The “old” versus the “new” psychological contract

Old psychological contracts based on the exchange of security for compliance have been shattered, with the new contract only now being established. Considerable agreement can be found in the literature for such a proposition. Spindler (1994).

Sims (1994) describes traditional psychological contracts as having existed in organisations characterized by stability, predictability and growth. The workforces of organisations characterized by stability, predictability and growth. The workforces of such organisations were seen as permanent, and employee loyalty was built on guarantees of long-term employment and investment in training. Employee commitment was the norm and employees expected advancement within the organization. Sims adds that today’s learner organisations offer limited opportunities for advancement, and employees have learned that job security can no longer be guaranteed even for good performers (Sims 1994).

Several authors refer to a dramatic revision in psychological contract provisions (DeMeuse & Tornow 1990; Burack 1993; Burack & Singh 1995). In the past the psychological contract was characterized by employees exchanging cooperation, conformity and performance for tenure and economic security. Such a dependent relationship virtually assured employee loyalty. The terms of the new contract are not yet settled, but the new responsibility of employers is said to be evolving towards creating opportunities for employees to take care of themselves (Ehrlich 1994). The following summary of this evolving relationship between employer and employee is based on the work of a number of authors.

Table 1: Distinction between old and new characteristics of psychological contract.

Old Contract	New Contract
Organization is ‘Parent’ to employee ‘Child’	‘Organisation and employee enter into ‘adult’ contracts focused on mutually beneficial work
Employee’s identity and worth are defined by the organization	Employee’s identity and worth are defined by the employee
Those who stay are good and loyal; others are bad and disloyal	The regular flow of people in and out is healthy and should be celebrated
Employees who do what they are told will work until retirement	Long-term employment is unlikely; expect and prepare for multiple relationships
The primary route for growth is through promotion	The primary route for growth is a sense of personal accomplishment

(Source: Kissler, 1994)

Sparrow (1996) also attempts to differentiate between old and new contracts (Table 2) based on the work of a range of authors. Hiltrop (1996) questioned a group of middle managers attending a workshop at the International Institute for Management Development in Lausanne. She found that the keywords used to describe the old contract were stability, permanence, predictability, fairness, tradition and mutual respect, while the new contract was described as a short term relationship with an emphasis on flexibility, self-reliance and achievement of immediate results (Hiltrop 1996).

Table 2: Differentiation between old and new psychological contracts

Contract element	Old contract	New contract
Change environment	Stable, short-term focus	Continues change
Culture	Paternalism, time served, exchange security for commitment	Those who perform get rewarded and have contract developed
Rewards	Paid on level, position and statues	Paid on contribution
Motivational currency	Promotion	Job enrichment, competency development
Promotion basis	Expected, time served, technical competence	Less opportunity, new criteria, for those who deserve it
Mobility expectations	Infrequent and on employee’s terms	Horizontal, used to rejuvenate organization, managed process
Redundancy/ tenure guarantee	Job for life if perform	Lucky to have a job, no guarantees
Statues	Very important	To be encouraged, balanced with more accountability, linked to innovation
Personal development	The organisation’s responsibility	Individual’s responsibility to improve employability
Trust	High trust possible	Desirable, but expect employees to be more committed to project or profession.

(Source: Sparrow, 1996)

Hiltrop describes the new ‘self- reliance’ orientation as far removed from the ‘organisation man’ concept of the 1960 according to which employees were expected to invest themselves completely in their company while the company did whatever was necessary to ensure that the employee succeeded in his or her job and career. This increased need for self- reliance among employees permeates most distinctions between the traditional and emerging psychological contracts (Hiltrop 1997).

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References

Ehrlich, CJ (1994). Creating an employer-employee relationship for the future. Human resource Management.

 Hiltrop, J M (1996). Managing the changing psychological contract. Employee Relations.

Kissler, G D (1994). The new employment contract. Human Resource Management.

Spindler, G s (1994). Psychological contracts in the workplace – a lawyer’s view. Human Resource Management.

Sims, R R (1992). Developing the learning climate in public sector training. Public Personal contract.

Human Resource Management.

Sparrow, P R (1996a). Transitions in the psychological contract: some evidence from the management: A battle between national mindsets and forces of business transition. Human Resource Management.