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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



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



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



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.

EUROPEAN MANAGEMENT JOURNAL Vol 13 No 3 September 1995 289




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

290 EUROPEAN MANAGEMENT JOURNAL Vol 13 No 3 September 1995




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

EUROPEAN MANAGEMENT JOURNAL Vol 13 No 3 September 1995 291




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

292 EUROPEAN MANAGEMENT JOURNAL Vol 13 No 3 September 1995




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



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.

2 9 4 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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