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For Handy, the idea of the psychological contract is at the heart of modern management. From your personal experience and other resources, use the concept to illustrate the expectations and obligations of both an employee and an employer in the construction industry.
Handy (1999) describes the psychological contract as an unstated set of expectations between an individual and the organization, coinciding with work colleagues, friends or family members. Implying that an individual can hold more than one psychological contract at any one time and it is therefore not necessary for our needs to be fulfilled by one contract only. It is distinguished from the legally binding, written contract in which it is the perception of both parties of their mutual obligations towards each other. Due to the informality of the psychological contract, as it is considered a 'state of mind'; the expectations often arise from previous actions, statements and promises of either party. The psychological contract influences the motivation of employees, and their commitment to thrive within an organisation, which can be related to Maslow's hierarchy of needs.
The working world today is a lot different to that a decade ago. Within the modern world, work needs are increasingly impacted by factors outside of work, as lives are much richer, varied, informed and connected. These factors add complexity to the psychological contract. Now, employees expect work flexibility and the integration of their personal life within their work patterns. Due to economic growth and industrialization, the construction industry has experienced a vast change in the way it operates. Financial circumstances, such as the recession, have placed huge pressures on the employer/employee relationship, and ultimately the psychological contract. Bardwick (2010) sees this impact as a 'psychological recession' defined as "an emotional state in which people feel extremely vulnerable and afraid of their future". Such circumstances will cause employers to change how they see employees, either as an asset or a cost.
Handy suggests that organisations can be categorised by the type of psychological contract that dominates: coercive, calculative or co-operative. It is likely that more than one type of contract can operate in an organisation. This can impose confusion on the individual if the expectations vary between different people with whom they work with. From my own experience within a small design consultancy, it is clear that different psychological contracts existed. Within the open plan office, there was only 9 people working; including the partners, engineers, draftsmen and secretary.
A co-operative contract was functioning between the partners and the organisation. Under this contract the partners identify with the goals of the company, and are expected to commit to achieving these whilst adding creativity and ingenuity. My boss was passionate about pursuing the intentions of the organisation as every project he worked on he was committed to and would deliver with high standards. He would work long hours to achieve this with no reward. Referring to Maslow's hierarchy of needs, it is clear that the partners have reached the highest level of self-actualisation, where they are pursuing a challenging job and the goals are meaningful to their work. However, lower down the hierarchy, the goals of the company may be of less importance. For example, the draftsmen were not motivated by achieving the goals of the company but by rewards; a so-called performance based reward culture. This type of psychological contract is more calculative. The draftsmen's motivational calculus, the decision on how much 'energy' he will expend on his work, largely depends on rewards offered by the organisation: such as salary, progression or social activity (Handy, 1999). Often, my boss would ask the draftsmen for additional drawings at short notice, increasing the workload, and the draftsmen would not necessarily always get a 'reward'. If this would continue to happen the contract could move to a more coercive type and either party would have to adapt their side of the contract.
Working alongside one of the partners, I was involved in my own psychological contract. As a placement student, I was expecting my boss to give me challenging work and experience so I could expand my knowledge of engineering. I was motivated to putting increased 'energy' into my work for no extra reward, such as pay, but for a good reference or possible future employment after graduation. Similarly, for the engineers working in the practice, they were highly motivated by the prospect of promotion to a more senior position, with no doubt a better pay package. On occasion, they would work late for no extra reward, but knowing this would be recognised by the partners. Both the engineers and I had calculative contracts, which, with time would become co-operative the more senior, and more involved with the creative design they become. These needs fall into Maslow's hierarchy, where the engineers will span from the 4th to 5th level, moving from self-esteem to self-actualisation.
The employer can influence the type of psychological contract they desire to dominate within the organisation, and thus influence the employee expectations. This is mainly considered in organisational design where consultancies typically choose a task culture with a matrix structure. The design process is at the heart of the office where certain employee's capabilities are used efficiently. This organisational design imposes a co-operative contract in which younger team members will experience more responsibility but not necessarily expect a reward, as they are working towards the achieving the goals of the company.
A breach of the psychological contract can occur for many reasons, for example if the organisation structure does not function correctly, employees may feel they are not being used effectively for what they do best. The construction firm Laing O'Rourke conducted a study on why they had a high staff turnover. Exit interviews were conducted to see why employees were motivated to leave the company. A break down of the psychological contract was mainly due to a lack of effective career development. By making changes in managing expectations, communication and consultation processes could effect the expectations of the employee and ultimately keep the psychological contract in tact (Furness, 2008).
It is therefore necessary for communication, justification and honesty on the employer side to ensure the psychological contract remains in tact. A break down can cause a sense of 'dissonance' by either party, described as 'a form psychological discomfort or stress' (Handy, 1999). Maintaining the psychological contract is essential as to not induce low job satisfaction, poor performance and loss of trust. It can prompt many challenges in leadership of the organisation, and leaders will have to show high levels of empathy with their employees to maintain the contract. Expectations are dependent on the individual, the organisation and its structure, and it is often difficult for both parties to have the same view. The use of different types of contract within consultancies makes this a lot easier.
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Identify a prominent leader in the construction industry whom you consider demonstrates good leadership. Discuss your choice by using the critical application of management theories.
According to John C. Maxwell a leader is "Someone who knows the way, goes the way and shows the way." There have been, and are still, many good leaders within the construction industry, influencing change and transformation of the built environment, an environment in which we all interact with. There have been many theories relating to management and leadership and this discussion will focus on trait, style and contingency theories.
A prominent person whom I consider to have good leadership is the CEO (Chief Executive Officer) of Atkins, Keith Clarke. Originally a trained architect, Keith Clarke has more than 30 years experience within construction. Previously undertaking the role of executive vice president at Skanska AB, he became the CEO of the global engineering firm Atkins in 2003. In addition to this he is the chairman of the CIC (Construction Industry Council); vice president for International Relations at RIBA (Royal Institution of British Architects); and an advisory board member at Imperial College. Prior to his work in construction Clarke spent a decade in New York studying urban planning before moving into an economic development role with Olympia and York and then Trafalgar House. Having had only one personal encounter with Keith Clarke, this discussion is largely based on external sources. Atkins has significantly grown in engineering and design since Clarke was appointed CEO, and his achievements within the company highlight good leadership.
When Clarke first joined Atkins in 2003, the company was suffering from financial difficulties left by his predecessor, Robin Southwell. Southwell had goals of making Atkins a multi faceted solutions provider; he tried to achieve this by making acquisitions in the U.S, imposing a large strategic change within the company. When Southwell quit as CEO, share price had fallen by 74%, there was a £5M first half loss of the tax year and 400 administrative jobs had to be cut as a result (Hansford, 2002). Following this Clarke focused on the company's core attributes: engineering, the environment and architecture, understanding what Atkins thrives to achieve in. This has resulted in Atkins becoming the UK's largest engineering consultants and the world's 11th largest design firm.
Listening to Clarke present his recent lecture on a low carbon economy highlighted his knowledge, enthusiasm, ambition and belief in how engineers are the key to leading the world into a low carbon economy. These particular characteristics, according to trait theory, would have been acquired when he was born. Goleman (1998) highlighted the importance of traits associated to emotional intelligence, such as: self-awareness; self-regulation; motivation; empathy and social skills, necessary in becoming a good leader. Compared to his predecessor, Clarke shows a series of traits to which prove successful. Southwell demonstrated a somewhat aggressive strategy to expand Atkins rapidly, highlighting ambition and courage, but the lack of emotional intelligence led to a failure and what I believe bad leadership. During an interview with The Times newspaper Clarke was quoted about his learning curve during in his time with Olympia and York:
"I learnt there is far more to leadership than you think. It is about the people, ethos and values, careers and bringing people together. Knowing that a business is more than a sum of its parts. No one teaches you the people things, the importance of wellbeing, that is a massive responsibility. " (O'Connor, 2010)
A major criticism of trait theory is that it only relates to the leader and fails to take into account certain situations. Not everyone can hold all the desired traits for a good leader and certain traits can be evolved through a person's lifetime. As Goleman (1998) suggests, it is the level of emotional intelligence that is the key to effective leadership. The quote above highlights Clarke's self-awareness and empathy for his employees, and how he has realised, learnt and adapted this throughout his career, developing him into a good leader who was not necessarily born that way.
Throughout Clarkes career, he has undertaken many roles within a business. From architect to chief executive, he has definitely got an understanding of both sides of the employee/employer relationship. This understanding can be crucial when applying style and contingency theories. The Tannenbaum-Schmidt model is a continuum describing the nature of the leaders style, ranging from autocratic to participative, shown in Figure 1.
Figure 1: Tannenbaum- Schmidt model of leadership
Quinnless (1986) showed that leaders within construction tended towards a more participative style than autocratic. Clarke has had to change his leadership style throughout his career; I think this is an important aspect of leadership, to be able to lead within varying circumstances. This is also in accordance to contingency theory. As the leader of a global multidisciplinary company, he will no doubt have to delegate tasks in order for him to continue a major role within a successful company. Whilst working as an architect he would have also presented and consulted about decisions. This requires a high level of emotional intelligence, particularly in how Clarke has formed relationships with his team and how they have gained respect for him.
The consideration of the task, team, and internal and external influences is an important aspect within leadership, something that earlier theories have not touched on. This is highlighted through Clarke when Atkins went through the global recession. Although jobs were cut, Atkins still have made a profitable turnover throughout the recession. The acquisition of PBSJ Corporation certainly helped with the short fall. What I think most likely aided Atkins through the recession is Clarke's incentive to design radically and differently, with a view of doing things better. By taking into account externalities and integrating them within his leadership style, proves why Atkins is so successful within the construction industry.
Hooper and Potter (1997) have underlined that with the changing nature of work and the increase in diversity of projects, future leaders will have to be more competent, articulate, creative and inspirational. I think Clarke is definitely heading in this direction creating a vision for the future of the built environment. Undertaking the role of chairman at the CIC, has given him the power to engage with different sectors. His 2050 pathway inspires designers, engineers and architects to embrace carbon critical thinking and put it at the forefront of design. Acquiring a large position within the London 2012 Olympics, Atkins has inspired and demonstrated how sustainable design can be achieved on large-scale projects. In order to achieve this, Clarke has had to allow people to thrive in what they do best individually, whilst being supportive and enthusiastic. The passion and enthusiasm of Clarke, for what could be a challenging future for construction, shows how he responds to the needs of the industry and although times are often tough, he has the knowledge, exuberance and courage to continue being good leader.
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