 Welcome back. This is the third clip of the fifth chapter about the war for talent. And in this knowledge clip I will talk about psychological theories of attraction and retention. So what I'm going to talk about after this clip you will understand mental processes that are related to an individual's talent, attraction and retention. I will talk about fairness, I will talk about expectancy theory and I will talk about psychological contract theory. But before I move on a little word on how these theories are different from the economic theories that we discussed in the previous clip. Psychology is interested in the evaluation that people make of their, in this case work environment, what it does to their emotions and how that affects their behavior. In a war for talent we are interested in people's motivation to work with a company, so their attraction, but also their motivation to stay working in a job, so to acquire and to keep the best talent. And you can imagine that these mental processes, they include much more than just an evaluation of wages. So in a way psychology is going to add a layer of complexity for the things that human resource management can do to attract and keep employees to the organization. In a way economists make life simple, if wages are the thing that you can manage it's the easiest thing and psychology in a way makes it more complex. But as you will see it's very important to understand the psychology side of motivation, attraction and retention as well. So let's start with the core concepts of this psychological perspective of attraction and retention. And the idea here is that in the eyes of employees when their rewards and their work is fair, if the organization pays a so-called fair price and we'll discuss later what this price and exactly entails, then they are willing to keep working in this organization. So fairness is the outcome of an evaluation and it's often exchanged with the word justice. Well, there are hardly any difference between those words but if you want to make a difference then justice is more the evaluation of the conditions for the outcome and then fairness is the reaction to the evaluation itself. So you can be dissatisfied about your salary for example and the process of how you come to this satisfaction would be the justice so you feel that it's not the right amount of salary and the dissatisfaction itself about it is then the fairness reaction. Core words in this theory of fairness are the words evaluation and reaction. So it's all about perceptions of employees, their emotions of how does it make you feel and how does it lead into behavior. So like I said, this is the domain of psychological theories. It's going inside the minds of people in general and try to understand what happens there. And it's oftentimes used to understand voluntary turnover and as we discussed in the first clip that goes with this chapter the voluntary turnover is costly. Those are people that you don't want to let go as an organization the people that you want to keep. So how can you prevent this behavior that we don't want to see? I'm going to talk about two fairness theories. I start with Adams, the oldest one and I'll build on that continuing with justice, the organization justice theory which was developed in the 1970s. So first to the oldest known theory in our modern age about fairness. Adams equity theory says that there is a need for a balance between what people put into some tasks and what they get into return. So for employees there should be a fair balance between how much time they invest in their job, how much effort, how much knowledge and the outputs that they get from that. So the amount of salary but also recognition by their supervisor so many different things can count as outputs in this balance. What employees do in order to evaluate whether their outcomes are fair is compare. So they compare either with colleagues or with friends or with general norms that exist in society that are considered as fair outcomes if you have such kind of inputs. Adams reasons once there is a perceived disbalance people feel deprived. They are taken away from what they are entitled to according to these comparison norms. So deprivation is the belief that you do not get what you are entitled to given your conditions, right? So for different types of jobs there are different outcomes that's perfectly acceptable only if there is a disbalance then you feel deprived. Deprivation leads to negative emotions and negative emotions people don't like those so they want to get rid of that and to want to restore the balance in order to feel better. So what can employees do in order to restore the balance? There's a choice of reactions that all happen. So first and foremost you can decide to maybe reconsider the comparison. So I think it's not fair that what I get from this organization for what I do but if I look at colleagues in the same department everybody is in the same position and my friend makes a bit more maybe he or she has more work experience who can tell so you can mentally change your perception and then make your situation acceptable again. So nothing much happens. You can get away from the negative emotions by choosing a different comparison. Organizations are not really bothered with the psychological process. It becomes interesting for organizations when people actively try to restore the balance by changing their input so it can either mean employees deciding that if they are not receiving the output they hope that they will just do a little bit less so their motivation is slacking or in the context of the war for talent they will look for another place where they can actually do receive the outputs that they were hoping for. So changing your input or changing your perceptions so a little bit more information about changing inputs. What can employees do to restore the perceived inequity between what they put into the job and what the organization gives in return? So like I said changing perception is one thing choose another comparison or change the input. An important word here is withdrawal. Withdrawal is doing a step back and doing a step back you can do that mentally and mentally means that you feel less engaged in your job that you feel less connected to what you're actually doing you're doing a step back and this will affect the behavior at work you'll be less inclined to help out a colleague to stay late you feel less committed to the organization so when you're at a birthday party you are not spontaneous to say how great this organization is so there is a mental... you're taking a mental distance from work you have cognitive withdrawal. Behavioral withdrawal is actually taking a literal physical step away from work which means like I said you work less hard but also for example if you don't feel well you report in sick a little bit easier you don't take up this extra project and ultimately you may actually decide to leave and this quitting behavior like I said in this war for talent is really the behavior that an organization would like to prevent. So there's an idea between the imbalance between what you bring to a job and what your organization gives you to return and if it's fair or not let's let a lot of researchers thinking to what conditions do people actually accept an outcome that is maybe slightly ingest so building on the work of Adams Thibauton Walker and Leventhal in the 1970s and the 1980s they continued doing research on this equity this imbalance but they said there are conditions where people can just accept that they earn for example less than their colleague and still be happy what do you think of that they recognize that first and foremost distributive justice is important so people must have this feeling of equity that what they receive in terms of outcomes is fair as compared to the norms those things and like I said this can include wages but it can also be promotion decisions or who gets a nice project and all these things so anything that is distributed among employees can lead to a feeling of injustice and hurt fairness feelings however organizations can justify an unequal distribution of outcomes among employees and employees can be happy with that and it has to do with two important conditions first if an organization says that it has procedures and these procedures are acceptable for making differences between employees then employees can be happy that there are differences for example in rewards so for example imagine that an organization has a merit system using objective criteria to determine how much salary each employee is worth and these are fair procedures then employees can be happy that some employees stand out and earn a bit more than others so this is procedural justice so the outcome is different but they are still happy with the outcome because there are procedures that justify a difference in outcomes another important condition for accepting a skewed distribution or potentially unfair distribution is to do with how it is communicated to employees and therefore all the employees taken on board and involved in this decision making process about the distribution a good relationship with your supervisor who is able to explain why this employee at this point has this project and you don't this really helps to make the outcome acceptable for employees there is a lot of research that confirms these three dimensions of organizational justice so distributive, procedural and interactional justice there is a little bit of debate that there is maybe a fourth dimension to organizational justice and you see it in light blue here and that is informational justice that is the idea that once you have all the information on a decision then you will be more happy with the outcome other researchers say that it is not really distinguishable between interactional and informational justice because often times this information is shared in interaction with your supervisors for example so important to remember these are the first three dimensions of organizational justice all of these have effects for the war for talent as I will show you in the next slide so turning to research findings from two large meta-analysis on the effects of organizational justice on outcomes that matter for organizations so starting with equity theory the discrepancy is researched between the expected pay employees expecting a certain salary and what they really deserved or what they really had in their pay slip eventually and one simply see that there is a discrepancy so basically when their salary is lower than what they expected this indeed has a result for how satisfied they are about their salary and taking together all this research in this area there is indeed a small positive effect of salary dissatisfaction with the intention to leave with employees sick leave and with thoughts of leaving the organization so voluntary turn over so this indicates that basically the equity and also distributive justice of salaries really matters for behaviors to keep employees in the organization and to keep them motivated another large meta-analysis looked into the distinction between distributive and procedural justice so which of those is actually the most important well it was found that of all the different types of organizational justice these two are equally important so if you as an organization manage as your employees perceive distributive justice as well as procedural justice you will have a workforce that is on average more motivated or more satisfied more committed more inclined to stay in the organization and as we know from social exchange theory you also get this in return positive behaviors like the willingness to do something extra and also employees in general feel better so there is good reason to do research about the perceived fairness of employees in organizations moving on to another theory that really influenced how how you can use benefits for employees to motivate them and to keep them in the organization is the expectancy theory by Victor Vrom so another oldy intriguing one what Victor Vrom did in comparison to the fairness and justice theories that we just discussed he really zoomed into what type of outcomes matter to people so he is in incongruence with the previous theory when it comes to the first assumption of the theory so the motivation to perform really depends on the expected returns for efforts so this is balance idea if I put in something and when I get a balanced return then I'll be motivated however Vrom noticed that not all people are motivated for the same things that makes complete sense some people are there to build a big career others are there to just meet people at work to have something to do some people are there because they value the location where the work is some people are there to name it people have very different value, very different returns and to motivate people you need to read to understand what's in it for them so what is the preferred outcome for each individual employee because the balance between inputs and outputs depends on the output that is liked by the employee Victor Vrom in the 1960s psychology was trying to make a huge statement that was really also about calculations and formulas so he tried to combine this in one formula you can see it in the bottom of the slide and it states that the motivation to reach a desired outcome so your effort to actually wanting to do something is the expectancy the instrumentality and the balance I'm going to dive into these three words on the next slide so remember expectancy, instrumentality and balance you see the formula again the dependent variable so to speak is the motivation to perform so our employee is going to put effort in their tasks well that depends first it depends on the value that they place in the in the outcome so how important is the return that the organization is offering for this employee if the output that they are expected to receive is not the thing that they hoped for that will immediately lower the motivation however if there is a valuable outcome to be expected then the motivation will increase however it also depends whether there is a clear connection between what employees perform in their jobs and the outcome so is there actually a chance that I will receive this valuable outcome when I put enough effort in this job I will give you a small example to stay close by so in universities many researchers hope to grow in the ranks of the university so career steps is a very important outcome for many employees what happens in many organizations and universities are no different is that there is a pyramid so there are very few positions of professors in the top ranks and slightly more but still not so many as associate professors and then there are a little bit more but also as scarcity as well as assistant professor and then there is quite a lot of students and PhD students who are aspiring to climb these ranks in practice is quite difficult to move through the ranks and is also not always clear that the best performer automatically moves to the next rank is also competition among academics in this case and there is also policies change so there is not always a clear link between your effort as an individual research researcher in this case and the chances to really obtain the next step in the career ladder so if there is lesser instrumentality so a less clear link between efforts and outcome the motivation to perform will reduce so what happens a lot in universities is that talents get frustrated at some point and they seek their luck outside of academia so for example they go work in government or in a large company where they also make more money as an example so finally instrumentality is about the procedures is it clear that there is a link and then expectancy has to do with am I able to reach to fulfill this effort to really perform at this level that is needed to receive the outcome that I want and if you feel at some point that I can't do this again this will be a reason to drop out of the motivation and maybe look for another job there is a lot of research to each of these dimensions a big disclaimer that I have to tell you here is that the formula is never confirmed so it is not a multiplication of these three things in reality these are all separate conditions that lead employees to evaluate whether or not they are going to stay in this job so there is a lot of value in the theory but not in the formula what the theory did bring was the awareness that people value different things and that has consequences of course for human resource management so what are the lessons that we can take from expectancy theory if it comes to managing employees so first and foremost communication is key make clear what the goals are make them make sure that these are attainable so just putting a high level goal is not motivating so attainable goals are more motivating than unrealistic goals keep your promises if you say that there is a connection between A and B so between effort and outcome make sure that it is there and communicate about the goals and the rewards finally be aware of differences in perception I think that is the key lesson of From's theory not all employees are motivated by the same thing and they can be perceived also in a different way than you would perceive them so what is actually good performance employees may think they have a wonderful performance but according to maybe your perception of a manager that might be not the case who's right also managers tend to think easily that all kind of extra tasks are also part of a job but actually are they so what is negotiated with employees about what their core tasks are what are they actually paid for and what is considered to be extra extra would be in the eyes of the employee a lot of extra effort and sometimes in the eyes of the manager so again a source of potential frustration and also lesson for manager try to understand for each and every employee what they come work for so what is it that they are looking for and make sure that you not only pay attention to the tangible outcomes like the salary and the career steps but also the intangible ones as a manager you can make a lot of difference just by recognizing that people also value a compliment to get some recognition for the work they do in words so a lot of food for thought about how to motivate employees and to keep them on board there are implications for human resource management for example you can think about customizing rewards for employees so make sure that every employee has a reward package that they find attractive you can imagine if you have to do that for every single employee it's going to be really really expensive and very impractical but what you could do is think about different groups of employees in your organization and try to make compensation or remuneration packages that are attractive for example students with a side job or for example for people with families or name it so you can indicate groups in your organization and offer them outcomes that might be valuable to them alternatively you could think of a total reward strategy so make sure that your package of rewards is competitive what your competition is doing and offer a very broad package of potential rewards within which employees can pick the things that they like the most so that's one thing the other implication is that you can think about employer branding employer branding involves doing a market research under your employees as well as under potential employees and try to understand what attracts the employees who currently work in your organization to this organization and communicate that to people who are looking for a job and that way you can already say well this is what this organization has to offer a lot of people find it really nice so maybe you are fit for us as well just some examples let's move on to the next and final theory of this clip and this is psychological contract theory as you can see this theory is a bit newer it's developed in the 1980s by Denise Rousseau and Denise Rousseau is diving into the unspoken aspects of the exchange relationship between employers and employees so in the relationship between employers and employees a lot more things happen that influence how people feel in organizations then are verbalized for example in a written and formal contract so the key points from the theory is that it builds on this idea of the expectancy theory so people have different expectations and managers and organizations expect returns for that and also these are not always so clear as I just explained in the example what is extra role behavior and what is not the word contract resembles to the legal contract that is also defining the work relationship between employees and employers so in a legal contract you usually see the salary the work hours maybe some regulations about attendance and maybe some information about vacation days but a lot of things are not there there's for example nothing about extra role behavior in a legal contract and yet it can be assumed that it's there neither will a legal contract say that you will have nice colleagues nor will a legal contract say that your manager will be supportive for you nor will a legal contract say that you will have a promotion in a certain amount of time so none of these things are in the legal contract but they do happen in the minds of employees and the frustrating thing is that employees can feel that the contract is breached is violated by the organization even if it's still within the framework of the legal contract and it has all these kinds of withdrawal consequences that we discussed before in the context of fairness so psychological contract in the definition is this is about the mutual mutual being both the employee organization mutual obligations and expectations of employers and employees and it goes further than the obligations that are stated in the legal contract to illustrate this in a picture the legal contract will say something about the type of work and the pay the psychological contract will contain many of the things that you see in this slide is for example trust dignity many things make up the psychological contract and it's purely in the minds of employees so this mutual obligations and expectations of employers that go further than the contract as stated in the legal contract they can be richer or less rich in content there are transactional contract and these are pretty close to the legal contract so imagine that you accept a job for three days to do some construction work in a workplace you're just going to help somebody for three days and that's it and you will have a amount of pay for that working time thing you show up, you do your thing and after three days is done there are minimal additional expectations for such a contract there still are so don't underestimate temporary workers expectations implicitly about their employer but they are less rich as compared to relational contracts and relational contracts they are in the minds of all the employees who have a more open-ended relationship with the with the organization they have many implicit expectations about how the organization should behave and about what they should do so you can tell you that it is more easy to violate a relational contract than a transactional contract so the final sentence the psychological contract fulfillment this is if employees feel that the organization lives up to the expectations then they will be happy about their jobs they will be likely to stay feel satisfied and feel committed to the organization so there are a load of positive outcomes for employees who are glad with their psychological contract with the organization an important thing that we take away from this theory is that breaches of contracts lead to violations and these are consequential for the positive outcomes so if an organization does not honor the expectations and obligations that are in the minds of employees so not on paper in their minds they will lead to negative emotions and to withdrawal cognitions and behavior so they will put less effort to the job and they might leave the organization so where can breaches of contract actually happen well I copied the picture from chapter 5 where you can find this model as well and you can see that there are different stages in psychological contract formations so there is pre-entry, recruitment socialization as well as later in the work so from the very first context that an employee has with an organization expectations start to build about how the company is supposed to behave if they perform in a certain manner communication with somebody in a job fair can already form some future employees in these psychological contracts same during recruitment so any contact with selection committee with talks with future colleagues this will all create an idea of what the psychological contract looks like later in the career all these things add up and if the organization then does not live up to these expectations it will reach in the contract can happen and people will feel demotivated so psychological contract formation the process and the evaluation of it are important and many different aspects of human resource management think for example the message you communicate to future workers in employer branding think about your recruitment process very importantly think about the first days that people spend at work do their way are you going to do this in a more structured way so everybody has the same information or are you just going to let it happen by accident and who know what people will put in their psychological contracts in these first days it will happen in performance appraisal so the moment where you sit with your supervisor and evaluate the employee's performance if there are different expectations employees think that they did well and they are receiving they are expecting a positive evaluation and then the manager has a negative one imagine what happens also talent management is a risky HR area so who are the talents in the organization if you ask employees who are talents they will say I am a talent so there is interesting research asking to organizations who are their talents and then asking to employees do you think you are a talent to this organization if you can imagine organizations will indicate roughly 20% of their employees as talents and employees themselves all of them 80% of them think that they are a talent to the organization so talent management programs have a huge risk of violating psychological contracts of at least 60% of employees so tricky business and finally of course I mentioned that a few times already the development of careers is also an important area where people build psychological contracts about so what can you do it's important to realize that this happens it has been extensively researched especially the consequences of breach and it has implications so be honest temporary expectations of employees say what you can promise and say that all the other things are maybe not realistic or maybe not at this point realistic but keep communicating and not just once not just as employees enter the organization but a lot of times not just during the performance appraisal interview which is usually only once a year but communication between managers and employees on a regular basis is really really important you know in the organization change is also a known example where psychological contracts are violated so engage employees in organization change processes inform them as soon as possible and explore together with them what it means to their position to their expectations and to their feeling about what they should do so a lot of communication and a lot of real people management needed to manage psychological contracts so this brings me to the end of this clip by now you know that fairness is first and foremost equity theory by alans adams then it's continued with teawatt and wallcar with organizational justice theories we build on the idea that people have value different outcomes by introducing expectancy theory and we ended with how important it is to understand how people build their expectations about the company and about their job and that if we shouldn't underestimate how important it is to keep an eye on potential violations of people's expectations in their psychological contracts that's it thank you