RecruitmentTalent Management

The psychological contract, a key factor in talent retention

PerformanSe|5 min read|11 April

The remote work imposed during the pandemic, and the crisis itself, probably changed the way people see work, what they expect from their employer, and consequently their desired psychological contract with the company. Today, mental representations of work change with work experience, but also with salient external factors, such as a global pandemic. Thus our R&D team decided to launch an exploratory study on the notion of the "Psychological Contract" with more than 12,000 data that we collected, coupled with interviews.

What is the desired psychological contract? 

To put it simply, today two types of contracts link us to our employer: the employment contract (tangible element) and the psychological contract (intangible element). The latter is defined by the employee's representations of his obligations to his employer. How do I project myself? What place do I give to the trust I have built up over time? How do I see my career? Do I agree with the value and culture of my company? These are all questions to which the psychological contract is linked. If you want to know more, a very nice article on the subject was written by Parlons RH and Dominique Duquesnoy: "Psychological contract: a new look at the "next world".

Psychological contract: How is it measured?

Assuming that the psychological contract contains all the mental representations of an individual (concerning his relationship to work) and consequently all the contractual clauses that cannot be listed in an employment contract, it is very difficult to have a universal measure of it.  In order to implement a measure of the psychological contract, we have chosen a specific measurement angle.


Why is it called the desired psychological contract?

For, we measure the preferences and expectations of employees regarding their work relationship. This measurement of the contract will allow HR professionals to use it in recruitment situations, but also in orientation and development. 

Our discoveries

Generational differences 

  • Younger generations have a more transactional approach (focus on the economic exchange between employer and employee) and older generations are more in the relational approach (focus on the quality of the relationship between employer and employee). This gives us an indication of how Generation Z views their relationship to employment.
  • The study also showed that the younger generations, even if very invested at the beginning of the job, are less persevering than their elders, less loyal (in the sense of staying a long time in the same company). They like to make efforts, but only if they find a meaning in it
  • The new generation also has a different vision of power in the company. They place less importance on the power they have over employees and more on the influence they have on results. This is a big difference with previous generations, who were very attracted to positions of responsibility and management. 

To summarize, during our interviews and in accordance with our data, young people show less need to take responsibility and are less willing to make efforts if they do not find meaning in their work. They are no longer looking for a transactional or even relational contract. They want a balanced contract. According to Rousseau (2000), people with a balanced contract are looking for continuous training and development, and they pay attention to their value in the labor market.

The Psychological Contract and Evaluation: Next Steps?

What we could observe before, especially in the literature, was a continuum between transactional and relational contracts, with a balanced contract functioning almost as a set of additional expectations.

Today, the younger generation is moving towards a balanced contract exclusively. Transactional contracts seem to become transitional contracts after a bad experience. Or simply the most suitable contract for highly structured jobs.

As for relational contracts, they seem to be rarer, and belong to older generations who need a more stable context to evolve.

Thus, on the basis of our quantitative and qualitative data, the measurement of the desired psychological contract in recruitment, but also in other fields, has gained in importance as a result of the natural evolutions of the professional world and those inherent to the Covid crisis.

Our Method 

We started, as for the elaboration of scales, with a documentary analysis which involved the reading of numerous scientific articles, with which we were thus able to list all the information available on each type of psychological contract (Transactional, Relational, Balanced). We isolated the salient characteristics of each type and formalized them into dimensions.

The next step was to write relevant items for the dimensions and to administer the resulting questionnaire in three iterations of testing to validate the structure, reduce the number of items, check for convergent validity, and finally normalize the scores.

At the end of this process, the desired psychological contract scale was constructed, consisting of three dimensions and a balanced contract scale:

The three dimensions:

  • Time projection: which measures whether a person should be in a working relationship that lasts over time.
  • The effort-reward ratio, which measures the person's propensity to go the extra mile if necessary.
  • Identification with values: which measures whether the employee is in agreement with the values promoted by the company.

Balanced Contract Scale

  • Who measures whether the individual is seeking to develop their employability through a strategic career pathway. 

It is important to note that in our study, we assumed that the transactional (financial approach to the employment relationship) and relational (human approach to the employment relationship) contracts were opposite, and at the end of the validation process, we ended up keeping only the items that measure the degree of the relational psychological contract.

Finally, although we were able to draw some conclusions, our study, like all studies, has some limitations. However, 3 essential points are to be retained:  

  • The younger generations are looking for meaning, they are not less hardworking than their elders, but following the Covid crisis, they are less afraid to ask for their value.
  • The concept of power has changed, with a more expressed need to influence situations and outcomes rather than direct people. 
  • Last but not least, being aware of the desired psychological contracts of employees (in general) leads to much more harmonious working relationships.

Want to know more about the psychological contract?

Check out our test to assess it 🤩

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