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Psychological contracts: The force behind organizational change

One church’s journey to align ministries reveals a sophisticated system with the power to initiate transformation.

Dale A. DeNeal

In the fall of 2007 our church completed an 18 month strategic planning process which resulted in a five-year ministry plan complete with vision statements and measurable goals. That was the easy part. For the past six months we have journeyed to align all our ministries to the “Plan.” To accomplish this the elders and senior ministry staff met with 47 ministry leaders to talk about the church’s vision and goals and then listen to each ministry leader’s ideas about how his or her ministry area could help contribute to the strategic plan.

The experience was amazing. Many of the ministry leaders demonstrated inspiring commitment and amazing buy-in to the church’s five-year vision and goals, and in some cases, surpassed our dreams and expectations of a preferred future.

This level of commitment and buy-in is what every leader looks for in his or her staff; however, what many leaders don’t see or understand are the forces at work which ultimately influences the level of commitment and buy-in for each organizational participant. These forces function at a subconscious level in organizations which is why many leaders often misread or misunderstand why some staff and volunteers achieve high levels of buy-in and why others do not. The force I’m talking about is called psychological contracts — a mysterious and ambiguous power that impacts the success of every organization to create change.

Creates forward motion

Psychological contracts (PC) are not only a force to help organizations excel, they are, unfortunately, the force that also creates most organizational failure. Like gasoline in a car, psychological contracts create forward motion when managed and applied appropriately. Mishandled, PCs can erupt like a firestorm and sweep through an organization with devastating results.

It’s important for church executives to understand the power of PCs, the potential they have to empower people and how to harness and manage this force for positive change. Leaders also have to deal with the unavoidable issue of a PC violation and how to manage and minimize its impact on their organization.

The term was introduced in the early 1960s by scholars who defined a PC as “a set of beliefs about what each party is entitled to receive, and obligated to give, in exchange for another party’s contributions.” Over time the definition evolved to emphasize perception as a distinguishing component.

An example of a “perceived promise” found in PCs is illustrated in a situation involving the American Rolling Mill Co. in Middletown, OH. For years the American Rolling Mill Co. gave free turkeys to its employees at Thanksgiving. When the company experienced a financial shortfall, it decided to suspend the distribution of nearly 15,000 turkeys. However, the Steelworkers Union took the company to court. The court ruled in favor of the workers stating that the company’s generous practice established a contract obligating the company to provide its employees their Thanksgiving turkeys.

All about commitment

So, what do employees and employers believe each other is obligated to provide? The answer to this question is referred to as the content of a PC. The content of PCs refers to the contribution employees believe they have committed to give their employer and in return, the contribution employers are committed to give their employees.

In addition to understanding what PCs are and what they contain, a church executive must understanding how they are formed. PCs are formed in a variety of ways. The formation of a PC can begin at the point of first contact with a potential employee. A contract can form from a statement printed on company literature or posted on the company Web site. A PC can take shape from an 
initial, prospective phone call or a statement made during the interview process. Because the church executive is typically involved in these initial interactions, he or she plays a significant role in how PCs are formed.

Several years ago, while conducting staff reviews, a performance issue was revealed with a particular ministry staff member. After much discussion, an improvement plan was agreed upon which included specific goals and outcomes. Another member of the ministry team agreed to be the staff member’s accountability partner. The improvement plan was documented and signed by all participants. Every three months I asked the staff member with the performance issue how things were going with the plan. The staff member said, “Fine.” However, I soon learned things were not fine.

Discussions and agreements

At the next annual review I discovered no progress whatsoever was made with the improvement plan. During the second review we again discussed the benefits the plan offered the staff member both personally and professionally as well as the benefit it offered the church. We refreshed the goals, signed a new agreement, and gave it another shot. Six months later I conducted a midyear review with the staff member and learned for a second time that nothing had been done with the plan.

During this meeting I also learned that the staff member had no intention on completing the improvement plan because the staffer believed the activities and goals listed in the plan did not fit this staffer’s job description and further, and more importantly, the improvement plan did not fit the staff member’s “philosophy of ministry.” Even though this employee discussed, agreed (at least outwardly), and signed a written improvement plan designed to benefit the staff member’s ministry skill; nevertheless, the staff member’s unwillingness to commit, buy-in, and follow through with the improvement plan had long been determined by a more powerful and previously formed PC.

A dark side to contracts

Unfortunately, there can be a dark side to PCs. If you’ve ever been on the receiving end of a staff member’s angry rants or experienced the silent treatment from a previously loyal staffer, or witnessed a worker’s performance drop below usual standards of capability, it’s a good bet that you experienced the dark side of PCs called psychological contract violation (PCV).

As church executives, these kind of encounters remind us that personnel issues are perhaps the most challenging, frustrating, and demanding aspect of our job and frequently make the occupations on the show “Dirty Jobs” look rather appealing.

All too often PC dynamics are off the radar screen of professional managers and consequently attribute unpleasant employee encounters to symptomatic causes: a bad day, moodiness or struggling with personal issues. These attributions may in fact be reasons for such conduct; however, unless you drill down a little deeper you may misdiagnose the real issue behind the unhappy behavior — your staff member is struggling with what he or she perceives is a PCV and your experience is the emotional repercussion of that violation.

According to D.M. Rousseau in Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements (Sage Publications, 1995), PCVs come in three forms: inadvertent, disruption, and breach of contract.

Inadvertent violation occurs when both parties are able and willing to keep their bargain, but divergent interpretations lead one party to act in a manner at odds with the understanding and interests of the other. Two people who misunderstand the time of a meeting will inadvertently fail to honor their mutual commitment to attend.

Disruption to the contract occurs when circumstances make it impossible for one or both parties to fulfill their end of the contract, despite the fact that they are willing to do so. A plant closing forced by a hurricane can prevent an employer from providing work. Similarly, a car accident can keep an employee from showing up to work on time.

Breach of contract occurs when one side, otherwise capable of performing the contract, refuses to do so.

When the turkeys aren’t delivered

Imagine three employees who did not receive their Thanksgiving turkeys. Each can interpret the PCV quite differently. One employee views the failure as merely an oversight (inadvertent). One employee blames environmental conditions (the poor economy) as the cause of the failure and holds the company harmless (disruption). One employee views the failure as an intentional act on the part of the company (reneging or breach). Which of the three employees will most likely respond in a negative or possibly hostile way? This is the dark side of the PC.

Unfortunately, many PCVs go unnoticed because most violations are shrouded in silence and passive aggression. In many ways, emotional outbursts, though unpleasant, are easier to address. At least the outburst provides a platform for discussion, dialogue, and ultimately resolution. On the other hand, the slow silent burn can char relationships beyond the point of recognition, rendering intervention improbable or impotent at best.

Church executives must also be mindful of a distinctive PCV dynamic unique to churches and religious organizations. This is “the call” factor. Many pastors and ministers choose ministry as their vocation because they feel God “called” them into the work. Not only do I believe God called me into fulltime vocational ministry but I also believe He called me into specific ministry experiences and churches. For each pastor or minister who believes in God’s call on his or her life the ritual of ordination further serves to reinforce this paradigm.

However, this calling brings a unique dynamic to PCs. The deep sense of divine purpose and partnership a minister brings to a church creates heightened expectations that impregnate the PC and transforms it to a level that at times seems to transcend the organization. Consequently, when a PCV occurs in conjunction with “the call” factor, emotions can be abnormally elevated and intense. I believe every church executive must be mindful of this PC dynamic when interacting with ministry staff.

Formed by the organization

Ultimately, the management of PCs and PCVs rest on the shoulders of the church executive. How leaders manage PCs account for most of the reason some staffers achieve high levels of commitment and buy-in and why others do not. A common denominator in the definition of a PC is that PCs are formed by the organization. Technically, an organization can not create a contract, only an agent of that organization can.

As our church leadership met with the 47 ministry leaders to hear about their ideas regarding the church’s five year vision and goals, I discovered, to my embarrassment, that the ministry leaders most hesitant and resistant to the plan were paid staff. I felt somewhat defeated by the experience until I remembered that Greg Hawkins, executive minister of the Willow Creek Community Church near Chicago, had the same experience during the alignment of Willow’s strategic plan. He encountered staff members who basically said, “These changes do not fit my job description or my philosophy of ministry.”

In other words, these staffers viewed the changes as PCVs. Consequently, some staff members resigned. However, Hawkins was also able to help many staff members create new contracts through a process he calls “The Learning Loop” (a series of collaborative meetings designed to foster goal setting, assessment, learning, and alignment in an affirming and safe environment).

Maintaining good relationships

The most important aspect of managing PCs is relationships. Relationships are the foundation for understanding, creating and managing PCs and it is up to the church executive to initiate, develop and maintain good relationships with his or her people. To remind me of the importance of relationships I keep a plaque positioned in front of my computer which reads, “The best minute I spend is the one I invest in people.”

The goal of creating strong relationships, however, is more than trying to stay on the employee’s good side — good relationships are about meeting and fulfilling employee needs. The church executive must think of relationships in terms of stewardship, which is about developing people and helping them to grow and experience their full potential. This is how you develop relationships in organizations.

Church executives must be attuned to the PCs at work in his or her organization. When church leaders are in sync with PCs, are mindful of the dark side of PCs, and learn to harness the power of PCs, they will tap into an amazing power to create positive change in their organizations.

Dale DeNeal is executive minister of Second Church of Christ, Danville, IL. [secondchurchofchrist.org]

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