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Title:  Transitioning  Employees  in  Tough  Times     Watching   the   news   or   reading   the   financial   reporting   of   both   local   and   international   newspapers,   we   are   simultaneously   bombarded   today   by   the   political   upheavals   of   the   Arab   world   (now   focused   in   Syria)   and   by   the   economic   problems   facing   the   western   world.   At   the   same   time,   it   is   of   the   very  essence  of  Hong  Kong’s  systems  that  we  are  all  affected  in  many  ways  by   the   economic   changes   afoot   elsewhere.   So   at   present,   it   is   the   events   across   the   other   side   of   the   world   in   Europe   upon   which   our   eyes   are   fixed.   The   austerity   demanded   of   the   peoples   of   these   states,   with   smaller   government   expenditure  and  increased  taxation,  is  impoverishing  economies  and  reducing   employment   (and   so   increasing   social   unrest).   Banks   are   seeking   to   reduce   costs   and   shore   up   their   balance   sheets.   All   this   has   the   effect   of   reducing   investment  and  so,  in  turn,  has  already  started  to  affect  financial  organisations.   The   impact   on   Hong   Kong’s   industries   is   obvious   and   well   reported.   Many   in   the  financial  sector  are  finding  their  job  in  flux.     So  just  as  we  were  affected  by  the  US  housing  crisis  in  2008,  this   crisis  brewing   in   Europe,   though   it   seems   so   far   away   from   us   in   Asia,   will   affect   us   here.   The   ripples   of   anxiety   are   already   beginning   to   lap   against   the   shores   of   Asia   and   we   have   undeniably   begun   to   see   local   reactions   to   reduced   confidence.   For   starters,   in   recent   months,   we   have   begun   to   see   increasing   personnel   movement,   downsizing   and   the   closing   of   practices   or   divisions   in   some   financial  institutions,  particularly  those  connected  with  European  markets.       Organisations  will  always  have  to  restructure  to  cope  with  changing  economic   situations,   but   it   makes   sense   to   do   so   in   ways   that   retain   the   loyalty   and   trust   of   their   salaried   staff,   people   who   are   as   much   a   part   of   the   business   model   of   a   company   as   the   fluctuating   bottom   line.   Employees   in   firms   affected   by   downsizing   will   work   better   if   treated   well.   Companies   that   treat   their   staff   well  will  create  reputations  that  will  give  them  an  edge  in  retaining  staff  and,   when  the  time  comes,  recruiting  them  again.  Organisations  that  have  adopted  


processes that  are  mutually  beneficial  both  to  them  and  departing  employees   are  likely  to  be  more  successful  than  those  which  do  not.         Consequently,  companies  need  to  consider  how  best  to  show  their  respect  for   employees   when   letting   staff   go.   This   is   just   one   part,   though,   of   the   wider   perception   employees   have   of   their   employer   and   work,   what   they   feel   they   owe   to,   and   are   owed   by,   their   firm.   This   wider   area   is   the   psychological   contract,   which,   recognised   or   not,   exists   in   some   form   for   each   and   every   one   of  us.  While  companies  will  always  need  to  specify  the  detailed  terms  of  work   in  an  employee’s  employment  contract,  they  should  also  be  conscious  today  of   the   impact   of   the   psychological   contract   they   hold   with   their   employee   and   how  that  will  affect  any  restructuring  process  they  face.       What  is  a  psychological  contract?     The  psychological  contract  is  not  new.  It  has  been  around  for  about  50  years.   According   to   Rousseau   (1995)i,   the   psychological   contract   is   defined   as   ‘individual   beliefs,   shaped   by   the   organisation,   regarding   terms   of   an   exchange   agreement   between   the   individual   and   the   organisation’   in   which   beliefs   are   referred  to  an  employee’s  interpretation  of  both  explicit  and  implicit  promises.   Research   into   this   area   continues   to   be   done   because   the   psychological   contract   has   been   identified   as   such   an   important   mechanism   for   understanding   employment   relationships   and   workplace   behaviour.ii   Thus   understanding   of   the   psychological   contract   has   great   importance   when   organisations   downsize   or   restructure,   as   it   helps   explain   many   employees’   reactions  and  behaviours.     The  psychological  contract  is  used  to:   1) Explain  how  reciprocal  promises  oblige  employees  to  do  things  for  their   employersiii.     2) Predict   how   employees  will  react   when   they   believe   promises   made   to   them  are  brokeniv.  


There  are  other  reasons  why  considering  the  psychological  contract  will  always   be  necessary  and  why  organisations  need  to  be  aware  of  the  issue  when  facing   restructuring  or  economic  uncertainty.    These  include:     1) The   implicit   linkage   between   the   psychological   contract   and   written   employment   contracts.   The   explicit   terms   and   conditions   embedded   in   employment  contracts  can  be  construed  to  have  wider  implicit  meanings   in  employment  relationships.v       2) Organisations   can,   through   an   understanding   of   their   psychological   contracts,   calculate   how   changes   to   employment   relationships   might   affect   their   employees’   work   experience.   An   example   here   is   how   the   impact  and  effects  of  downsizing  can  affect  the  trust  in  the  relationship   between  employee  and     3) Ensuring  that  there  is  an  ongoing  reciprocal  process,  where  terms  are  re-­‐ negotiated,   fulfilled   or   breaches   are   noticed   on   a   daily   basis   by   both   parties  to  the  psychological  contractvii     What  makes  a  psychological  contract?     The   next   question   is,   what   are   the   contents   of   a   psychological   contract?   According  to  Rousseau  (1990),viii  these  are:  ‘expectations  of  what  the  employee   feels   she   or   he   owes   and   is   owed   in   turn   by   the   organisation.’   This   will   be   of   particular  relevance  when  employees  are  being  asked  to  go.  It  is  at  such  times   that  employees  will  look  for  a  fulfilment  of  their  expectations  and  will  seek  to   exercise   the   rights   they   believe   they   hold   under   any   psychological   contract.   This   will   be   more   than   just   the   compliance   with   the   terms   agreed   in   the   employment  contract,  such  as  bonus  or  a  month’s  salary  in  lieu  of  notice.  They   will  also  include  expectations  of  treatment  after  notice.  When  a  psychological   contract   is   breached   or   violated,   employees   will   likely   experience   anger,  


distrust, reduced   loyalty   and   commitment,   and   an   increased   propensity   to   leave  the  organisation.ix     What,   then,   can   organisations   do   to   ensure   that   they   are   able   to   meet   their   employees’   expectations   of   their   employment   relationship?   When   organisations  start  to  think  in  terms  of  severance  packages,  they  can  consider   more   than   notice   periods   and   monetary   payouts   and   provide   their   departing   employees  with  an  outplacement  programme.     What  is  an  outplacement  programme?     When  employees  are  asked  to  leave  an  organisation,  they  will  look  very  closely   at   what   their   employers   provide,   especially   so   if   they   are   long-­‐serving   employees,  who  will  expect  their  loyalty  and  service  to  be  compensated.  They   will,   in   effect,   expect   the   organisation   to   go   an   extra   mile   for   them.   Meeting   such   perceived   obligations   can   be   done   by   adopting   measures   such   as   transition  support,  providing  departing  employees  ample  time  to  find  a  job  or   providing  outplacement  programmes.       Outplacement   programmes   are   conducted   by   trained   consultants   who   work   with   the   affected   employee   on   various   levels.   Consultants   concentrate   on   managing   employee   emotions   while   getting   employees   back   into   the   employment   market   through   reviewing   their   CVs   and   polishing   their   interviewing   skills.   Whilst   the   consultant’s   role   is   to   encourage   and   help   the   employee  move  forward,  it  remains  the  prerogative  of  the  employee  to  decide   on   the   progress   of   the   process.   The   outplacement   programme   does   not,   of   course,   guarantee   that   the   employee   will   end   up   gainfully   employed.   Rather,   such   a   programme   aims   to   provide   the   employee   with   a   set   of   tools   and   methods  to  continue  the  search  for  new  work  opportunities.     Although   there   is   no   explicit   legislation   in   Asia   calling   for   employers   to   provide   an   outplacement   programme   as   part   of   a   severance   package,   in   view   of   advocating   best   practices   it   nevertheless   makes   good   commercial   sense   for   departing   employees   to   be   given   the   option   of   participating   in   one.   Many   organisations  think  that  a  quick  pay-­‐off  and  exit  of  departing  employees  is  the  


best way   to   deal   with   redundancies.   However,   they   often   do   not   realise   that   if   the   employee   leaving   the   firm   or   the   rest   of   the   company’s   staff   see   the   treatment   as   unfair   or   ungenerous,   they   will   not   be   shy   in   sharing   the   experience  outside  the  company.  Hasty  actions  towards  departing  employees   can  affect,  on  many  levels,  the  company’s  reputation  in  the  market.    It  is  also   likely  to  deter  future  employment  of  talent  when  the  organisation  recovers.     What  is  the  relevance  of  these  issues  in  the  present  economic  climate?     Whilst  we  here  in  Asia  may  not  feel  the  full  brunt  of  the  events  in  Europe,  we   will  not  escape  them  unscathed.  Asia  is  mutually  dependent  on  the  European   market   and   is   already   being   affected   by   its   slowdown.   Downsizing   has   commenced   in   certain   industries.   In   these   circumstances,   I   would   urge   organisations   preparing   for   any   full   blown   economic   crisis   by   modifying   the   way   they   work   to   be   mindful   about   giving   full   consideration   to   the   psychological  contracts  they  have  with  their  staff.       Any  plans  for  restructure  should  include  strategies  to  smooth  the  transition  for   their   employees.   They   should   adopt   best   practices,   such   as   the   support   for   transitioning   provided   by   outplacement   programmes.   Doing   so   will   not   only   make   the   whole   process   bearable   for   both   exiting   and   remaining   staff,  but   it   will   also   ensure   that   departing   employees   will   be   more   likely   to   share   good   things   about   their   transition   out   of   the   organisation,   wherever   their   futures   take  them.     Austin  Tay   Austin  Tay,  Reg.  Psychol.  (I/O  Psych.),  MBPsS   Director,  Consulting  and  Assessment  

Talent2                                                                                                                                     i   Psychological   Contracts   in   Organizations:   Understanding   Written   and   Unwritten   Agreements.   Sage,   Thousand   Oaks,  CA.   ii  Conway,  N.,  and  Briner,  R.  B.  (2005)  Understanding  Psychological  Contracts  at  Work:  A  Critical  Evaluation  of   Theory  and  research.  Oxford  University  press,  Oxford;  Guest,  D.  (2004a)  The  psychology  of  the  employment   relationship:  an  analysis  based  on  the  psychological  contract.    Applied  Psychology,  53,  541-­‐55;  Guest,  D.   (2004b)  Flexible  employment  contracts,  the  psychological  contract  and  employee  outcomes:  an  analysis  and   review  of  the  evidence.  International  Journal  of  Management  Reviews,  5/6,  1-­‐19;  Levinson,  H.,  Price,  C.R.,  


                                                                                                                                                                                                                                                                                                                                                                                                                        Munden,  K.J.  and  Solley,  C.M.  (1962)  Men,  Management,  and  mental  health.  Harvard  University  Press,   Cambridge,  M.A.;  Schein,  E.H.  (1965,  1970,  1980)  Organisational  Psychology.  Prentice-­‐Hall,  Englewood  Cliffs,   NJ.   iii   Coyle-­‐Shapiro,   J.   and   Kessler,   I.   (2002c)   Contingent   and   non-­‐contingent   working   in   local   government:   contrasting   psychological   contracts.   Public   Administration,   80,   77-­‐101;   Rousseau,   D.M.   (1990)   New   hire   perceptions   of   their   own   and   their   employer’s   obligations:   a   study   of   psychological   contracts.   Journal   of   Organizational  Behavior,  11,  389-­‐400.   iv    Conway  and  Briner  (2002a)  A  daily  diary  study  of  affective  responses  to  psychological  contact  breach  and   exceeded  promises.  Journal  of  Organizational  Behavior,  23,  287-­‐302;  Robinson,  S.  L  (1996)  Trust  and  breach  of   the  psychological  contract.  Administrative  Science  Quarterly,  41,  574-­‐99,  Robinson,  S.  L.,  and  Rousseau,  D.M.   (1994)   Violating   the   psychological   contract:   not   the   exception   but   the   norm.   Journal   of   organizational   behavior,  15,  245-­‐59.   v    It  has  been  observed  that  parties  involved  in  the  employment  relationship  do  show  implicit  perceptions  to   the   psychological   contract   -­‐   Rousseau,   D.M.   (1995)   Psychological   Contracts   in   Organizations:   Understanding   Written   and   Unwritten   Agreements.   Sage,   Thousand   Oaks,   CA.;   Kalleberg,   A.,   and   Rogues,   J.   (2000)   Employment  relations  in  Norway:  some  dimensions  and  correlates.    Journal  of  Organisational  behaviour,  21,   315-­‐35.   in   Conway,   N.,   and   Briner,   B.R.   (2009),   Fifty   years   of   Psychological   Contract   Research:   What   do   we   know  and  What  are  the  main  Challenges?,  Chapter  3,  p72   vi   Feldheim,   M.A.   (2007)   Public   Sector   downsizing   and   employee   trust.   International   Journal   of   Public   Administration,  30  (3),  249-­‐70.   vii   Levinson,   H.,   Price,   C.R.,   Munden,   K.J.   and   Solley,   C.M.   (1962)   Men,   Management,   and   mental   health.   Harvard  University  Press,  Cambridge,  M.A.;  Schein,  E.H.  (1965,1970,1980)  Organisational  Psychology.  Prentice-­‐ Hall,   Englewood   Cliffs,   NJ.   in   Conway,   N.,   and   Briner,   B.R.   (2009),   Fifty   years   of   Psychological   Contract   Research:  What  do  we  know  and  What  are  the  main  Challenges?,  Chapter  3,  p72   viii   New   Hire   perceptions   of   their   own   and   their   employer’s   obligations:   a   study   of   psychological   contracts.   Journal  of  Organisational  behaviour,    11,  393.   ix   Robinson,   S.L.   (1996)   Trust   and   breach   of   the   psychological   contract.   Administrative   Science   Quarterly,   41,   574-­‐99.   ;   Robinson,   S.   L.,   &   Morrison,   E.W.   (2000)   The   development   of   psychological   contract   breach   and   violation:   a   longitudinal   study.     Journal   of   Organizational   Behavior;   21,   525-­‐46.,   Robinson,   S.   L.   &   Rousseau,   D.M.  (1994)  Violating  the  psychological  contract:  not  the  exception  but  the  norm.    Journal  of  Organizational   Behavior,  15,  245-­‐59.  

Transitioning employees in tough times  

This Article appeared on HKIHRM Magazine May 2012

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