The 21st Century workplace is foreign to the workplace of just a few decades earlier. Technological advancements have introduced new types of work arrangements, fueling the rise of the “Gig Economy”. Millennials are now the largest demographic in a multi-generational workforce that has experienced over a decade of low unemployment. The new workplace has changed the dynamic of the employee and employer relationship and their expectations of one other.
Changes in the workplace are showing early signs of success. A Gallup (2018) study found that 34% of US workers consider themselves ‘engaged’ at work. This statistic ties the previous highest worker engagement level since Gallup began reporting this national figure in 2000. Roughly 53% of the workforce, fall into the “not engaged” category. Gallup defines this workforce as “generally satisfied” but are not cognitively and emotionally connected to their work and workplace. To put it simply, workers would leave their current job for a better offer. Many organizations battle with the juggling act of attracting and retaining talent. Meanwhile, workers are frequently searching for better opportunities to further their careers, only staying with organizations on average for 4.2 years (Bureau Labor of Statistics 2018).
The employees’ and employer’s relationship are going through turmoil, as the new workplace behaviors and norms have yet to be fully understood and this transitional period comes at a cost. It is likely that a high degree of incongruity between an employee’s ideal, versus their actual set of obligations in an employment relationship could contribute to job dissatisfaction and related outcomes such as absenteeism, turnover, or reduced organizational citizenship behavior (Edwards 2007). Is it an employee’s responsibility to update their skills, or is an organization expected to provide training? Are individuals responsible for saving for retirement or are organizations responsible for providing retirement assistance? Are individuals responsible for their career development or are organizations responsible for providing opportunities for career development? The answers to these questions will vary from person to person, company to company, and engagement to engagement. Making employee and employer relations in the workplace complicated.
It is their (employees) perception of reality, not any so-called ‘objective’ reality, that shapes their expectations, their attitudes, and their behaviors. Consequently, to understand employee attitudes and behaviors it is necessary to understand their perceptions – their reality (Parks 1998). The impactful changes in the workplace have created a cloud of confusion about what is considered a fair exchange in the employee and employer relationship. They are struggling to parsimoniously adapt to the new workplace. Factors attributing to the complexity of this change include varied perceptions of a multi-generational workforce, driven by stereotypes, and the creation of new work arrangements, which affects how individuals engage in meaningful work.
The employee and employer relationship reached a new level of complexity and is becoming increasingly idiosyncratic. By re-calibrating the Psychological Contract, we can begin to adapt to the new workplace, by understanding the multi-generational workforce that is heavily influenced by Millennials and align individuals with meaningful work in the best work arrangement. The Psychological Contract accounts for the perceived promises that employees believe their organizations have made to them. (Parzefall 2011). The creation of new work arrangements and a Millennial driven multi-generational workforce has complicated the once simple Psychological Contract, where employees demonstrated loyalty and hard work to an organization for reciprocation of long-term employment and retirement assistance. As organizations change in response to the new workplace, employees will naturally be concerned about their relationship with the employers. It’s imperative that organizations address the Psychological Contract during organizational change because failure to do so could result in an unintended breach of contract.
A contract breach is the cognition that one’s organization has failed to meet one or more obligations within one’s psychological contract in a manner commensurate with one’s contributions (Parzefall 2011). Empirical studies have found downward changes in various employee emotions, attitudes, and behaviors, including organizational commitment (Lester et al., 2002), increased turnover (Maertz and Griffeth, 2004), reduced organizational citizenship behaviors and in-role behaviors (Hui et al., 2004; Turnley et al., 2003), and increased deviant behaviors (Kickul, 2001) following the experience of a breach (Parzefall 2011). Therefore, it is particularly undesirable for an organization to have employees who experience Psychological Contract breaches, intentional or unintentional.
Millennials + Multi-generational Workforce
With Millennials currently leading as the dominant generation within the workplace, they are studied quite often, but not all studies are done by researchers. Many have labeled Millennials as ‘entitled’ based on their behaviors and interactions within the workplace. No research supports this observation. It appears that the effects of generational membership on workplace behavior are not as strong as suggested by commonly held stereotypes (Beckton 2014). In fact, we find there are more differences within generations than between them (Foster 2013). Confusion surrounding Millennial behaviors is often miscategorized, due to focusing on a generational divide rather than a workforce divide
Karen Foster produced a study of Generations as a Discourse where she interviewed 52 Canadians aged 25 to 86, to learn about generation in the workplace. Foster began the conversation by asking the question, “tell me your working life story, beginning with your earliest memory of work – your own or someone else’s – and leading up to the present”. What she found is that the individual’s perception of generation in the workplace was split between “Generation as an Axis of Difference” or “Generation as a Socio-Historical Dynamic”. Generation as an Axis of Difference is where participants of all ages put generation in service of the belief that older and younger people today possess fundamentally different attitudes about how a person should relate to his or her work. Two related problems emerged from this study. First, that “the younger generation has an overblown sense of ‘entitlement’ about rewards and conditions of paid work. Second, that vaguely defined older people ‘lived to work’ while young people ‘work to live. These two themes were the most consistent across all interviews (Foster 2013). Generations as a Socio-Historical Dynamic is when generation gets dawn into larger narratives about social change and progress, including primarily; technological advancements; (women’s) increasing career opportunities; shifting gender roles; the perceived rise of ‘knowledge economy jobs and the corresponding decline of manual labor; and increased prosperity (Foster 2013).
The Psychological Contract, therefore, is not impacted on the generation one belongs to but their perception of how the employee and employer relationship “should be”. Research supports that the Psychological Contract can be driven by the individual ideology that can be characterized as varying on a continuum from ‘self-reliant’ to ‘employer reliant’. Self-Reliant is the notion that employees are responsible for their own careers and is exemplified by the belief that employees should be responsible for their own employability, including training and skill acquisition. (Edwards 2007). Regardless of generation, an individual with a self-reliant perception prefers to take ownership and responsibility of their career. They rely on themselves for career planning, to learn what skills they need to develop for their next opportunity, and how they should save for retirement. Conversely, Employer-Reliant is the belief that the appropriate conduct in employment relationships is support for and care for the employee in terms of providing long-term job security in exchange for loyalty and dedication. (Edwards 2007). These individuals, regardless of generation, perceive training and skill development to be the responsibility of the employer, along with retirement assistance, and health benefits. Being Self-Reliant or Employer-Reliant is an idiosyncratic conversation of preference, ability, strengths, and context of the situation, not a generational divide driven by false stereotypes. It is essential that organizations seek to understand what employees believe the organization’s responsibilities are to them individually and they are not assumed by generational stereotypes or workplace trends. By conducting employee and employer relationships in this manner, organizations can reduce the falling victim to certain biases or unconsciously practicing poor ethics, like ageism. This provides organizations an opportunity to creatively think about current employees and future talent that is overlooked due to beliefs in false stereotypes. Once the employee and employer can get past the misalignment of generational stereotypes and understand the idiosyncrasies of employee expectations, they can begin to be creative with Psychological Contracts and align them with ideal work arrangements.
Work Arrangements
Over a fifth of U.S workers and even more globally, now perform economic work under arrangements that differ from full-time regular employment (Cappelli 2013). In the new workplace it is common to find organizations that are a mix of full-time employees and contingent employees, fueling the rise of the gig economy. The employment deal that employees face seems to have changed significantly over the past two decades, as more and more jobs have been switched from ‘traditional’ employment relationships to a more ‘contingent’ employment contract (Parks 1998). The types of contingent work arrangements have quickly grown but are still quite understudied by researchers. Peter Cappelli and JR Keller created a systematic approach to developing a classification system that distinguishes between full-time employment and its alternatives, as well as among the alternatives themselves. They took the approach of grouping work arrangements into categories that share common properties and that are distinct from each other. The properties they focused on centered on control over the work process and include the contractual nature and number of parties involved in the working relationship (Cappelli 2013). In other research it was common to find up to categorization of over 10 different types of work arrangements, making things even more confusing. The addition of new work arrangements has muddied the water and requires clear communication from employees and employers.
Understanding the expectations of work arrangements will influence the ability to develop strong Psychological Contracts with employees. Psychological Contracts are important – they specify how an employee ‘defines the deal’ – and whether the employee feels that ‘the deal’ has been honored or violated (Parks 1998). The new workplace expects organizations to build employee Psychological Contracts in relation to the work arrangement. This entails organizations and employees working together to understand what work arrangement is best for the opportunity and parties involved. The increased degree of flexibility new work arrangements provide the workplace can benefit employers and employees alike but can also increase the chances of a Psychological Contract breach. Employees and Employers are equally responsible for understanding what they want in a Psychological Contract and where they can be flexible (and not flexible). Gaining from the new flexibility of the workplace will depend on if employers/employees take the time to understand what they value, and what they can truly offer. Employers and employees who accept this new level of clarity required will unlock the power the flexible new workplace offers, where employers can provide individuals more opportunities to engage in meaningful work.
Regardless of the individual’s expectations of the organization, employment arrangement, or generational demographic research suggests employees yearn for meaningful work. Since 2005, the importance of meaningfulness in driving job selection has grown steadily (Anchor 2018). BetterUp, a data analytics company, set out to understand how important meaningful work was to people. They surveyed 2,285 American professionals, across 26 industries and a range of pay levels, company sizes, and demographics. They found more than 9 out of 10 employees are willing to trade a percentage of their lifetime earnings for greater meaning at work (Anchor 2018). The findings were consistent across ages and salary groups. What makes this challenging for organizations is aligning employee’s idiosyncratic definitions of meaningful work with opportunities within the organization. The Psychological Contract is the framework that provides the employee guidance on how to practice meaningful work in the organization’s environment. Simply put, Psychological Contracts are mental models or schemas of the employment relationship (Rosseau 1998). Psychological Contracts assist in guiding the type of acceptable behavior and norms within the organization. Employers and Employees can take this information and construct Psychological Contracts to design jobs that provide meaning, align values and fit a work arrangement.
Final Thoughts
By applying the Psychological Contract, companies will stop wasting time strategizing how to manage by generation, reduce the complexity of multiple types of work arrangements, and enhance their ability to attract and retain talent by providing opportunities that employees desire. The Psychological Contract is one that is always in motion and requires constant attention. Managers of the new workplace will be required to be proficient in designing and managing Psychological Contracts in order to stay competitive in the VUCA landscape. For all managers, it is useful to remember not to stereotype workers as unmotivated or entitled, but instead to remember that differences in circumstances and in the way different employees perceived their Psychological Contracts need to be considered for all employees. (Parks 1998).
The workplace changes have caused an unintentional breach of the Psychological Contract between employees and organizations. There is no denying that the workplace has experienced a profound change in the past few decades. Utilizing the Psychological Contract can help us recalibrate to this new environment of a Millennial lead multi-generational workforce, and new types of work arrangements that enable individuals to engage in meaningful work.
References
- Anchor, S., Reece, A., Gabriella Rosen Kellerman, R.G, and Robichaux, A. (2018). 9 Out of 10 People Are Willing to Earn Less Money to Do More-Meaningful Work. https://hbr.org/2018/11/9-out-of-10-people-are-willing-to-earn-less-money-to-do-more-meaningful-work, accessed November 2019.
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- Cappelli, P., & Keller, J. R. (2013). Classifying work in the new economy.Academy of Management Review, 38(4), 575-596
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- Parzefall, Marjo-Riitta; Coyle-Shapiro, Jacqueline A-M. (2011). Making Sense of Psychological Contract Breach. Journal of Managerial Psychology; Bradford Vol. 26, Iss. 1: 12-27. DOI:10.1108/02683941111099592
- Rousseau, D.M & Tijoriwala, S.A (1998). Assessing Psychological Contracts: Issues, alternatives, and measures. Journal of Organizational Behavior 19, 679-695 (1998).
- Turnley, W.H., Bolino, M.C., Lester, S.W. and Bloodgood, J.M. (2003), The impact of psychological contract fulfillment on the performance of in-role and organizational citizenship behaviors, Journal of Management, Vol. 29 No. 2, pp. 187-206.
- U.S. Department of Labor, Bureau of Labor Statistics. (2018). Librarians. Occupational outlook handbook, 2017-18. Retrieved from http://www.bls.gov/ooh/education-training-and-library/librarians.htm #PsychologicalContract#workplace#millenials#generations
