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The Psychological Contract: Engaging throughout the Hierarchy of Needs

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Gabriella Angiolillo
on November 15, 2012

Today’s employees are skilled knowledge workers whose minds are the (arguably) most important capital for a majority of companies.

With minds comes independent thought. The key for the most output and commitment is for companies to align an employee’s thoughts to the companies’.

A paycheck alone cannot buy the cerebral mind.

In line with a more service-based economy, a new employee contract – termed the “psychological contract” – has emerged (Source: London School of Economics and Political Science). In particular, research by Roussseau and Schein asserts that the psychological contract is about mutual obligation grounded in perception.

The two key phrases are “perception” and “mutual obligation”:

(1)    Perception

Employee surveys typically uncover that traditional employee compensation is only part of the story. For example, a Saratoga Institute survey indicated that “89% of managers believe employees leave for more money. But, in fact, 88% of employees leave for reasons other than money.”

Thus, uncovering what “other than money” equates to is key.

(2)    Mutual Obligation

So what is the perceived mutual obligation?

It is what the organization does to motivate, engage, and promote happiness in the mind of the employee.

Maslow’s Hierarchy of Needs, when applied to knowledge workers, suggests that once employees perceive that they’ve received “fair” and “traditional” compensation (e.g. physiological needs), B-needs are what truly engage an employee (e.g. self-actualization and socialization).

So What?

An A-Player engineer or sales professional has options, and those options most likely meet or exceed market pay. Thus, you should at least meet perceived “fair” rates to stay competitive, but what does going beyond that deliver in terms of employee motivation?

Even if an organization pays above market it may gain the “physical presence” of the employee, but not their minds. That’s because pay does not encompass the entirety of the “perceived mutual obligation” as it does not create a social community of motivated, engaged, and, yes, happy employees.

Total Rewards: Great management, career growth (both lateral, vertical and experimental), training, recognition, employee perks and culture are what not only draws and retains A-Players, but are what binds those A-Players to your organization in a way that generates their best, most passionate work.

I would go even further to assert that providing such growth opportunities and investment in qualified employees borders on a moral imperative. Maybe it is just the simple fact that people spend so much of their waking lives working. To do anything else is a dishonor to an organization and the great people working within that organization. Paraphrasing William Butler Yeats, organizations in which “the best lack all conviction while the worst are full of passionate intensity” are ones that at the very least constrain their growth (while in fact silencing and driving their best people away).

There is self-interest too. In not employing total rewards, you are wasting the potential and time of both your employees and the organization as a whole. You are forgoing the opportunity to create an environment where all the individual contributors of your company are aligned, working together to create something even greater and more than they ever could alone.

Crafting a reward system that engages throughout the hierarchy of needs not only aligns the mind of each individual employee with your company but aligns the minds of all your employees together to your company.

Keep Your Edge

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