Keeping the people balance in organizations

“No strings attached” keeping the people balance in organizations

Ioannis Nikolaou

Social, political, economic and demographic trends are transforming the landscape of global businesses, but most companies worldwide are still challenged to achieve success according to traditional measures: profitability, market share, customer satisfaction and innovation, “forgetting” their most significant index of success: their own people. Employees should not simply be considered as the most significant asset of an organization, as most CEOs will tell if you ask them, but they should really be the first and foremost requirement for organizational success, especially today when everything around us changes with an unprecedented speed of change. The natural consequence of these changes is the transformation of the employment relationship. The traditional working relationship is shifting towards a “new deal”, which is being characterized, among others, by short-term contracts, lack of stability and employability and alternative forms of work. A noticeable evidence of the collapse of the traditional employment relationship is the decline of the trade union membership and some collective values related to it and the rise of a more dyadic – level agreement.

Over the last few decades, the Human Resources Management movement has emphasized the necessity of paying increased attention to the human workforce, suggesting practical and concrete steps in order to improve people’s balance at work for the benefit of both employees and employers.

Within this context, Organizational Psychology and Behavior researchers attribute to the employment deal three main features that reflect the transition of the employment deal; standard, position-based and idiosyncratic.

Standard deal reflects the traditional employment agreement based on the legislation or collective rights, position-based also partly represents the old deal, as it refers to certain features available to a specific group of workers.

On the other hand, idiosyncratic agreement reflects aspects of the contract negotiated on a more individualized level, gaining more ground and becoming more salient nowadays. The theoretical background of analyzing this new individualized and less explicit deal is psychological contract theory, defined as “the beliefs, based upon promises expressed or implied, regarding an exchange agreement between an individual and, in organizations, the employing firm and its agents.” Nevertheless, recent voices of concern are raised regarding the static feature and the emphasis on the two types (relational and transactional) of psychological contract as well as the lack

Otto Neumaier/Gottfried Schweiger/Clemens Sedmak (eds.): Perspectives on Work, Wien–Münster: Lit-Verlag, 2008: 261–265.

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of emphasis on the formation and development of psychological contracts, in the new working environment. Therefore, the focus of the current paper is to explore this new organizational reality with a more flexible approach in employment relationships. Our current approach is captured by the term dynamic psychological contract.

Breach and violation of the psychological contract due to reneging or incongruence entail negative consequences for the employee and the organization. Specifically, research has shown that violating a contract may lead to attitudinal consequences, such as reduced organizational commitment, work satisfaction, work – family balance, job security, motivation and stress as well as (may lead) to behavioral consequences such as decreased attendance, intention to stay, job performance and organizational citizenship behaviors.

Within the literature, psychological contracts function rather as a hygiene factor as the consequences when violated are more salient than when overfulfilled. Fulfillment should not be considered as the opposite of violation.

Hence, researchers’ challenge may need to focus not only on the management of psychological contract violation and breach but also – and preferably – on the management of the psychological contract that will prevent negative consequences and increase positive outcomes, i. e. the management of the dynamic psychological contract. In layperson’s words, psychological contract researchers and theorists know what violates one’s psychological contract with all the consequent negative outcomes but they still ignore the antecedents and dynamics that lead to a fair contract followed by the positive outcomes for the organization and its employees.

The first component of the successful employment relationship is the individual employee. People come and go in organizations because we find what we are looking for, or because we do not. We often even decide to remain in our positions despite the fact that we might hate our job, our colleagues or our boss, because we might not have anywhere else to go. More and more we feel frustrated and stressed with numerous negative outcomes for the employee, the organization and the society in general. According to a recent study by the Families and Work Institute, 56 percent of workers said they typically have to work on too many tasks simultaneously or are so interrupted that they find it difficult to get work done. Nearly one-third said they often or very often don’t feel they have the time to process or reflect on the work they do. Stress-related health problems among most professionals are already a huge cost to employers. In the UK, for example, it’s estimated that stress accounted for nearly a third of all absenteeism and sick leave – by far the leading cause of missed work.

Research in Organizational Psychology and Behavior has acknowledged strong links between personality and individuals’ behavior at work. We have identified several dispositional characteristics that affect the way we behave,

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perform or even feel at work settings. For example, conscientiousness is positively associated with job performance, emotional stability with employee satisfaction and well-being, and agreeableness with contextual (or extra-role) work performance, but also with the ability to work effectively in teams. Further, employees who feel strong about themselves and about their abilities to handle difficult or unknown for them situations also tend to demonstrate positive work behavior, but also exhibit increased levels of physical and psychological health. However, in the new working environment people have also to be proactive, and be able to anticipate and “predict” the future. They should also be able to handle their own and other people’s emotional state (especially of those they manage). Numerous researchers have called this skill as Emotional Intelligence, capturing the third pole of individual differences (along with intelligence and personality).

One may claim that the aforementioned individual characteristics compose the “perfect” occupational personality profile. Individuals with those characteristics will not remain passive to the constantly changing work environment. First of all, they will acknowledge their own skills and will seek for the best career choices, let along the fact that they will be often “headhunted” by competitors. These individuals, more often than not, seek for various “benefits” from their organizations, with financial rewards not necessarily being their top priority. They search for organizations that will satisfy their intrinsic motivation factors, such as work achievement, career advancement, increased job responsibilities, training and learning opportunities and the nature of the job. They know that the new financial environment does not allow the organizations to offer them “job for life” or the traditional – old-fashioned working environment, as a result of the rapid technological changes, and they also know that most likely not even the owner or the top management of a company can guarantee the company’s future existence. Consequently, they build with their organizations a dynamic psychological contract. This contract does not remain stable and unchanged throughout their working life within their organization. A dynamic psychological contract may be conceptualised as the certain contributions and obligations of both sides that formulate a healthy psychological contract adapted to the new organizational reality leading to the optimisation of employee and organizational performance. It is characterized by a certain degree of mutuality between the two parties, in the sense that the actions of the organization representatives may directly affect employees’ attitudes and work behavior and vice versa.

The second component of the employment relationship is the organization. In order to maintain the dynamic psychological contract, as active and productive, organizations should also behave proactively, paying increased attention to their people. Many of them, especially in the economically de-

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veloped countries of the North America and the EU, have taken serious steps in implementing changes to their HR policies and procedures in order to enhance employee morale. Flexible working patterns, such as part-time work schedules and job sharing are only a few examples of these attempts.

Nevertheless, the success of HR systems depends largely on the existence of a supportive culture and competent leadership within organizations. A culture of trust, teamwork and collaboration among management and employees and between employees themselves allows for the development of a sense of belongingness and acquaintance in the working environment, therefore enhancing the feeling of psychological “proximity” and security in the organization. Leadership should also act as a means in empowering and motivating people at work. Numerous researchers have verified the importance of leadership for successful people management, demonstrating that lack of leadership skills is one of the strongest predictors of poor working relationships and increased withdrawal cognitions or even actual turnover.

Two final issues we should turn our focus on, since they are related to the theme of the current conference, are a suggestion of the necessary steps both parties should or could take in order to adopt as successfully as possible to this new dynamic psychological contract, and the ethical concerns regarding this relationship. People find themselves working in a very competitive work environment, where they feel increased pressure to perform beyond standards or they might have to deal with negative consequences. Similarly, organizations are required to perform beyond the norm, if they want to “remain in the game” thus exercising increased pressure to their employees.

A common feature for both parties is adaptability. Individuals should demonstrate increased ability to settle in new working situations and also reassess their “contractual” agreement with their organization. They should exhibit increased levels of readiness to change, a dispositional characteristic describing individuals prepared to adapt to change, and also challenge and reassess their working values and work relationships. On the other hand, organizations in order to accelerate in the new competitive environment, should not take employees for granted, simply because they offer them a job and a salary. On the contrary, they should emphasize on their development with a humancentered approach. A number of ethical issues are also raised regarding this dynamic relationship. This is where the Human Resources Management movement should exhibit its major influence. The role of the HR department of an organization should be to keep a balance between employees and the management of an organization. An ethical approach to Human Resources requires a balance between the sincere interest to employee development and the longevity of the company. Increased emphasis on either of them, with narrow interest to the other, brings serious unethical consequences to the respective party.

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Summing up, the essence of the dynamic psychological contract is that both involved parties should make constant efforts to keep a fair and balanced employment relationship, with genuine concern for the other party, since they both need each other in order for our society to thrive and accelerate. Therefore, their relationship should be based on mutual concern. One may not survive without the other. Our society needs both strong and financially healthy employers as well as satisfied and happy employees, in order to maximize the benefits of healthy and constructive employee relations.