The relationship between workers and employers has transformed dramatically over the past several decades. Globalization, technological innovation, and societal shifts have disrupted traditional models of employment and required a re-evaluation of the implied contract between companies and their employees.
Today we will explore how the contract between workers and organizations has evolved, discuss key factors driving this change, and provide recommendations for how modern employers can adapt their leadership approach and cultures to better meet the needs of today's workforce.
A Changing Social Contract
Prior to the 1980s, most employees in Western nations viewed their jobs as long-term commitments with a single employer (Rousseau, 1995). Often referred to as the psychological contract, there was an implicit agreement where loyalty was exchanged for long-term job security, stable career progression, and strong benefits (Sharma, 2016). However, societal changes like increased mobility, individualism, and work-life balance priorities have weakened this one-dimensional view of long-term attachment to a single employer (Stone, 2018).
Research indicates employees today place more value on flexibility, meaningful work, learning and development opportunities, strong workplace culture, and trust in leadership rather than just compensation or tenure with an organization (Gallup, 2017).
Contract Flexibility and Independence
The rise of the gig economy and freelance work has further disrupted traditional employment models and expectations of the worker-firm relationship (van Jaarsveld, 2020). Platforms like Uber, Fiverr, and Upwork have enabled rapid growth in independent contracting and contract-based flexible work arrangements (Burt, 2018). As of 2020, around 36% of U.S. workers engage in some form of independent work (IPR, 2020).
This flexibility appeals to many employees who value work-life balance, scheduling control, portfolio careers, and the opportunity to take on multiple short-term projects (Manyika et al., 2016). At the same time, contract and gig work often comes with less stability, benefits, and career advancement compared to traditional full-time jobs.
Impact of Technology and Automation
Advancing technologies like robotics, artificial intelligence, and cloud computing have significantly altered the skills required of workers and nature of work itself (Frey & Osborne, 2013). It is estimated that up to 45% of current job activities are at high risk of automation by the early 2030s (McKinsey, 2017). This disruption challenges traditional career paths and lifecycle employment models within many industries.
For example, advances in automation have eliminated many administrative and repetitive manufacturing jobs. At the same time, new roles focusing on skills like programming, data analytics, and user experience design have emerged.
The contract between firms and their human workforce must adapt to both leverage the capabilities of emerging technologies and retrain/reskill employees for roles less susceptible to automation. Lifelong learning and skills development are increasingly important aspects of the psychological contract.
A New Strategy for Organizations
To attract and retain top talent in this evolving employment landscape, organizations must thoughtfully re-evaluate their culture, leadership approach, and value proposition for employees. Some strategies modern employers can adopt include:
Flexibility and Autonomy: Providing more flexible work arrangements like hybrid schedules, work-from-home opportunities, and results-only work environments fosters employee motivation, engagement, and satisfaction.
Meaningful Work: Clearly communicating an organization's purpose and impact while enabling employees to do work they find intrinsically valuable and fulfilling strengthens psychological buy-in.
Learning and Growth: Establishing strong learning cultures with access to continual skills training, career development resources, and internal mobility options supports employees' long-term employability and affiliation with the company.
Trusting Leadership: Leading with transparency, empathy, and empowerment based on results rather than rigid presence policies builds trust and loyalty between managers and their teams.
Total Rewards: Shifting from a pure compensation focus to holistic "total rewards" including additional benefits like flexible time off, parental leave, student loan repayment, and health/wellness offerings further enhances attractiveness.
Industry Examples
Tech giants like Google, LinkedIn, and Twitter have led the way in implementing many flexible and family-friendly work strategies to attract highly skilled talent. However, other industries are adapting as well. For instance:
At manufacturing giant BMW, extensive skills training programs provide opportunities for assembly line workers transition to new technology-focused roles like robotic engineering and AI development.
Hospitality leaders like Four Seasons offer education benefits, leadership development curriculums, and pathways for career progression beyond front-line positions to strengthen retention among service professionals.
For professional services firms Deloitte and PwC, results-only environments, generous paid time off policies, and compressed/part-time schedules appeal to knowledge workers demanding work-life integration.
As the contract between employers and employees evolves, companies proactively revising their cultures and talent value propositions will be best positioned to attract and retain top talent now and in the future. Continuous evaluation and adaptation are required to maintain a strong partnership with a changing workforce.
Conclusion
Massive technological, social, and economic disruptions have transformed how workers view their relationship and commitment to employers. To keep pace, organizations must thoughtfully update the implied contract to better meet contemporary needs around flexibility, growth, trust, and overall well-being. Those leading with an employee-centered vision, a culture of lifelong learning, and a cooperative rather than coercive management style will find the most success cultivating loyalty and engagement in this new era of work. Sustainable partnerships between forward-thinking companies and their human talent will drive innovation and competitive advantage for years to come.
References
Burt, D. (2018, September 13). The state of independent work. Harvard Business Review. https://hbr.org/cover-story/2018/09/the-state-of-independent-work
Frey, C. B., & Osborne, M. A. (2013, September 17). The future of employment: How susceptible are jobs to computerisation? Technological Forecasting and Social Change. https://doi.org/10.1016/j.techfore.2013.08.014
Gallup. (2017). State of the American workplace. https://www.gallup.com/workplace/238085/state-american-workplace-report-2017.aspx
Independent Panel on Federal Reserve (IPR). (2020, November). The role of independent businesses in the U.S. economy. IPR. https://www.federalreserve.gov/newsevents/pressreleases/files/ipr-business-role-20201124.pdf
Manyika, J., Lund, S., Bughin, J., Robinson, K., Mischke, J., & Mahajan, D. (2016, October). Independent work: Choice, necessity, and the gig economy. McKinsey & Company. https://www.mckinsey.com/featured-insights/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy
McKinsey Global Institute. (2017, January). A future that works: Automation, employment, and productivity. McKinsey & Company. https://www.mckinsey.com/featured-insights/digital-disruption/harnessing-automation-for-a-future-that-works
Rousseau, D. M. (1995). Psychological contracts in organizations: Understanding written and unwritten agreements. Sage.
Sharma, S. (2016). Psychological contracts: A literature review. The IUP Journal of Organizational Behavior, 15(2), 7-25.
Stone, D. L. (2018). The changing nature of work and its implications for organizational justice. In E. A. Locke (Ed.), Handbook of research on workplace diversity (2nd ed.) (pp. 331-359). Edward Elgar Publishing.
van Jaarsveld, D. D. (2020). The meaning we give: Towards answering the question “What is (organizational) work?” Journal of Business Ethics, 167(2), 233–249. https://doi.org/10.1007/s10551-019-04162-3
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
