Contracting for growth

A great article  by Kevin Friery recently caught my attention and gets right to the  heart of the challenge managers face as they navigate the work place of the 21st century

It reports that: A recent piece of research carried out by Right Management with MDs of SMEs across the UK rather alarmingly revealed that over half (52 percent) thought it was better to motivate staff through incentives rather than career development. This rose to 62 percent in London and the South East.

Friery goes on to say  “This flags up a major problem in the workplace – too many organisations do not understand how to attract and retain talented staff, and there is insufficient understanding of the psychological needs of the workforce.”

It explains that there are two major components to the employee/employer relationship:

  • The Transactional Contract, which covers the overt, tangible, contractual aspects of the relationship
  • The Psychological Contract, which is more subtle and unspoken but nonetheless powerful, it is about the underlying alignment between the parties and the way employees are treated; respect and recognition of individuality could be examples of this

The article explains:

“It is easy to see why a manager may be tempted to focus on transactional issues, because they are more concrete than psychological issues – the problem is, evidence shows that it is the psychological contract that determines whether someone stays or leaves, is aligned and engaged or disenchanted and switched off. It is breach of the psychological contract that makes your talent walk.”

The sorts of incentives the managers in the survey were referring to were the sorts of benefits that can be outlined in a transactional contract; such as benefits and money. They are clearly overlooking or undervaluing the power of more intrinsic motivators such as autonomy, variety, training and  flexible working arrangements.

The scope and support to learn and grow at work are also key to employee commitment and engagement; as Friery says, ” Looking at how people spend their leisure time teaches us that striving for mastery is a key component of how people self-motivate; why would we expect it to be different at work? Creating an environment in which people can grow and develop, can learn new skills, pays dividends in enhancing the Psychological Contract.”

The opportunity to align personal values and purpose to an organisation is also key and making an organisation’s purpose clear and meaningful is integral to this process.   As Friery, so eloquently puts it, “This requires strategic managers to ensure that communication with staff does not confuse purpose with profit. If the sole raison d’être is to make a profit, employees become disengaged and disenchanted; when the business is doing something that appears worthwhile employees are far more engaged and motivated. Strangely enough, companies that understand and apply this philosophy also happen to be very profitable, but it isn’t their sole motivator.”

We live in challenging and complex times with many people looking to raise their consciousness in their lives and work. Managers need  to recognise this shift and adjust and balance their views of what makes a good “incentive”.  Harnessing the power of the underlying psychological contract to create enhanced engagement and productivity would be a great step forward.

“Classic economic theory, based as it is on an inadequate theory of human motivation, could be revolutionised by accepting the reality of higher human needs, including the impulse to self actualisation and the love for the highest values.” – Abraham Maslow

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