What do knowledge workers really value?

PSYCHOLOGICAL CONTRACT

What do knowledge workers really value?

Many HR managers in knowledge-intensive firms may see performance-based rewards as the route to commercial success. But new research by Templeton College, Oxford, examining perceptions among R& D employees confirms that organisations need to address the whole of the psychological contract — in particular, good job design and employee involvement.

Information technology has revolutionised many organisations — and quickly — producing a growing demand for new skills and knowledge. Many organisations would now endorse the view that they operate in a vastly different employment environment in which knowledge workers are central to organisational success.

Faced with the competitive demands of the global marketplace, knowledge-intensive companies are increasingly trying to find new ways to speed-up the process of innovation. But, according to the Templeton report, policies that focus on managing only the financial elements of the psychological contract will not be sufficient to foster higher levels of innovation.

The research

Marc Thompson and Paul Heron of Templeton College surveyed 429 research workers, scientists and engineers in six high-technology companies in the UK to find out what knowledge workers actually want from the employment relationship.

The research focused on the organisational factors that motivate employees to innovate and create new knowledge. In short, it enumerates what knowledge workers feel the organisation owes them in terms of 24 aspects of the psychological contract — including pay, training, career development, personal growth, work-life balance, autonomy, responsibility, employee involvement, interesting work and job security — and what they receive in practice.

The importance of intrinsic rewards

The Templeton researchers’ central thesis is that managers must address the whole of the psychological contract. Good job design and employee involvement are critical. Say Thompson and Heron: The challenge for managers is to design interesting and challenging work that provides opportunities for skill acquisition, career development and recognition .

What comes across loud and clear from this research is that the deal is not just about offering employees more money. Quite the contrary. Of the 24 work-related issues examined, annual pay increases linked to individual performance was rated seventh most important, while a share of the company profits came in ninth.

It is our contention that polices that focus on managing the extrinsic financial aspects of the psychological contract will not in themselves be sufficient to stimulate higher levels of innovation, Thompson and Heron conclude.

What do knowledge workers really value in the psychological contract?

working on challenging assignments

opportunity to balance work and home life

job security

opportunities to develop new skills

promotion on the technical ladder

Source: Innovation and the Psychological Contract in the Knowledge Business, by Marc Thompson and Paul Heron, Oxford Executive Briefing.

What is the psychological contract?

By now most of you will be familiar with the notion of the psychological contract. It is a concept that has attracted a great deal of attention in recent years. Although there is no single definition of the psychological contract, in essence it refers to the mix of mutual assumptions, expectations, promises and obligations that exist between individual employees and employers.

In short, this concept expresses the combination of beliefs held by an individual and the employer about what they expect of one another. But why exactly is it so important? Put simply, the state of the contract can greatly influence employee behaviour and attitudes.

• A positive psychological contract is predicted to lead to higher employee satisfaction, higher levels of motivation and higher levels of commitment to the organisation.
• There is an assumption that any "shortfall" between employees' expectations and what the employer delivers is associated with lower satisfaction with work and results in a higher propensity to leave the organisation.

Professor David Guest of King's College, one of the leading UK writers on the subject, and his colleagues at Birkbeck College, argue that the state of the psychological contract is defined by:

• employees' general perceptions of "fairness of treatment" at work
• trust in their management and, in particular, trust that the organisation keeps to its promises or commitments
• delivery of the "deal" with respect to key promises and obligations.

The psychological contract tells us something very important about what employees actually want from the employment relationship. Importantly, the psychological contract highlights that there are other areas beyond the purely monetary that organisations need to address in order to foster a positive shift in employee behaviour and encourage employees to voluntarily commit to fully contribute to the competitive success of the organisation.

Want to know more?

Title: Innovation and the Psychological Contract in the Knowledge Business, by Marc Thompson and Paul Heron, Oxford Executive Briefing.

Methodology: Data was obtained from surveys of knowledge workers in six R& D-intensive high technology companies in the IT, software, electronics and pharmaceutical sectors. The surveys were conducted in 2000 and a total of 429 employees participated.

Availability: Contact Templeton College, University of Oxford, Oxford OX1 5NY, tel: 01865 422500, email: enquiries@templeton.oxford.ac.uk.

Posted 1 March 2002