The Great Rethink: Why the ‘psychological contract’ is gaining prominence | Thomas.co
Submitted by William Beaumo… on Fri, 11/25/2022 - 10:24

Thomas’s Director of Science Jayson Darby sat down with Organisational Consultant Clive Cary to talk about a topic that recently inspired Clive to embark on a PhD: the ‘Great Rethink’. During their discussion, they reckon with the complex global situation that has led to widespread reappraisal of the working world.

Clive: Some of the issues that the ‘Great Resignation’ highlighted still haven’t been addressed. For example, attracting and retaining talent, the crisis of meaning, and the fact that the pandemic precipitated a period of reflection for many people. All this has led to people and organisations becoming more purpose driven. I don’t think those conversations have gone anywhere. I see the ‘Great Rethink’ as being bigger than the ‘Great Resignation’. It’s even more macro, and has been exacerbated by global events. 

Jayson: Often these patterns are quite cyclical. Employee engagement or the nature of the relationship between the employer and the employee for example. We see these kinds of debates coming around every 5-10 years, and often they are punctuated by a crisis, whether it be the financial crisis in 2008 or the pandemic more recently. But I agree, this time it feels like there are larger, macro factors at play. All the crises that previously changed the employer-employee dynamic haven’t been as major as the one we’ve just experienced. The pandemic has changed the working environment for lots of people, which I think has added a completely new dimension to what people are looking for from their careers and their managers.

I agree with you about these macro trends leading to classic challenges that never really went away, but they are becoming a lot more focused, because we are seeing their impact to a greater degree. I think the ‘Great Resignation’ what the first phrase that was coined, because we saw disproportionate numbers of people leaving their jobs. What I’d love to hear from you is: do you think they are all leaving the workforce, or are there other businesses that are succeeding because those individuals are taking jobs elsewhere? Is that because during the ‘Great Resignation’ people have been rethinking what they want in their professional lives, and they are moving to companies or industries where they are finding that meaning?

Clive: Those people I have spoken to pre- and post my most recent piece of research all had an additional factor, which is burnout. Most of them have been moving away from what they preciously did and looking for something that felt much more aligned with their values and organic behaviours. So, there was a soul-searching element.  It’s a huge question you pose. One of the things that we’ve talked about whenever I’ve worked with Thomas is this idea of talent, which can move about in any economy. If you are talented, you will find a place, and you can move roles. One of the things I am interested in is what’s going to happen at the macro level - we could be affected by things we can't even conceive right now. This could be a factory somewhere in Europe that makes a component that goes into lots of different machines that we buy, and suddenly they go bust because of the energy crisis, and we can't manufacture all the other goods this component fits into.

Jayson: There are so many different threads linking together. Which means that organisations must respond and ask themselves, ‘what are the areas that we think we can actually influence?’

Clive: One of the areas that’s intriguing me is that if talent can move freely to some degree, I would have thought organisations and individuals would need to become even more collaborative. There's a phrase ‘go woke, go broke’ that I've read recently. I think if organisations were to be overly charitable in any environment, I don’t think that works. We must have some pragmatism because a business is there to make money, which is how it stays afloat and continues to employ people. 

But at the same time, there’s a question to answer about whether organisations truly care beyond the headline level, beyond the policy, having a mental health first aider, or ‘box ticking’. My sense is that they are going to need to do a lot more for everybody, but also be a lot more thoughtful about the way they handle their top talent, because if their talent decides to leave, surely there is going to be a loss, particularly if the talent has gone through a personal crisis. If this crisis grows, whether it's called the ‘Great Rethink’ or ‘renaissance’ or ‘rebirth’, and the workforce is having those kinds of thoughts, maybe it’s an opportunity for organisations to have those kinds of thoughts. That relationship should be symbiotic to some degree. It’s not just an exchange of time for money. 

Jayson: You touched on a few points there. One is that the transactional relationship between the employer and employee, which I think has continued shifting towards greater balance. The power dynamic has shifted in favour of the employee post-pandemic, although it does depend on the market and industry. There are certain experiences that give us signals about what a company values. Is this a core value of the organisation, or something they are doing because they have to from an employment law perspective?

Sometimes we see among those businesses who are feeling the effects of the ‘Great Resignation’ that the employees have seen behind the corporate ‘wall’ in a sense, and discovered that their company is saying a lot of the things you’d expect from an employer, but those words feel a bit hollow. You might see mental health first aiders but it’s not clear that the senior leadership team really understand the impact mental health, for instance. Employees are seeing a disconnect between championing mental health, whilst many of their co-workers are having to work on their holidays. To return to pure psychology, there is a cognitive dissonance between the messages employees are hearing from their organisations and what they actually feeling.

You hear a lot about younger generations looking for more meaning in their work and lives, but I don't think it is younger generations only, it's just that they're more freely able to talk about it and connect on social media and realise that lots of people feel the same. I think everybody wants to feel a greater sense of meaning and purpose in their work now. Partly because we spend so much time at work, and partly because we have had several ‘once in a lifetime’ events in the space of a few years. Suddenly, people are asking themselves, ‘Do I want to live in this city? Do I want to be closer to my friends and family? Do I want to be working in this sort of role? Do I want more flexibility? What really matters?’

I think all those considerations were happening anyway, but I think they were ten or twenty-year long trends that we might have talked about at an HR breakfast seminar. It's all been expedited, and I think the reason we're seeing such challenges among businesses now is that typically trends that they would have had to adapt to over years happened suddenly over 2-3 years. Now they're trying to adapt, and they might not have the agility to do so. What are your thoughts on that?

Clive: I think that’s interesting. There is an argument I heard only yesterday about how a global recession is going to help bring people back to the office for fear of losing their jobs. I think in certain industries that's possibly true. Certainly, that's what they're going to do with the civil service for example. I can see that happening primarily in regulated industries like finance, but I still think they're going to be very careful. I don't think it's a done deal when it comes to flexible working. I'm part of Generation X, and I think we accepted an awful lot. You can probably trace the five-day week back to the industrial revolution.  I think the generation in their early 20s are starting to challenge that status quo. I think older generations are also realising that they are probably going to have to work for longer than they had anticipated for economic reasons and want to do something they enjoy. I'm cautious about the headline that people are going to rush back to the office or the ‘Great Return’.

Jayson: I also saw a counterargument recently that suggested that in an economic downturn, employers will leverage the shift of power to demand that people to come back to the office. Then again, will employers embrace hybrid and remote working more because they don't want to the costs of heating and running an office because power and energy prices are so high. There isn't a clear answer because there are so many macro factors.

We've suddenly seen lots of knowledge workers move to hybrid or remote working patterns, we've also seen people move out of different economic centres, we've seen catchment areas for jobs increase. Then we are also facing a looming recession. In the past recessions were the result of an inherent weakness in part of the economy - whether the housing market over inflated or the dotcom bubble in the 90s - something had run away from itself and there was a contraction back to reality. Whereas this is not being caused by any kind of endemic weakness in the economy, other than energy prices going through the roof and the workforce is shifting.

You never see discussion in the media at a moment about why companies in the UK are struggling to fill vacancies to a much greater degree than another European markets. We don't talk about Brexit because it is such a politically fraught topic, but it is harder for European employees to live and work in the UK, which is why certain industries that used to have a higher transient European contingent of students or people on short term work visas – especially in retail, hospitality and manufacturing - have really struggled. There wasn't the pent-up demand in parts of the UK population in the first place, and due to the barriers that have been erected, it's harder to fill those gaps.

So, you've had an enormous political shift in the UK that took place in the middle of a pandemic that changed our working patterns forever, and now we're entering a recession that is being triggered in part by rising inflation and energy prices. It’s a convergence of factors. Businesses would probably be able to adapt to any one factor, but this is going to put them under so much pressure. I think what we're seeing is organisations react to this pressure, but employees seem to be the ones leading the conversation and pushing for better standards in the workplace. At moment we are seeing a lot of industrial action in the UK in a range of different industries. Anecdotally, business leaders seem to be far more sympathetic than they used to be because I think there's a far greater shared sense of everyone is struggling to a certain degree. For some people it's a real struggle, for others, their energy bills going up by a couple of hundred pounds a month is something they can absorb but they resent it. There is a shared experience of things feeling unjust.

Clive: Irrespective of political allegiance, the Westminster bubble - the people we look to in times of crisis - don't seem to have made a terribly good fist of it, arguably throughout Europe. Besides the energy crisis there are other factors - this summer was incredibly hot in Europe, so wheat crops didn't ripen properly - they were burned - so bread has gone up in price. Almost wherever you look there are complicated issues going on, and people can't deal well with complexity. I think it was Miller in 1951 whose experiment showed that the human brain can only process five factors plus or minus two before it kind of explodes. Let’s look at the complexity of this for a moment. You've got inflation, the cost of living, the energy crisis, a forthcoming recession...

Jayson: That's the challenge the fact is there are so many different areas, some that feel existential, all these things are coming together. You mention something around command and control, and I think that we're seeing this theme in people that are rethinking what they want from their career and their working life. Whether it's government ministers demanding that people work to a certain pattern in in office premises, or managers and leaders equating presenteeism and performance together or the realisation that people can be very productive remotely, there is this area in people feel as though they are losing control.

It appears that the kind of organisations and industries that are doing well, growing and attracting people, are the more progressive organisations. They are very mission-led, start-up organisations with a core mission to rally people around. You're also seeing organisations that focus on individual development, coaching and learning doing quite well in the market right now, especially in terms of filling vacancies. It feels more purposeful if you're helping to create something that helps someone feel better about themselves, or handle challenge more effectively. Coming back to the point around these macro factors leading people to rethink what they want from their careers, people can get pushed to burnout in the best of times, but when businesses are struggling and the work environment is becoming more challenging, the risk of burnout is even greater. I'd love to hear more about your views on burnout and recovery, because I think that it’s the burnout experience leading people to re-evaluate what they want from the workplace.

Clive: Only yesterday I reached out to City University to apply for a PhD on the topic area or meaningful work. You used the word ‘purpose’ and I think the thing that comes out of the ‘Great Resignation’ or the ‘Great Rethink’ is the idea of a purpose driven organisation. If you can align that with an individual’s purpose, then I think in theory we are in perfect harmony. I think people want to work and feel that they are adding something. You might argue that people are going back to more fundamental needs like paying the bills in the months and years ahead, and that's an element too. But I I've sensed –anecdotally- that people want to have time for each other. There is a burning kindness I’ve noticed in people. Locally where I live there's quite a big community feel. People want to support the local shops and they want to help each other out, and I'm just wondering if that's a fundamental human need as well. Certainly, when you come out of an experience like burnout, it gives you the perfect opportunity.

I think there's a paucity of research into the process of recovery. There's an awful lot on burnout, but I have yet to find much on the process of recovery. I found a few interesting papers when I was finishing my dissertation, and a lot of them did have an overlap with what organisations can do. I would very much like in my own research to have a very clear focus on those two elements; not just individuals but organisations. When we spoke previously, we talked about job crafting, but there's many more things besides and the number of companies doing job crafting is very small. I would like to think that organisations will take it much more seriously and involve employees where possible. It is going to be hard in in in a recession to do that because sometimes you just have to make the numbers work. That may well be the focus for next year to two years, but I don't think this other stuff is going to go away now.

The pandemic really gave people that opportunity to think. They want different things. Some people aren’t going to want to look behind the corporate ‘facade’, but I think bigger numbers are going to want to. Perhaps that will also be brought by the upcoming generations, who are going to struggle to do things that we did, like buying properties. I read a piece of research about lawyers deciding that they don’t want to become partner. They would rather stay at senior manager level, earn ‘X’ and have ‘Y’ lifestyle.

Jayson: You touched on a point there that came up in discussion with some of our psychologists the other day. We were discussing the definition of success. A lot of the lot of the formal definitions of success when we're validating assessments that predict success, often we are looking at speed of promotion, earning potential, and upward mobility, which has been the classic sign of success. But there are huge swathes of people that want to achieve mastery in a particular area or topic and build their expertise. Some people don't want the stress or pressure of managing people or having to make strategic decisions about an organisation. People can be very happy not doing those things. In a lot of classic models, they would be viewed as less successful, but that probably isn't so. Especially if we consider that a lot of the trends we're seeing now - in terms of where candidates are going and what employees are thinking about the workplace - is toward becoming more meaning and purpose driven. I think there might need to be a discussion about the concept of success.

I also loved when you were talking about burnout and recovery from it, because burnout, especially the causes and potential prevention of burnout in the workplace, is quite well understood. As you say, recovery and what people do afterwards isn't. I can see some connections to the experience many people had during the pandemic that wasn't the same as burnout, but of being put under quite extreme pressure, getting to a potential breaking point and having to re-evaluate what they value, is similar if not quite the same. It’s a shame, but we’ve been hearing for last 15 years about critically low levels of engagement in the workforce. If you speak to many people that have experienced burnout, it's unfortunately surprisingly common. What do you think is going to happen next in the workplace in the next five or ten years? What do you think the factors are going to be that people are basing their employment decisions on?

Clive: I'm part going to lean on what one of my good friends has told me, who is a road planner. His prediction is that in twenty years' time, people won’t be driving cars. The general trend will be car shares or bicycles, and that because of technology, people would increasingly demand to work from their own space. Where I live on the coast, if you drive from Brighton towards Worthing, you'll see developments going up. Inbuilt in all of them are huge coffee shops and gyms. You see it coming in the infrastructure of the buildings along the South Coast. It's almost as if the builders are intentionally creating community around these blocks of apartments. They are sculpting gardens and locating the developments by the side of the river. They are trying to create a lifestyle. My friend is of the opinion that we will be demanding that. That’s not to say we won't go into an office once or twice a week if they are still available, or once a month, but we will have different expectations. Similarly, we will go back to shopping locally. Of course, with people will continue to love the convenience of online shopping. But I think that's absolutely one of the factors, in terms of locality. 

I didn't see burnout as a problem. It's often viewed in negative terms. The people I've researched with so far, have seen burnout as an opportunity. They've gone from thinking, ‘Oh my God this is awful’ to ‘Hang on this could be quite useful’. I think similarly in terms of the forthcoming issues with the economy. Sometimes they aren't quite as bad as we fear. I think burnout can be quite a good metaphor for what's going on in life in general. Whatever is coming in the next ten years, we’ll get through it. I think that as a result of those experiences, people will channel them into questions like, ‘So what does this mean for me?’ To go back to what you said earlier, when life feels like such a mess on a global scale, with myriad factors that we can't control, as a psychologist you have to ask, ‘What do we do what we do instead?’ We will try to control what we can control. Perhaps we will become slightly more inward looking. We naturally get more local in our thinking. I see that as a factor. I wonder if people are going to downsize, get rid of debt, and lead lives where they are more able to be in control. 

Jayson: It’s an interesting theme control. Having more control over your life, your work and what's expected of you. To link it back to what people are looking for in terms of meaning and purpose in their careers, I think we are seeing people exercise their control and their influence. For the longest time now we're seeing a much more candidate-driven market in terms of their expectations. Look at things like diversity inclusion initiatives and flexible working initiatives, these areas that are relatively recent in corporate history haven't been driven because somebody in executive leadership decided that we should now do this. The pressure came from either external factors or from employees, and sometimes to reputational risk to an organisation not maintaining pace with certain progressive trends that are happening in the market. I think that this sense of having control over your life and your career is so intertwined. You’re right when you speak about the experience of burnout potentially being an opportunity. The actual experience is terrible and isn't something that anybody is going to enjoy, but there is also always an opportunity in a crisis to re-evaluate.

There's lots being published about the ‘Great Resignation’, the ‘Great Rethink’, quiet quitting and professional coasting. Often, they are they are a new layer on top of quite classical things around disengagement, the psychological contract being broken between employees’ expectations and what an employer actually does. There's a more contemporary element on top of these issues. It feels as though organisations are grappling with things that feel quite new, but often they are challenges and crises that have been faced in the past. So again, you are right when you say we have weathered bigger crises in society, and we will come through them. The question is, are we going to come through these current crises and challenges with a better working environment and unwritten contract for the employee, or are we going to see things shift back towards employers having more control and dictating working patterns and working environments? I'm of a slightly more optimistic view. I think the trend of employees driving how and where they work and what they do I think is going to continue. There might be a few bumps, and it might take longer in certain industries, but I think this trend of the employee having more influence in the working world is going to continue.

Clive: I spoke to company the other day that has grown from nothing six years ago to turning over between ten and fifteen thousand pounds a day in online sales, so it's a ten to twelve million turnover so it's been a huge success story, and they're doing it on a core staff about ten. But now customers want to know where products are made and if they are sustainable. The reason that I had a call with one of the directors was that that they are going for a couple of B-Corp accreditations.  Both were similar: one was about people and business and the other had a people and process focus. But both had ‘people’ in them. We entered quite a lengthy discussion about how to not just make sustainable, high-quality garments ethically, but also being known as an organisation that is interested in the way they treat people. We talked about how to prove that by having the right cheques and balances, and the right processes and culture to demonstrate that. I wonder to your point if people are going to look for that. I know I look for that.

I think there’s going to be a lot of pressure on organisations to tick as many boxes as possible, in a world of diminishing resources, morals might become more important. The Green agenda is important politically because it’s what people want, even if no one calls out on the news, “Well if China and America don't reduce their carbon, we’ve got no hope anyway.” We just talk about net zero because that's what people wants to think we are working towards. I think it will be a similar sort of thing with people wanting to work for an organisation with good values. I think it's going to be on people’s wish list.

Jayson: I think it’s about trying to avoid a bit of despair. If you feel as though you can't do anything to influence these challenging things you keep hearing about in the world around you, people will despair. I think it's why there is such a ‘Great Rethink’ about meaning and purpose in the workplace because as you say complexity is overwhelming, and we're seeing all these different factors that we've discussed during this talk influencing the world of work. It seems to their employees are prioritising meaning and value in their work far more, which is leading to some companies in some industries thriving and being slightly buffered from some of these challenges to a greater degree than other organisations that may be struggling with higher resignation rates or to hire in the current environment. In your professional opinion Clive, what advice would you give them? What should they be prioritising at the moment, when they are looking to bring new people into their organisation and look after the people they already have?

Clive: I'm going to sound like I'm Thomas advert now. I should say I don't think it's a silver bullet, but I have consulted in over forty blue chip organisations, some of the biggest and some small and medium ones, so I've been around the block so to speak professionally. I think I could count on less than one hand organisations that I really think have a good level of people focus. I’m a pragmatic person, in my career you must deliver the goods to keep your contract, and I think that's important. We need commercial pragmatism. But I still think organisations don't use tools that Thomas has got as well as they might. Often people don't quite know they need some help, and they are working in an organisation and trying to work out who they are what they really want to do. That's part of being human: we evolve. But it's an underutilised tool, the Thomas Behaviour assessment. It adds a layer of information which is useful across all stages the employee life cycle. I think that’s terribly useful. If we're seeking to give someone basic purpose, let's put the right person in the right role. Organisations don't do it, still. They haven’t got it cracked.

Jayson: It’s a trend we see across the market. Ultimately psychological fit with the role is so important. It's finding out how to match people to roles where they're going to be productive and happy. Anyone that's heard me speak in the last couple of months will always hear me say that we're trying to find a match between a person and a job where the person will be productive, because there must be a commercial reality. But we also want the person to be happy. You can dislike detail and craft a fantastic career as a financial accountant, but you will be playing against some of your natural preferences and strengths. It’s not rocket science to understand, ‘If this is how I like to behave and these are my strengths, of course I'm going to enjoy that type of role.’ It's just not that formalised in a lot of talent management practise.

Clive: Therein lies the problem. Human behaviour is clearly complex. I read somewhere once that there are something like 50,000 words to describe aspects of personality and behaviour in the English language. But fundamentally a psychological tool breaks it down into somewhere between five and eight, Myers Briggs for example has a sixteen-box typology. However, we can still reduce something to what’s manageable. Going back to the complexity of the global situation, people don't need many factors. I think the beauty of this tool is that it is a vehicle to open up those discussions. No, it's not rocket science, so while people doing it? The excuse I used to hear is “We are too grown up around here, we just get on with the job.” I used to reply, “That's not good enough. You have to be more thoughtful about this.” Generally, people could then have a more thoughtful discussion. But I think they do the basics badly. Whenever I go to an organisation I ask, “How much do you know about your people?” It’s not long before they admit to not knowing very much. When I showed executives at this clothing company their profiles, they thought I was some sort of magician. She came up with the same profile for the role as I did. It was exactly the same graph. I always ask to look at job specifications when I go into a company. The amount of rubbish that you get put in front of you is quite astonishing. Almost always there’s not enough behavioural description.

Jayson: You’re touching on something foundational there. As an organisation, you could be at the mercy of all these different macro trends that we've been discussing. You can read about the ‘Great Resignation’, the ‘Great Rethink’ and despair about what it might mean for your business. But you’ve just listed some practical actions to help a company gain agency amid some of these trends. Whether it's asking themselves how much they know about their people. If the answer is ‘Not much’, then they've got their starting point. If you look at things like job descriptions and job adverts, if it's pretty standard and focused on skills and experience requirements, are you really going to be attracting candidates that are looking for meaning and purpose? If you don't know anything about your current employees, or what they want from their work, how are you going to possibly retain them? I think out of everything that we've discussed today, if anyone listening comes away and asks themselves the question, ‘How much do I know about their people?’, and if that triggers some thoughts, that would be the first step towards regaining control of their organisation’s destiny and becoming less subject to these macro trends.

Clive: I think the danger of people listening to something like this is that some people think, ‘It's just some people bandying around ideas”. I think for me, the important thing always answering the ‘So what?’ question. As we’ve discussed, there are lots of factors affecting businesses today that they can’t control. But they can control the people they bring in and how aligned they are with the organisational values. If they don’t have values, why don’t they? Can they describe their culture? If there’s an effort to recruit people who are aligned with the organisation’s goals, I think that’s a good starting point, because those employees will feel emotionally secure. Aren’t we going to need that psychological contract in a time of uncertainty?