i s i ons a f f ec ti ng t hem. Recen t su rveys
c a r r ie d o u t b y H a r d i n g ( 1 99 1 ) o f I n te r n a t io n a l S u r v e y
R e s e a r c h i n B r it a in s h o w t h a t y o u n g p e o p l e b r o u g h t u p
EURO PEAN MANAGEMENT JOURNAL Vol 13 No 3 Sep t ember 1995 287
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T H E C H A N G I N G P S Y C H O L O G IC A L C O N T R A C T
E x h i b i t T h e R o y a l B a n k o f S c o t l a n d
The R oyal Bank of Scotland is currently redefining the psychological contract that suggests i ts employees have
jobs for l i fe. According to Steve Rick, the b ank s director of personnel policy and development, the shift is part of
a major change programme that is fundamental, root and branch re-engineering of the business
Personne/
Management,
Augu st 1994). The programme was designed to end the compan y s job-for-l ife culture w hich
focused on pay for leve l rather than for performance. This is being replaced by an achievement culture, where
staff are expected to be more proactive w ithin specialist roles, the changes were f irst introduced to the bank s
Glasgow off ices, where over 20 grades have been reduced to about f ive broad bands with different pay scales
within each band. Existing staff have had to re-apply for redesigned jobs. The new jobs have been advertised in
terms of competencies without reference to pay or grade, which has led to lower-ranking staff emerging much
higher in the new structure. When this process has been consolidated, i t wil l be extended nationwide to the
bank s 10,000 staff.
E x h i b it 2 T h e C o n n e c t i c u t M u t u a l U f e I n s u r a n c e C o m p a n y
One of the oldest Hartford insurance companies, is also trying to change the existing psychological contract.
According to Bill Garfield, the Vice President of Human Resources, the objective is to introduce uncertainty into
an organization that has for 140 years worked on getting rid of every shed of uncertainty that could ever exist
The New Y ork Times,
April 4, 1994 ). Th e transform ation, still only in its initial stage, calls for most jobs to be
posted and the com pany s 1,889 employees to be reassinged to a new posit ion, with a new pay scale and new
duties. C omp any officials say that m ost people s salaries will not change significantly, but that some could go up
and some could go down. The responsibi l i ty for career management is being shifted back to each employee, who
may apply for any three posted m anagerial jobs in the new organisation. Newly hired managers wil l be
responsible, in turn, for hiring their own staff, for managing their own career, for keeping their skills and
competencies up to date, and for gett ing themselves moved to the next posit ion at the right t ime. The company
chairma n has vowed repeatedly that this Transform ation Project is not about shrinking C onnecticut M utual.
Employees are not being braced for large numbers of layoffs, but some people, despite the f lurry of statements,
newsletters an d question-and-answ er brochures to explain the transformation, believe it is all about layoffs
anyway, no matter what the company chairman really says. Clearly, some of the risks being taken by Connecticut
Mutual wil l only be evident well into the future, as employees consider what has happened and adjust to the new
work environment.
i n a n a t m o s p h e r e o f p e a c e a n d r e l a ti v e a f f l u e n c e a r e
m o r e c o n c e r n e d w i t h t h e i r q u a l it y o f l if e, a r e m o r e
c r it ic a l o f e m p l o y e r s a n d a u t h o r i t y , a n d s e e k jo b s w h i c h
a r e c h a l l e n g i n g a s w e l l a s u s e f u l f o r s o c i e t y . O l d e r
w o r k e r s , p a r t i c u l a r l y t h o s e o v e r 50 , a r e m o r e l i k e l y t o
e m p h a s i s e t h e P r o t e s t a n t w o r k e t hi c, w h e r e a s t h e y o u n g
v a l u e i n d e p e n d e n c e , i m a g i n a t io n , t o l e r a n c e a n d
r e s p o n s i b il i ty . I n a d d i ti o n , t h e i n c r e a s i n g e m p l o y m e n t
o f w o m e n a n d t h e g r o w i n g n u m b e r o f d u al c a re e r
c o u p l e s a r e s h i f ti n g t h e b a l a n c e b e t w e e n t h e f a m i l y a n d
t h e w o r k p l a c e , c r e a t i n g i n c r e a s e d d e m a n d s f o r m o r e
a u t o n o m y a n d m o r e f l ex i b il it y i n t h e w a y i n d i v i d u a l s
a r e tr e a te d . A p p a r e n t l y , a m o n g p r o f e s s io n a l w o m e n
a n d c o u p l e s , t h e i d e a l jo b i s s e e n a s o f f e r i n g fl e x ib i l it y ,
a u t o n o m y , r e s p o n s ib i l it y , v a r i e t y a n d o p p o r t u n i t i e s f o r
t r a i n i n g a n d d e v e l o p m e n t .
T h e r e i s l i t t l e d o u b t t h a t e a c h o f t h e f a c t o r s i d e n t i f i e d
a b o v e i s cr e a ti n g a n u m b e r o f n e w c h a l le n g e s f o r h u m a n
r e s o u r c e m a n a g e r s a n d l i n e m a n a g e r s a l ik e . F ac e d w i t h
p r e s s u r e s f o r g r e a t e r p r o d u c t i v i t y , s h i f ti n g d e m o -
g r a p h i c s , a n d c h a n g i n g w o r k f o r c e e x p e c t a t i o n s , m a n y
c o m p a n i e s a r e g r a p p l i n g w i t h q u e s t i o n s s u c h a s :
H o w c a n w e a t tr a c t a n d r e t a in p e o p l e w h o c a n l iv e
w i t h a n d o f t e n th r i v e u p o n u n c e r t a i n ty a n d a r e
w i l l i n g t o c h a n g e w i t h t h e o r g a n i s a t i o n ?
H o w c a n w e g e t a n d m a i n t a in t h e lo y a l ty a n d
c o m m i t m e n t o f o u r e m p l o y e e s , w h e n j o b s e c u ri ty ,
p r o m o t i o n o p p o r t u n i t i e s , a n d c a r e e r e n t i t le m e n t s
a r e d e c l i n i n g ?
H o w c a n w e m e e t t h e c a r e e r e x p e c t a t i o n s o f
e m p l o y e e s w h o e x p e c t ra p i d p r o m o t i o n s i n a n
o r g a n i s a t i o n t h a t i s b e c o m i n g f l a tt e r , l e a n e r a n d
n o t e x p a n d i n g e n o u g h t o c r e a t e n e w j o b s ?
H o w c a n w e e n c o u r a g e ( o l d er ) e m p l o y e e s t o t a k e
m o r e r e s p o n s i b i l i t y f o r t h e i r o w n p e r s o n a l a n d
p r o f e ss i o n a l d e v e l o p m e n t ?
H o w c a n w e d e v e l o p p r o c e d u r e s a n d p r o c e s s e s
t h a t h e l p a g r o u p o f m a n a g e r s a n d s p e c ia l is t s
u n d e r s t a n d a n d c o m m i t t h e m s e l v e s to w o r k in g
t o g e t h e r ?
H o w c a n w e b u i l d a n o r g a n i s a t i o n a l c u l t u r e a n d
s t r u c t u r e i n w h i c h e m p l o y e e s f e e l s a t is f ie d ,
c h a l l e n g e d a n d e m p o w e r e d ?
T h e s e a r e o n l y a f e w q u e s t i o n s , b u t t h e y r e p r e s e n t k e y
p r o b l e m s t h a t h u m a n r e s o u r c e m a n a g e r s f a c e a s th e y
t ry t o r e n e w a n d r e d e fi n e e m p l o y e e c o m m i t m e n t i n th e
1 9 90 s. S i n ce t h e t ra d i t io n a l c a r r o t s t h a t e n c o u r a g e d
c o m m i t m e n t i n th e p a s t a r e b e y o n d w h a t m o s t c o r-
p o r a t i o n s c a n n o w a f f o rd , n e w t y p e s o f i n c e n t iv e s n e e d
t o b e e x p l o r e d . T h e s e n e w i d e a s n e e d t o f o c u s n o t o n l y
o n h o w t o c r e a t e i n c e n t i v e s t h a t e n c o u r a g e p e o p l e t o
2 88 E U R O P E A N M A N A G E M E N T J O U R N A L V o l 1 3 N o 3 S e p t e m b e r 1 9 95
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THE CHANGING PSYCHOLOGICAL CONTRACT
be creative, flexible and receptive to the continual need
for change.
T h e N e w o n tr ac t
What are the principles upon which the new
psychological contract is based? How does this compare
with the past? Some authors suggest that we are
witnessing the following changes in the relationship
between employees and employers in Western
organisations:
1. Organi satio ns are becoming much more
demanding places to work. Employees are
expected to do their work, think of ways to
improve it, contribute to learning and change
efforts, and manage their own ongoing learning
processes (Galbraith et al., 1993).
2. The paternalism that was possible in the 1950s and
1960s has ended. The employee does not sign up
for a career, and the employer does not assume
long-term caretaking for his or her personal
income (Clark, 1992).
3. We can no longer expect business organisations
always to be stable and long-lived. Roles and
responsibilities are not well specified and secure.
Consequently organisations are becoming much
more ambiguous places to work (Galbraith et al.
1993).
4. Increasingly, people are being utilised where they
have needed skills and can expect to move from
place to place in their organisation as needs
change. To maintain their personal income and
employability, individuals have to plan their own
development, build a professional reputation, and
learn to manage their own careers (Handy, 1989).
5. Many of the factors that have traditionally
supported and reinforced feelings of psychological
success, including job security, increasing levels
of income, and the status that derives from one s
position and employer, are becoming less acces-
sible and more chancy. Hence, many working
people will have to reexamine their career
aspirations and look to other sources of personal
meaning to avoid the experience of psychological
failure (Mirvis and Hall, 1994).
6. Promotion is the motivational currency of the old
era. What matters now is job enrichment,
employability and providing the opportuni ty for
employees to develop the skills and perspective
to take care of themselves (Noer, 1993).
7. Because organisations can no longer offer promo-
tion as a reward for loyalty and performance, the
rewards of managers and professionals cannot be
managed the way they used to be. Pay systems
must be altered so that people are no longer paid
on the basis of their level, position or status, but
instead on their contribution to the firm (Moss
Kanter, 1994).
8. Transactional contracts will become the norm in
industry. For example, many of the traditional
career-orientated employers -- IBM, Hewlett
Packard, and Ciba Geigy among others -- are
increasingly hiring-in managerial and professional
talent and making continued employment
explicitly contingent on the fit between people s
competencies and business needs. This trend
reaches its logical conclusion in Jack Welch, CEO
of General Electric, who contends that GE offers
its people a one day contract (Mirvis and Hall,
1994).
Several authors, then, suggest that a new type of
psychological contract is emerging one that is more
situational and short term and one that assumes each
party is much less dependent o n the other for survival
and growth. In its most naked form, this new contract
is defined as follows:
There i s no job secur i ty . The employee wi l l be employed as
long as he or she adds va lue to the organisa t ion and i s
persona l ly respons ib le for f ind ing new wa ys to add va lue . In
re turn the employee has the r ight to dem and in teres t ing and
imp or tant wo rk has the f reedom a nd resources to per form i t
wel l rece ives pay tha t re flec ts h i s or her contr ibut ion and
gets the exper ience an d t ra in ing needed to be employable here
or elsewhere.
A n e w p s y c h o l o g i c a l c o n t r a c t i s
e m e r g i n g o n e w h i c h is m o r e
s i t u a t i o n a l a n d s h o r t t e r m
This development implies that commitment to corporate
goals is decreasing, and that job security and company
loyalty may be at an all time low (De Meuse and
Tornow, 1990). For example, Hirsch (1987: 46) notes that
yesterday s rules, and pleas to climb the company s
career ladder are sudden ly transformed into to day s
uncertainty and fear of firing . This does not mean,
however, that company loyalty and commitment are
dead. Rather, it means that these values must be
generated through different avenues. It also means that
companies must work harder tha n ever to make them-
selves attractive places to work. Opportunities for
promotion or pay increases are not what t hey used to
be in downsized and restructured companies.
Consequently, new ways to attract and keep talented
employees must be developed.
Exhibit 3 summarises the main characteristics of the old
and new psychological contracts, as described by a
group of middle managers in a recent workshop at the
International Institute for Management Development.
The key words used to describe the old contract are
stability, permanence, predictability, fairness, tradition,
and mutual respect. In exchange for a career with the
organisation, employees were expected to be loyal,
dependable and comfortable with long-term promo-
tional prospects. In return, the employee would be
offered continued employment, annual salary increases,
and slow but steady advancement.
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THE CHANGING PSYCHOLOGICAL CONTRACT
E x h i b i t 3 C h a n g i n g P s y c h o l o g i c a l C o n t r a c t
haracter is t ic Old New
F oc us S e c u r i t y E m p l o y a b i l it y
Format Structured Flex ible
Durat ion Perman ent Var iable
Scope Broad Narrow
Und erlying Tradition Ma rket forces
principle
I n te n d e d o u t p u t L o y a l t yand Value added
c om m itm e nt
Em ployer s key Fa ir pay for High pay
responsibility goo d wo rk for
high
performance
E m p l o y ee s k e y G o o d aking a
r e s p o n s i b i l i t y p e r f o r m a n c en d i f fe re nc e
present job
Em ploy e r s k e y Sta b le inc om e Oppor tun i tie s
input and career for self-
a d v a n c e m e n t d e v e l o p m e n t
Em ploy e r s k e y
Time and effort
Knowle dge
input and skills
Clearly, the si tuation is vastly different today. A self-
reliance orientation increasingly pervades the
employment relationship. The need to be flexible and
adaptive to change is emphasised. This is a far cry from
the Organisation Man pheno menon of the 1960s, in
which an employee completely invested himself in his
company, worked 60- to 70-hour weeks when needed,
relocated frequently at short notice, an d did whatever
the company asked (Whyte, 1956). In contrast, Hirsch
(1987) likens the current situation to an employment
strategy which professional sports call free agency . In
this strategy, professional athletes attempt to maximise
their personal status and income by selling their
individual talents to the highest bidder. Their sense of
identity is linked to their profession, rather than to
specific countries, organisations or sports clubs: they are
professional athletes first, a team member second.
Hirsch suggests (American) managers may want to
adopt a similar strategy in the present business
environment.
Im pl i ca t ions for um an Resource
M a n a g e m e n t
The implications for hum an resource management are
enormous. The changing psychological contract is
crucial to the nature of careers and the treatment of
people as key organisational assets in the next decades.
What will organisations expect of their employees when
they are faced with even greater competition, inter-
nationalisation and integration of functions? And wh at
will employees expect of their employer when faced
with increased professional risk and uncertainty? How
can the two sets of expectations be reconciled? What
does this mean for the management of people within
the organisation? These are key issues which must be
addressed for they will determine the context for both
the psychological and formal contracts between
employees and employers. We do not have all the
answers, but a number of suggestions can be made:
F i n d N e w W a y s to A t t ra c t R e t a i n a n d
M o t i v a t e T a l e n t
Under the traditional system, company loyalty was
rewarded with job security and large companies had a
core group of professional employees who were
dependable, who would work hard and who would
sacrifice the present for the future. The new
psychological contract rests on the assumption that
people will not be automatically loyal to their company
as a whole, but that, as professionals, they will be
moved by a new kind of loyalty to their own disciplines
and skills. It also assumes that people will care more
about their own development and that their skills are
highly transferable between companies and industries.
Companies, therefore, can no longer rely on traditional
methods and techniques to attract and retain talented
workers. Instead of career paths and job security, new
kinds of incentives have to be applied. According to
Moss Kanter (1994), companies n eed to switch
incentives from careers, status and promotion to
personal reputation, teamwork and challenging assign-
ments. They have to find ways of making work
sufficiently challenging and involving so that it becomes
a source of loyalty which translates into a new kind of
security, which she calls employabi lity security . This
is the promise that the employee s skills will be
enhanced, and access to other tasks and assignments
will be facilitated. Moss Kanter says:
This i s the bes t promise employers can g ive to the i r s ta f f
par t icu lar ly in the current era wh en organisa tions come and
go change shape or change s ides rapid ly . I t i s a d i ff i cu l t
t rans i t ion o f po l icy but I am f ind in g companies ve ry receptive
t o t h i s n e w p h i l o s p h y .
P s y c h o l o g i c a l C o n t r a c t s N e e d t o E v o l v e i n
L i n e w i t h t h e N e w C h a r a c t e r i s t i c s a n d
E x p e c t a t i o n s o f P e o p l e E n t e r i n g t h e W o r k
Force
As noted above, the work force is changing and
employees expectations are evolving in line with the
economic situation (high unemployment, more
competition and the creation of a global market) as well
as the new demographic situation (ageing of the
population, higher education levels and more women
entering the workforce). Increasingly, employees want:
to know more about what is happening in the
organisation
to understand why managers have made decisions
to contribute their own ideas and to participate in
the decision making
p r o e s s
to feel valued and be personally recognised for
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THE CHANGING PSYCHOLOGICAL CONTRACT
their contribution to the success of the
organisation.
Satisfying these demands requires openness and a
genuine commitment by managers to honesty, two-way
communication, and delegating authority and res-
ponsibili ty to the lowest possible level. Clearly, winning
commitment to change without the old carrot of job
security can be very difficult. However, all employees
deserve at least an explanation of how that change will
affect them and what the co mpany will or will not do
to help. In fact, Chevron has discovered that when it
candidly explains its problems to employees, their
commitment to the c ompany and their work increases,
even if the news is bad (O'Reilly, 1994). Consequently,
moving from concealment to openness is one of the
main leadership challenges of the 1990s.
F i n d W a y s t o A v o i d B u r n o u t
One of the great unanswered questions of the new
psychological contract is how older workers will fare if
continually forced back into interna l or external labour
markets to compete for challenging assignments with
younger employees. As O'Reilly (1994) points out, a
genuine commitment by companies to retrain or find
new jobs for employees with declining skills is helpful,
but not everyone can be retrained or relocated.
Companies that fail to demonstrate some sort of
commitment to helping those workers may not find
many people who are willing to commit themselves to
their long term success. Some companies have tr ied to
deal with this issue by making the access to jobs more
transparent. For instance, at Raychem, employees can
tap into IIINsiders (the internal-information interview
network), to arrange interviews with other employees
who are willing to talk about what jobs they do, and
how they got to do them. Other firms, mostly in
technology industries, have set up new career centres
where employees can find advice on everything from
information on job vacancies both inside and outside
the organisation to personal assessment tools to discover
individual interests, talents and skill requirements.
Whether these services are called outplacement, career
guidance, or inplacement, the goals are essentially the
same: increasing the mobility, 'competencies' and
'employability' of employees within the organisation.
The principal barrier to such solutions may lie in the
perceptions of individuals themselves. As BP's HR
manager says: 'The problem is how to change people's
minds, not to think about career developmen t only in
terms of promotion, but to develop a broad range of
skills to add value to the job' (Lester, 1994: 80). Long-
term careers and steady promotions may still be offered
to a chosen few, but most people will either have to
change companies to rise to senior manageme nt ranks
or stabilise at lower levels.
W h a t S o l u t i o n s D o e s R e s e a r c h
S u g g e s t
The implications of the changing psychological contract
for those who survive the effects of restructuring,
downsizing and reorganisation are likely to be little more
comfortable than for those who do not. Yet, more than
ever, the organisation needs the employees' commit-
ment in order to succeed. The pressure is to do things
better, faster, and cheaper and people have to know
what they are expected to do in order to achieve these
objectives. Merely telling people what to do does not
make them committed. Real commitment can only be
achieved through mobilising energy, ideas, and effort
that come from each employee willingly and spon-
taneously. This section will integrate some ideas from
the literature to provide a number of general
recommendations for building employee commitment
in the new socio-economic environment.
C h a n g e s i n M a n a g e m e n t ty le
Many researchers have measured the effect of
manageme nt style on employee commitment in organ-
isations and most have fo und that role clarity, two-way
communication, decentralisation, and direct
participation in decision-making all cultivated higher
commitment amongst employees (Stevens et al., 1978;
Morris and Steers, 1980; Rhodes and Steers, 1982).
Other studies have found that managers can get greater
commitment from employees by giving them more
discretion, control and other resources for their work
(Dansereau et al., 1975). This finding is further
supported by Lawler and Mohrman (1989). They
suggest that to develop greater commitment among
employees, a manager must allow the employee to share
in the risks as well as in the rewards. Their concept of
Total Employee Involvement (TEI) calls for shar ing
important information, sharing management authority,
delegating responsibility for performance management,
and allocating rewards based on corporate success.
B u i l d C r o s s f u n c t i o n a l T e a m w o r k
The push towards cross-functional teamwork and
projects can be seen as a very important development
that enhances commitment to organisational objectives.
Not only do cross-functional teams make inter-
dependence and co-operation amongst individuals and
functions more visible and decisions less reversible, but
they also provide a smaller social environment where
organisational commitment can be more easily built
through relationships, social involvements, and shared
values and ideas with team members. Furthermore,
such teams increase individual learning and skills,
provide more rapid feedback, and overall enhance an
employees personal and professional development.
reate halleng ing W ork Experiences
The challenge of work experience has been shown to
be one of the most significant factors in the development
of commitment (Steers, 1977; Meyer et al., 1989). Given
this strong influence, efforts should be made to design
tasks and structures that will enable people to feel a
sense of accomplishment, to express and use their
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THE CHANGING PSYCHOLOGICAL CONTRACT
talents, and to exercise their own decision-making
powers. By designing jobs to increase the opportuni ty
for challenge and self-development, steps can be taken
to help ensure a high commitment and identification
w i t h t h organisation. Also, involving new entrant s in
work that is challenging and that increases their growth
and development is important as individuals begin their
socialisation in the organisation.
I m p r o v e t h e I n d u c t i o n a n d S o c i a l i s a t i o n
Process
Since the initial stages of employment have been shown
to be highly critical in setting the future frames of
reference for employees, special attent ion must be paid
to how n ew employees are introduced into the organ-
isation. Wanous (1975) research on the earliest stages
of employment has shown that most new employees
tend to go into jobs with inflated expectations. He
proposes that recruits be given a realistic job preview
which illustrates both the desirable and undesirable
aspects of the organisation, rather than using the
traditional approach, which tries to maximise th
positive aspects of the organisation to the exclusion of
realistic aspects. Research done by Louis (1980) also
suggests that unmet expectations during the initial
stages of emplo yment result in a lack of commitment
and increased turnover. In view of the fact that most
turnover occurs within the first six months, more
realistic job previews and a concern towards under-
standing and meeting new employees expectations
could provide a more realistic and positive initial
organisational experience and reduce the cost of early
resignations.
C r e a te a n A t t a c h m e n t T h r o u g h P r o f e s s io n a l
R e l a t i o n s h i p s
The management of expectations through realistic job
previews are critical at the later stages of the
employment relationship as well, especially in the light
of the finding that people at medium tenure and
position express more commitment to their profession
and less to their organisation. Perhaps a way to avoid
th
declining commitment experienced at that stage
would be to provide various social involvements (e.g.,
opportunities for group affiliation, off-the-job contacts)
that create an att achment through professional relation-
ships and help bridge the gap between commitment to
personal interest and the organisation (Sheldon, 1971).
B u i l d O r g a n i s a t i o n a l P r i d e a n d R e c o g n i s e
P e r s o n a l V a l u e s
The organisation should be a vehicle with which
individuals can develop personal pride and express
important values about their work to their friends,
family and relatives. As pointed out at the beginning
of this paper, the relationship between the organisafion
and the individual has weakened, often resulting in
distrust and cynicism towards the organisation. Also
given that man y organisations have been restructuring
and eliminating jobs and people that were deemed
important, it must be pointed out that the changes in
the 1980s have result ed in an empl oyment relationship
primarily based on instrumental or more extrinsic factors
-- What s in it for me? . This type of relationship may
not generate the effort and spontaneity necessary for
managing a competitive organisation (Katz and Kahn,
1978). To be successful, organisat ions need to integrate
as far as possible the needs and values of the organ-
isation with those of the individual, so that the latter
believes that if the organisation thrives, he or she will
thrive too. As Armstrong (1990) says, people may work
hard if they believe in the mission of the company and
can identify with its values, aims and activities; they will
work even harder if they feel that achieving these values
does something for them too.
I Organisationsneed to develop a
new kind of commitment
through the creation of meanings
and values by individuals and
groups
Organisations, then, need to develop a new kind of
commitment -- commitment through the creation of
meanings and values by individuals and groups through
their work, their relationships with other people, and
their opportunities for growth, rather than impersonal
values and mission statements handed down from th
top. This does not mean that a chaos of values will
occur. As Carlile (1991) argues, what it does suggest is
that shared values will form around personal values and
meanings which are unique and important to the
individual and the group. Rockwell has operationalised
this to a degree by suggesting that each management
team, work group, or division articulate a statement of
values (a credo) that expresses the work they do and
how they accomplish that work in a meaningful way.
What is important is that these credos are unique to each
group and help create an identity that can be shared and
in which each individual can find meaning. It is these
more intrinsic factors that build the k ind of commitment
that allows employees to be energetic, proactive, and
competitive.
u r t h e r I m p l i c a t i o n s f o r H u m a n
R e s o u r c e M a n a g e m e n t
All of these organisational changes place new demands
on the human resource manager. The following lists a
few possible practices to consider when building a new
type of employee commitment now and in the
foreseeable future:
R e w a r d a n d R e c o g n i s e H i g h A c h i e v e m e n t
Given the pressure to do things better, faster, and
cheaper, reward systems should recognise contribution
rather than position or status. In addition, since cross-
functional projects and assignments are more temporary
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THE CHANGING PSYCHOLOGICAL CONTRACT
a n d l e s s h ie r a rc h ic a l , r e w a r d s y s t e m s s h o u l d b e m o r e
d y n a m i c a n d f l e x i b l e . R e w a r d a n d r e m u n e r a t i o n
pack ages sa l a ry , i ncen t i ves , bon use s , benef i ts ) shou l d
e n c o u r a g e e m p l o y e e s w i t h o p p o r t u n i t y to s e r v e b e y o n d
t he i r j ob descr i p t i on , ga i n p ro fess i ona l exper t i se , and
cu l ti va te co re com pet enc i es across func t i ona l g roup i ngs .
M anage Career Expecta t ions
As no t ed i n t he p rev i o us sec t i on , r ea li s ti c j ob p rev i ew s
s h o u l d b e u s e d t o p r o v i d e m o r e a c c u r a t e i n f o r m a t i o n
t o t h e p o t e n t i a l e m p l o y e e . N e w e m p l o y e e s m u s t b e
g i v e n j o b s th a t p r o v i d e c h a l l e n ge a n d t h a t a l s o p r o v i d e
t he oppor t un i t y t o i n t e r ac t i n a g roup se t t i ng . To
mai n t a i n o rgan i sa t i ona l commi t men t , peop l e a t l a t e r
c a r e e r s t a g e s s h o u l d b e g i v e n t h e o p p o r t u n i t y t o w o r k
p a r t t im e w i t h p r o f e s s i o n a l g r o u p s b u s i n e s s s c h oo l s ,
p ro fess i ona l assoc i a t i ons , consu l t i ng agenc i es , e t c . ), an
o p p o r t u n i t y t r a d it i on a l l y r e s e r v e d f o r n o n - m a n a g e r ia l ,
l e s s -s e a s o n e d e m p l o y e e s .
De centra l ise Performance ppra isals
C o n s i d e r i n g t h e s h i f t t o w a r d s d e c e n t r a l i s a t i o n a n d
e m p o w e r m e n t , i t i s e s s e n t i a l t h a t i n d i v i d u a l s a n d
g r o u p s h a v e m o r e r e s p o n s i b i l i t y o v e r t h e a p p r a i s a l
p r o c e s s . F u r t h e r m o r e , a p p r a i s a ls s h o u l d b e b a s e d o n
c o n t i n u o u s p e r f o r m a n c e a n d c o n t i n u o u s i m p r o v e m e n t ,
r a t h e r t h a n s i n g l e e v e n t s o r p a s t a c h i e v e m e n t s .
Provide Sys temat ic Tra in ing
S y s t e m a t i c t r a in i n g a n d d e v e l o p m e n t o p p o s e d t o
s e n d i n g i n d i v i d u a l s a w a y o n a d h o c t r a i n i n g
p r o g r a m m e s ) w i l l e n h a n c e c o m m i t m e n t b y g i v in g
t a l e n t e d e m p l o y e e s t h e o p p o r t u n i t y t o d e v e l o p th e i r
sk i ll s and t o ach i eve pos i t i ons o f g rea t e r cha l l enge and
r e s p o n s i b i l i t y . I n - c o m p a n y p r o g r a m m e s , e s p e c i a l l y
cross-funct ional and non -hierarchical ones, can al so help
t o i mpro ve i den t i f ica t ion w i t h o rgan i sa t iona l va l ues and
i n c r e a s e c o m m u n i c a t i o n a m o n g f u n c t i o n s , l e v e l s a n d
d e p a r t m e n t s .
Nurture Leadersh ip Talent
I n v i e w o f t h e n e e d f o r t e a m w o r k , i n d i v id u a l s n e e d t o
b e t r a i n e d i n t h e s k il ls n e e d e d f o r w o r k i n g i n g r o u p s .
M a n a g e r s n e e d t o b e t r a i n e d i n c o u n s e l l i n g a n d
coach i ng t o exerc i se l eader sh i p and f ac i l i t a t e t he
r e l a t i o n s h i p s b e t w e e e n t h e v a r i o u s f u n c t i o n s a n d
p r o f e s s i o n s w i t h i n a w o r k g r o u p .
El iminate Sys temic Barr iers to Change
S t r a te g i e s a n d r e s o u r c e s n e e d t o b e d e v e l o p e d i n o r d e r
t o i m p l e m e n t t h e s e s t r u c t u r a l a n d m a n a g e m e n t
chan ges. A s Carl ile 1991) points out , the quest ion nee ds
t o b e a s k e d : h o w s h o u l d i n d i v i d u a ls b e t r a in e d , g r o u p s
b e s t ru c t u r e d , a n d m a n a g e m e n t p r a c t ic e s b e c h a n g e d
t o fa c il it a te e m p l o y e e e m p o w e r m e n t a n d i n v o l v e m e n t ?
T h e r e a r e a n u m b e r o f o b s t a c l e s t h a t m u s t b e o v e r c o m e
i n o rder t o mak e t he change s e f f ec t ive . A t r ad i ti ona l pay
s t r u c tu r e , b a s e d o n s t a t u s a n d p o s i ti o n , i s o n e o f th e m .
P o o r w o r k i n g c o n d i t i o n s , i n a d e q u a t e t ra i n in g , a n d
u n d u l y r e s t r i c t i v e o r b u r e a u c r a t i c h u m a n r e s o u r c e
p rac t ices a r e o t her s . As Arm st rong says , you wi l l neve r
p r e v e n t p e o p l e g r o u s i n g a b o u t t h e s e , b u t y o u c a n a t
l eas t r educe t he scope fo r l eg i t i mat e g rumbl es .
Overa l l , t hese s i x ac t i v i t i es can be seen as a se t o f
me t hods and t echn i ques des i gned t o i ncrease t he l oya l ty
a n d c o m m i t m e n t o f e m p l o y e e s b y s e t ti n g u p a s y s t e m
f o r e s ta b l is h i n g a n d d i s c u s s in g e m p l o y e e e x p e c t a t i o n s
ear l y i n t he empl oymen t r e l a t i onsh i p , c r ea t i ng oppor -
t un i t ies t o check ou t whe t her t he p sycho l og i ca l con tr ac t
i s s ti ll val id at later s tages, and renego t iat ing the cont ract
i f necessary . Fo r some compan i es , t hese t echn i ques a r e
c o n s i s t e n t w i t h t h e h u m a n r e s o u r c e p o l i c i e s a n d
prac t i ces t ha t a r e a l r eady be i ng empl oyed t o a t t r ac t ,
r e t a i n a nd mob i l i se peo p l e a t a l l l eve l s o f t he
o r g a n i s a t i o n . F o r m a n y o t h e r s , h o w e v e r , t h e t a s k o f
d e v e l o p i n g a n d i m p l e m e n t i n g s y s t e m s a n d s t r u c t u r e s
t ha t suppor t t he new soc i a l and economi c r ea l i t y wi l l
con t r ad i c t a se t o f per so nne l po l i c i es and p rac t i ces t ha t
h a v e s e r v e d t h e o r g a n i s a t i o n f o r a l o n g t i m e . I n m y
op i n i on , t h i s t r ans fo rmat i on wi l l occu r on l y when
g e n e ra l m a n a g e r s d e v e l o p a v i e w p o i n t o f h o w t h e y w i s h
t o s e e e m p l o y e e s i n v o l v e d i n a n d d e v e l o p e d b y t h e
o rgan i sa t ion , and w hat p er sonne l po l ic i es and p rac ti ces
are app rop r i a t e t o ach i eve t hese goa l s . As Beer e t a l . ,
1984) po i n t ou t , w i t hou t e i t her a cen t r a l ph i l o so phy o r
a s t r a t e g i c v i e w o f t h e l i n k b e t w e e n h u m a n r e s o u r c e
ma nagem en t and t he overa l l capab i li ty and per fo rmance
o f t h e c o m p a n y w h i c h c a n b e p r o v i d e d o n l y b y g en e r a l
manager s ) , m anager i a l beha v i ou r wi t h regard t o peop l e
i s l i ke ly t o r emai n a se t o f i nde pen den t ac t iv i ti es car ri ed
o u t b y i n d iv i d u a ls , e a c h g u i d e d b y t he i r o w n p e r s o n a l
values, opinions and pract ical exper ience. Clear ly , f rom
t he o rgan i sa t i ona l s t andpo i n t , i t i s w i se t o deve l op a
c o h e r e n t h u m a n r e s o u r c e p o l i c y t h a t w i ll m a k e i t
poss i b l e fo r manager s a t a l l l eve l s o f t he o rgan i sa t i on
t o a t t r ac t and r e t a i n t he r i gh t mi x o f peop l e and t o
e s t a b li s h t h e t y p e o f e m p l o y m e n t r e l a t i o n s h ip t h a t i s
c o n s i s t e n t w i t h c h a n g i n g b u s i n e s s n e e d s , s o c ia l v a l u e s
a n d e m p l o y e e e x p e c t a ti o n s . W i t h th e h e l p o f h u m a n
resourc e special is t s, general ma nage rs p lay an important
ro l e i n c r ea t i ng a se t o f human r esou rce po l i c i es and
prac ti ces t ha t a r e cons i s t en t wi t h bus i ness r equ i r emen t s ,
s o c i e t a l c h a n g e s a n d t h e v a l u e s a n d e x p e c t a t i o n s o f
e m p l o y e e s .
o n c l u s i o n
T o c o n c l u d e , i n c r e a s i n g c o m p e t i t i o n a n d c h a n g i n g
e x p e c ta t io n s a m o n g e m p l o y e e s h a v e p r o m p t e d a
g rowi ng d i s i ll u s ionmen t wi t h t he t r ad it i ona l ap p roaches
t o th e m a n a g e m e n t o f h u m a n r e s o u rc e s b a s e d o n
l if et ime em pl oym en t and s t eady p romo t i on f rom wi th i n .
C o n s e q u e n t l y , c o m p a n i e s h a v e e x p e r i m e n t e d w i t h a
r ad i ca l l y d i f f e r en t s t r a t egy , des i gned t o i ncrease t he
f lex ib il it y, p rodu ct i v i t y and com pet i t i vene ss o f t he
en t erp r i se . Th i s t r ans fo rmat i on has h i gh l i gh t ed some
f u n d a m e n t a l q u e s t i o n s a b o u t h o w t o d e v e l o p a n d
m a i n t a i n t h e c o m m i t m e n t o f p e o p l e w h o n o l o n g e r
EUROPEA N MAN AGEM ENT JOURNAL Vol 13 No 3 Sep temb er 1995 293
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T H E C H A N G I N G P S Y C H O L O G IC A L C O N T R A C T
e n j o y t h e j o b s e c u r i t y a n d s t a b il i ty t h a t w a s t r a d i t io n a l l y
o f f e r e d th e l o n g - s e r v i n g e m p l o y e e s . T h e k e y
a s s u m p t i o n s u n d e r l y i n g t h e s e q u e s t i o n s a r e t h a t :
1 . t h e p s y c h o l o g i c a l c o n t r a c t t h a t d e f i n e s t h e
r e l a t i o n s h i p b e t w e e n e m p l o y e e s a n d t h e i r
o r g a n i s a t i o n i s c h a n g i n g d r a m a t i ca l l y ;
2 . t h i s c h a n g e is c a u s i n g a s t r o n g n e e d fo r
o r g a n i s a t io n a l s t r u c t u r e s a n d s y s t e m s t h a t p r o v i d e
o p p o r t u n i t i e s f o r g r e a t e r p e r s o n a l a n d p r o f e s s i o n a l
g r o w t h .
C o m p a n i e s l i k e A T & T , C h e v r o n a n d t h e R o y a l B a n k o f
S c o t l a n d h a v e a l r e a d y b e g u n r e - e x a m i n i n g a ll p o l ic i e s,
p r a c t ic e s , a n d m a n a g e r i a l v a l u e s t h a t a f f e c t t h e
m a n a g e m e n t o f h u m a n r e s o u rc e s . T h e y fi n d th a t th e
t r a n s i t i o n i s d i f f i c u l t , b u t s e e r e f o r m a s e s s e n t i a l f o r
a c h i e v i n g a b e t t e r r e c o n c i l i a t i o n o f t h e n e e d s o f t h e
o r g a n i s a t io n w i t h t h e n e e d s o f t h e i n d i v i d u a l a n d o f t h e
b r o a d e r s o c i e t y . U n f o r t u n a t e l y , m o s t o r g a n i s a t i o n s
c h a n g e h u m a n r e s o u r c e p o l i c i e s a n d p r a c t i c e s i n
r e s p o n s e t o c ri si s. F o r t h e m , t h e n e e d e d c h a n g e s a r e
m o r e l ik e l y t o b e a m a t t e r o f r e v o l u t i o n t h a n r e f o r m .
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JEAN-MARIE
HILTROP
I M D ,
Chemin de Be l ler ive 23 ,
PO Box 915, Lausanne ,
C H - I O 0 1 , S w i t z e r l a n d
Jean-Marie Hi l t rop i s
P r o f e s s o r o f H u m a n
R e s o u r c e M a n a g e m e n t a t
the In ternat ional
I n s t it u t e f o r M a n a g e m e n t
D e v e l o p m e n t ( I M D ) ,
Lausan ne , in Swi t zer land . H e was involved , for
many years , in execut ive educat ion a t the
M a n a g e m e n t C e n t r e o f t h e U n i v e r s i t y o f B r a d f o r d
a n d a t t h e D e p a r t m e n t o f A p p l i e d E c o n om i c
Sc iences a t the Kathol ieke Univers i te i t Leuven in
B e l g i u m . H e h a s b e e n a p e r s o n n e l m a n a g e r a n d
consul tant for several European companies .
Recent ly , he co-authored
E u r o pe a n H u m a n
R e s o u r ce M a n a g e m e n t i n T r a n si ti o n a n d
E u r o p e a n C a s e b o o k o n H u m a n R e s o ur c e a nd
C h a n g e M a n a g e m e n t ,
both publ i shed by Prent ice-
Hal l , and he i s current ly leading an in ternat ional
research projec t which examines the impact o f
human resource prac t ices and compet i t i veness o f
European organisations.
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