A Guide to Remaster the Psychological Contract

Margaret Bellinder
Change Management and Organizational Adaptability Intergenerational Diversity

The Industry 4.0 Psychological contact

Recent shifts in societal expectations around employment are driven by factors such as the job market, technological advancements, shifts in generational values, and events-such as the COVID-19 pandemic. From the employer’s point of view, employees with a true commitment to their organization are increasingly rare and competitive work-life balance, compensation, benefits, and developmental opportunities are imperative to retain talent. Within this dynamic, businesses maintain less obligation to ensure job security for their personnel. While the average employee can fluidly transfer between organizations in pursuit of competitive incentives, their freedom is shadowed by a lack of continuity in their career progression and potential for impromptu unemployment.

Both parties might agree that the industry 4.0 psychological contract could use some remastering.

This article proposes a guide to remaster the psychological contract to strengthen employee commitment and create a future of work that enhances professional development.

Table of Contents

Map Out Clearly Defined Career Progressions

As of 2024, approximately 40-50% of companies in the U.S. offer some form of structured career progression framework or strategy, though the level of comprehensiveness varies widely. This can include clear pathways for promotion, defined roles, and performance metrics. However, a fully comprehensive strategy—one that includes personalized development plans, mentoring, and ongoing training—is still not universal, with less than half of companies implementing such detailed frameworks. The demand for these frameworks is growing as younger workers prioritize career development and continuous learning opportunities.

Practices of upskilling and career progression frameworks are becoming increasingly prevalent, especially in industries facing skill shortages​, as if to counteract the the shift into a gig-economy (World Economic Forum, 2024). A recent study in the tourism industry found that employees with higher career commitment tend to experience greater subjective career satisfaction (Bhawna et al., 2024). Emerging trends like quiet quitting and declining organizational commitment are harmful to business success and employee well-being alike, diminishing employee self-efficacy and career resilience.

Integrating career progressions into company culture through career coaching, competency building, and functional rotation opportunities translates to employee loyalty to the organization (Moreira et al., 2024). In a survey of 1,532 US tech employees, career advancement opportunities proved the primary factor influencing employees’ decision to remain at their current organization (McKinsey and Company, 2023). Evidence suggests that the key to rebuilding the psychological contract is investing in career progression initiatives.

Successful career development frameworks take a modern approach to create compelling advancement opportunities within the organization. With the rise of knowledge work, career tracks that focus on expertise are appealing to many workers, especially those in the tech industry (Mckinsey and Company, 2023). These expertise-centric trajectories appeal to employees in knowledge work and offer a nonlinear option for those less interested with people-management positions.

Another means to diversify career progression frameworks is to support learning and exploration within each level, such that employee growth is continuous throughout their career. Presenting employees with outlets to learn new skills, such as professional competitions, external projects, and symposium events can support their up-skilling potential. Opportunities to build one’s resume beyond the surface level learning of certifications or corporate training establishes a basis for competitive career development within an organization.

Company culture will either vitalize or kill career progression frameworks. To capitalize on growth potential, personnel need leaders who support their investment into developmental projects and respect the trial and error reality of new skill acquisition. Design a performance management system that tracks readiness for the next position and mediates employee understanding of how they are progressing. Create common understanding around the purpose and value of the career progression framework, starting with employee orientation. Reward employees that are motivated to learn and advance within the organization.

Other characteristics of a robust career progression track include competitive and sustainable practices. Companies can expect higher attrition if their employees are advancing slower than their peers with similar experience. Paying attention to the advancement rate and compensation within the market is necessary to remain competitive. Additionally, sustainable talent management relies on procedures to train and prepare successors as critical employee talent advances. If employees who are eligible for advancement are denied the opportunity because of slowed hiring or insufficient preparation for their replacement, than they may assess it is time to leave the company altogether to continue their career progression. Ostensibly, the key to rebuilding the psychological contract lies in enacting a successful career progression framework.

Leverage Person Organization Fit

Let’s discuss the concept of person-job-organization (PJO) fit. In-depth job interviews and transparent onboarding are crucial to optimize person-organization fit (Scroth, 2019). The concept is derived from research by James P. Campbell and is ubiquitously supported by empirical studies across the field of IO psychology. There are two elements of PJO fit that describe how effectively an individual will assimilate into their position:

Elements Of PJO Fit

  • Person-Job fit: The degree that an individual’s Knowledge, Skills, Abilities, and Other Characteristics (KSAOs) fulfill the requirements of their job responsibilities
  • Person-Organization fit: The degree that an individual’s personality, values, beliefs, and cultural orientation overlap with that of the organization.

To give an example, Howard Shultz (founder of the know proliferate coffeeshop Starbucks) originally worked as a marketing director for a coffee company who aimed to sell coffee beans. While he believed the company would be well suited to sell brewed coffee in pursuit of a comfortable café experience, he could not redirect the company’s focus from the status quo. Eventually, he departed from the organization and successfully brought his vision to life through independent pursuits. His Starbucks brand resonated with the customer and expanded to become an industry leader. Cultural shifts are inspiring many personnel to take this journey when they sense that there is low PJO fit.

Align GenZ Values with Company Strengths

Business applications started to roll out at increased rates in 2015, corresponding to the the milestone where cellphones entered the hands of most Americans (Small Business and Entreprenueurship Council, 2023). The significance of this timing, corroborated by a spike in applications from 2021, is that technology is interacting with the work mindset of the youngest generation- also given the name IGEN. There is an EXPLOSION of entrepreneurial interest amongst GenZ. This archetype of the employee with low PO fit quits to becomes entrepreneur that challenges their original organization’s franchise is popularizing rapidly. Icons like Steve Jobs and Elon Musk are on everyone’s radar, cementing this impression. It is a serious disservice to organizations to neglect the outstanding innovative instinct and visionary capability deep-seated in the modern worker’s psyche. Organizational goals and beliefs need to be a) shared and b) recognized by the modern worker to cement their commitment.

The existence of pointless tasks is a motivation killer. Studies on GenZ indicate this generation is motivated by meaningful work tasks. They explicitly state that they expect to know the intent and significance of their assignments at work so that they can connect their efforts to a purposeful outcome (Chillakuri, 2020). When they are tasked to craft an email, revise the email, rework the email to match their boss’ exact specifications, and then trash the email because by the time it’s ready, the need for it has passed, they experience soul-crushing demotivation at work. The same is true for PowerPoints. When I asked my coworker in the engineering department about her typical work, she explained that “everything needs to be a PowerPoint”, an admonition that her energy is devoted to capturing all information in slide format.

 In reading this, I would suspect that audiences in managerial positions will question whether it is GenZ unrealistic expectations of work that are leading to their apparent dissatisfaction. The research supports the notion that GenZ enters the workforce disillusioned. A study by Chillakuri (2020) advocates for transparent onboarding practice that targets expectation managements prior to integrating fully into the role. In-depth onboarding sessions that offer Q&A can condition new hires and facilitate communication around the expectations for employees given the company’s ethics and standards. In-depth job interviews and transparent onboarding are crucial to optimize person-organization fit (Scroth, 2019).

Another clear agent of employee integration is managerial support. In recent studies of GenZ workers, coaching mediated the relationship between worker boredom and intention to silent quit (Chillakuri, 2020). The role of feedback in managerial support in this relationship cannot be understated. Real-time feedback turns projects into learning and development opportunities, giving them greater value for the GenZ individual. Those tasks that are dissociated from a broader purpose can be redeemed in the eyes of GenZ if there is learning value. My research on Gen Z indicated that learning and development is at the apex of the Gen Z worker value hierarchy (Bellinder, 2024). Shaping language and company.

References

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