Re-Thinking Engagement in Light of the New Psychological Contract

With all the resources invested in building engagement, why haven’t the numbers gone up?

Engagement has been a hot-button issue for organizations hoping to improve the connection AND output of their workforce. However, a number of studies in the last year show that, in spite of the high focus on engagement, the overall statistics measuring engagement among the American workforce hasn’t shifted from where it was a decade ago. Given the significant investment in building engagement, why isn’t it paying off?

The answer may lie in the what is known as the psychological contract. In 1960, Chris Argyris described this contract as the unwritten agreement between employer and employee. The psychological contract said that, as long as employees come in and work hard, the employer will take care of them. Or, in other words: if you’re loyal to us, we’re loyal to you.

However, in the late 80’s and early 90’s, organizations started to talk about “re-engineering” and “right-sizing,” processes intended to help streamline operations and create more efficiency. Intended or not, the fallout was that many organizations launched massive layoffs. Organizations broke the psychological contract. In doing so, they changed the way employees viewed their loyalty to the company.

The consequences of breaking the psychological contract.

With the psychological contract broken, it should come as no surprise that by the mid-90’s, organizations began talking about how they could go beyond “satisfaction” and strive for “engagement.” But without the psychological contract in place, what would inspire people to become passionate enough about the organization to go above and beyond in support of it?

This has proven to be a difficult problem to solve, and unfortunately, efforts to do so often backfire. Without any obvious incentive, efforts to increase engagement read simply as a call for greater discretionary effort from employees to pick up the slack now that there are fewer people to do the work.

In large part it is true. Many employers view engagement as a one-way street – just another way to get more out of an employee. Even though they have broken their end of the psychological contract, they still expect the employee to maintain their side of the bargain. This is a one-sided way of looking at the relationship, and is particularly likely to backfire with the Millennial generation, who never grew up with the psychological contract.

Crafting a new psychological contract.

Millennials have gained a reputation for being “entitled” or disloyal because they tend to view work as moving from one “gig” to the next. However, this is the logical response to the broken psychological contract, and a lesson they may have learned well from earlier generations.

While Boomers were largely caught off guard by the disappearance of the loyalty contract and Gen X had to scramble to work out an appropriate response, Millennials have had an opportunity to ‘start fresh’ regarding the employee/employer relationship. And the lesson they have learned from their predecessors is to think about their own career first and create as many options as possible, because they can’t count on one employer to be there for the rest of their life.

Accordingly, now that loyalty and longevity have been replaced, employers need a new psychological contract. If we could describe the new contract as it appears to exist in today’s workforce, it would look like this:

As an employer, I will invest in you, give you new projects and opportunities to grow professionally, and in response you will give me the best of your abilities for the duration of your time with our company.

This means changing the viewpoint of the employer toward the employee. Notably, this is much more of a “lease vs. buy” mentality. It means that the question employers need to ask their employees is not, “What do I need to do to get more out of you?” but rather, “How can our organization continue to represent the best opportunity for you?”

Now that long-term commitment is off the table, employers need something new to offer in order to inspire and engage their workforce. As things stand, the millennial generation seems willing to trade stability for opportunity. It is not a violation of trust; it is the only world that generation has known.