Instrument of Change

A new CIPD Change Agenda examines the role of the psychological contract in change situations

Attitudes towards the ‘psychological contract’ have moved on since the Institute embraced the idea ten years ago.  It’s no longer about academic models or analysis – ‘psychological contract’ thinking is increasingly reflected in the practice of organisations in both private and public centres.  The CIPD recently published a Change Agenda drawing on survey and case study evidence that can help organisations think about the best way of managing change.

Research suggests that in many ways the ‘old’ psychological contract is still alive and well.  Employees still want security and are prepared to offer loyalty, though they may feel less committed to the organisation as a whole than to their workgroup and possibly to customers or clients.   In general, they remain satisfied with their jobs.  Levels of employee satisfaction and commitment are up.  Fears that commitment was about to fall off a cliff in protest at employers’ collective failure to match employees’ expectations haven’t been borne out.  There’s little evidence to support the idea of a shift from ‘relational’ to ‘transactional’ contracts.  However, there have been important changes in employee priorities, particularly among younger employees and those in higher-paid or professional jobs.  These shifts partly reflect tighter labour markets and partly inter-generational changes in attitudes, as children react negatively to aspects of their parents’ lifestyles.  Although there is no ‘new deal’ employees are increasingly in the driving seat and looking for work-life balance.  The challenge for employers is to adapt their policies and communications so as to underpin a positive psychological contract in the face of changing employee needs and expectations.

The new Change Agenda also looks at managing change. Unless people issues are faced up to at an early age, the process is likely to end in tears.  It’s not always possible to avoid breach of the psychological contract, but employees are more likely to be forgiving when managers explain what has gone wrong and how they intend to deal with it.  The psychological contract may need to be renegotiated. Key steps for organisations are to:

• take people management issues into account in planning change
• manage expectations by giving early warning of changes
• involve employees and get ‘ownership’ of the changes
• communicate – share information with employees, listen to the response
• consult employees on proposed changes
• remember that the line managers’ role is often critical

HR professionals have a key role to play both in contributing to top-level decisions about the direction and pace of change and in supporting line managers across the organisation to implement them. The idea of the psychological contract can help HR managers make the business case for incorporating effective people management policies and practices into the change management process.

Source:  Impact.  Quarterly update on CIPD Policy and Research
Issue 14/February 2006