Negotiating the un-negotiable – appraisals and the psychological contract
The psychological contract is the implicit and unwritten understanding of the relationship between an organisation and its employees.
In effect, the psychological contract is about the unspoken “promise” that employers make to their workers and what the workers offer in return. Research has shown that employee promises include working hard, developing new skills, upholding the company's reputation and coming up with new ideas. In return, companies offer, among other things, opportunities for training and development, recognition for new ideas, feedback on performance and reasonable job security.
However, research has also shown that the psychological contract is likely to be formed early in the working relationship – when an employee has just joined the organisation for example, and that it is not regularly “renegotiated”. In which case, the contract is likely to be violated very easily as promises are not kept, either on purpose or by accident, on either side.
But how can something that is not written down, often not spoken of, and to all intents and purposes, invisible, be negotiated? Given the impact of the psychological contract on job satisfaction and commitment to the organisation, it is vital – but is it possible to manage something that exists only in the mind?
One way of bringing joint obligations and promises to prominence is to ensure that there is space and time to talk of the elements which support the contract – as mentioned above, these include employee effort and employer commitment to training and development.
Many of the elements listed above would be central to a performance appraisal and it's our suggestion that both employees and employers are missing the opportunity to check understanding, and potentially realign expectations.
The immediate impact of this way of looking at appraisals is that it can make the discussion of money and bonuses inappropriate. Research into the efficacy of appraisals as a goal-setting mechanism has shown that when financial incentives are included in the appraisal, less time and effort is spent on discussions of future development and to tackle difficulties in the workplace.
Given that few people work simply for money, and that the key elements that drive employee commitment are likely to be intrinsic rather than extrinsic, the appraisal that concentrates on the annual bonus is likely to be missing a huge opportunity to address the parts of the job that motivate employees. This means that the appraisal – which can often be a time intensive part of management responsibilities – is failing both employer and employee and having a limited impact on business performance.
To ensure that the appraisal focuses discussion on what is likely to motivate employees and to enable the meeting to add to and cultivate the psychological contract, it should concentrate on:
This admittedly rough agenda begins to mould and restate the basis of the psychological contract, enabling the employee and the employer to understand each other's perspective, to openly discuss their needs and also to develop an atmosphere of trust.