The psychological contract is a deceptively simple model for managing what organisations want from their employees and what employees want from their employers. In essence it is about the sets of expectations held by employer and employee about each party’s obligations towards the other, and about the conduct of the relationship between them.


Dr Graham Dietz, lecturer in Human Resource Management at Durham Business School

It is ‘psychological’ in that it consists of everything that is not part of the legal contract, but which may nevertheless be part of an implicit agreement between the two parties. For employees, it covers their expectations on fair treatment, on training and development, on career progression, on the organisation’s ethical standards, etc. For the employer, it encompasses expectations on effort and commitment.

The ‘contract’ begins when a potential new recruit first engages with the company’s recruitment/employer branding materials and is reinforced or undermined during the selection process. But it is dynamic: it is constantly revised and updated throughout an individual's time with that organisation from induction through to the first appraisal and beyond.

1. Track creation of expectations in branding: What are they and where are they being created, and by whom. A cost-effective way to achieve this is to ask new recruits in focus groups.

2. Check psychological contract against delivery.

3. Are you underselling or overselling the employer brand?

4. Adapt expectations and modify policies to deliver on the promise.

5. What is your branding USP? If your branding promises are enticing and ambitious, look at changes to HR policies to deliver on those promises.

6. Consider realistic job previews, and either tone down the employer branding or emphasise alternative recruitment messages.

CASE STUDY

Last year, managers from a high street retail bank taking the Business School’s Executive Education programme took the psychological contract model as a template to examine systematically the expectations raised by their employer branding, following them through to see whether and how they were met.

Through interviews with new hires from the previous six months they found inaccuracies on the corporate website on salary scales, and a less than enticing tag-line to their recruitment ads 'We work our socks off here!' They also found inconsistencies in what new recruits were promised in interviews (from nothing to a guaranteed career path). Using the model the managers identified problem areas, and have presented practical recommendations to senior management to better align the branding with its delivery on the ground.

ABOUT DURHAM BUSINESS SCHOOL

Durham Business School is the one of the longest established business schools in the UK and the leading business school in the North East. Over the last two years the School has grown considerably to take its faculty membership to over 80 - including 26 professors.
 
Predominately postgraduate with a student body of 2,700 - Durham Business School has an international reputation and 93% of its full-time MBA class are from outside the UK. Durham's distance-learning MBA is listed in the FT's top 32 distance programmes in the world.

The School is highly regarded for its research in entrepreneurship, finance and public policy and has a long and respected history for developing and assisting businesses from SMEs to multinationals. It champions the exchange of intelligence and information between business leaders and the academic community.

Durham Business School is an active contributor to the development of business policy both in the UK and internationally and in 2008 launched its new Management Development Centre.