I had a discussion with a manager recently which might be of interest to you.

“In the last couple of months I noticed something happening with my staff”; he said. “The mood is sombre. Absenteeism has gone up and in the past we didn’t have any problems with people staying at home sick. There is also less commitment. What is happening?” I looked at him as his clear eyes stared at me in confusion. I asked:”Did you go through any big changes in the company recently?” “Yes, unfortunately we had to close down one department and had to make some people redundant. It was a hard thing to do but it didn’t make economic sense to keep going on as we were. Some of the people who we had to let go were with us for 20 years. It made a huge impact on the place, but I think we have moved on from that and that people are glad that they still have a job.”

I explained to him that what might have happened was that the psychological contract between employees and company was seen to be broken. His reply was that he didn’t know he had a psychological contract with his people.

A psychological contract is what employees and employers believe are the terms and conditions between them. These beliefs are not written down but are expectations between staff and management over what they thought they could expect from each other regarding being employed by his company. You might not be fully aware what these beliefs and expectations exactly are but they are set in the mind of your staff and if then something happens what they did think was going to take place the psychological contract is broken and the symptoms mentioned at the start might occur.

Probably making staff redundant, who were employed here for more than 20 years changed the expectation that staff had lifelong employment with the company. When they realised that this was no longer the case they recognised that this could happen to them as well and a strong belief they had regarding the company was gone. As a result their attitude towards the company changed.

Over the last number of years the psychological contract between staff and companies has taken a hammering in companies. During the recession Life-long employment is no longer the norm. What companies now offer is a job and in a lot of cases for less money than before. Promotions are few and rare. Annual wage increases are rare and this can even include a reduction in wages as well. Recession fatigue has set in.

These companies are not just doing this to spite their workers but because competition has increased, money is scarce and the market demands that companies become flexible and agile to react to changing market demands.

If the psychological contract has changed in your company and employees are reacting in the manner described then you need to take action to prevent this from further escalating. It is important to establish if there is still a matter of trust between management and employees, because if the trust is gone then it will take some time to re-establish trust. Furthermore it is important to communicate what staff members can expect from the company, if they give their commitment what they can expect in return. Listening to staff members and find out what they regard as important at work. Of course wages and benefits are still important but also training to learn new skills. This can be training on the job as long as employees have a reasonable chance to make it on their own if the company can’t support them any longer.

But above all employees expect that management treat them with fairness and respect even during this economic crisis and at the end of their employment.