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  • Writer's pictureKhurram Rana

100 Years of HR and the changing psychological contracts


Read a really informative article by Linda Pophal on the 100 year history of the Human Resource Department. Trying to link that in to the changing psychological contract over the years.

A psychological contract refers to the unwritten expectations and beliefs that employees and employers have about the mutual obligations and promises that exist between them.

Over the last 100 years, the psychological contract of the employer and employee has evolved significantly, reflecting changes in societal, economic, and technological trends.

Some key changes that have occurred in this over the last 100 years:


From job security to flexibility:

In the early 20th century, job security was a key expectation of employees, and employers offered lifetime employment to retain their workforce. Today, employees prioritize flexibility and work-life balance, and employers offer more temporary and contract-based work arrangements to meet these needs.


From paternalism to self-determination:

In the mid-20th century, employers acted as paternalistic figures, making decisions on behalf of their employees. Today, employees demand more autonomy and self-determination, and employers have shifted to more participatory management styles.


From loyalty to skills:

In the past, employers valued loyalty and seniority in their employees. Today, employers prioritize skills, and employees are expected to continually update their skills to remain competitive in the job market.


From work for pay to meaningful work:

In the past, work was seen as a means to earn a paycheck. Today, employees want work that is meaningful and aligns with their values and purpose.


From top-down communication to dialogue:

In the past, employers communicated with employees in a top-down manner. Today, there is more emphasis on dialogue and two-way communication, where employees can provide feedback and contribute to decision-making.


Reviewing these changes in the perspective of various industries:


Manufacturing Industry:

In the early 20th century, manufacturing industries such as Ford Motor Company offered lifetime employment and job security as part of the psychological contract. Workers were expected to follow strict assembly line procedures and were not given much autonomy or input in decision-making. However, as the industry evolved, employers began to prioritize efficiency and productivity over job security, and employees demanded more flexibility and control over their work. Today, manufacturing industries use more flexible work arrangements, such as temporary workers and contract employees, to meet changing market demands.


Technology Industry:

In the mid to late 20th century, the technology industry, particularly Silicon Valley, had a reputation for offering employee perks such as free meals, laundry service, and other amenities as part of the psychological contract. However, this often came with an expectation of long working hours and a lack of work-life balance. Today, technology companies prioritize flexibility and remote work arrangements, as well as employee wellness and mental health resources.


Software Industry:

Early software companies, such as IBM and Microsoft, offered job security and stability as part of the psychological contract. Employees could expect to work for the same company for their entire career and receive generous benefits, such as healthcare and retirement plans. However, as the industry became more competitive, these benefits became less common and employees began to prioritize other factors, such as flexible work arrangements and career growth opportunities.



Digging deeper into the software / Information technology industry:


In the 1990s and 2000s, the software industry had a reputation for offering high salaries and stock options as part of the psychological contract. However, this often came with an expectation of long hours and a lack of work-life balance. Today, software companies prioritize work-life balance and employee wellness, with many offering flexible schedules and remote work options. Additionally, companies are more likely to offer comprehensive benefits packages, such as mental health resources and parental leave.

The software industry has always placed a high value on skills and expertise. In the past, employers placed a premium on technical skills and academic qualifications. However, today's software industry values a broader range of skills, including collaboration, communication, and problem-solving. Companies are also more likely to offer skills-based training and development opportunities to keep employees up-to-date with the latest technology trends.

The software industry has also seen a shift in the way employees view their work. In the past, employees were often motivated by financial incentives or the prestige of working for a top tech company. Today, employees in the software industry are more likely to prioritize meaningful work and social impact. Many companies have created initiatives to encourage employees to volunteer and contribute to social causes.


The software industry has also seen a shift in the way employees view their relationship with their employer. In the past, employers were often seen as paternalistic figures, making decisions on behalf of their employees. Today, software companies prioritize transparency and communication, with many offering regular feedback and opportunities for employees to contribute to decision-making. Additionally, many companies have embraced a more flat organizational structure, where employees have more autonomy and input in the direction of the company.


Healthcare Industry:

In the past, healthcare providers such as hospitals offered job security and a sense of purpose as part of the psychological contract. Employees were often expected to prioritize their work above all else, leading to high levels of burnout and stress. However, today's healthcare industry places a greater emphasis on work-life balance, employee wellness, and skills-based training and development to keep up with advances in technology and medical research.


Creative Industry:

In the past, creative industries such as advertising and media relied heavily on long hours and a "work hard, play hard" culture as part of the psychological contract. However, as the industry has evolved, employers have begun to offer more flexibility and remote work options to accommodate changing attitudes towards work-life balance. Additionally, employees in creative fields are now more likely to prioritize meaningful work and social impact over high salaries or long hours.


Service Industry:

In the past, service industry jobs such as retail and hospitality were often low-paying and lacked benefits or job security. However, today's service industry has seen a shift towards offering more employee benefits, such as healthcare and retirement plans, as well as opportunities for skills-based training and advancement. Employers are also more likely to offer flexible schedules and remote work options to attract and retain employees in a tight labor market.


What does this change mean for the Human Resources Professionals?



In the early days of the software industry, HR departments were primarily focused on hiring and payroll. The psychological contract was centered around job security and stability, so HR departments were tasked with finding and retaining talent for the long-term. Benefits packages and retirement plans were key selling points for companies looking to attract top talent.

As the software industry became more competitive in the 1990s and 2000s, HR departments began to focus more on employee retention and engagement. Employee perks, such as free meals and on-site gyms, were introduced to keep employees happy and productive. HR departments also began to prioritize diversity and inclusion, recognizing the importance of creating a workplace culture that values differences.

In recent years, HR departments in the software industry have shifted their focus to employee wellness and work-life balance. The psychological contract has evolved to include more flexible work arrangements and a greater emphasis on mental health. HR Professionals are now tasked with providing resources and support for employees to maintain their well-being, such as access to counseling and mental health days.


The software industry has also seen a shift towards a more skills-based approach to hiring and employee development. HR professionals are now tasked with identifying and developing the specific skills needed to meet business objectives. This includes offering training and development opportunities to keep employees up to date with the latest technology trends.


Human Resources professionals in the software industry have had to adapt to changing attitudes towards work and the role of the employer. As the psychological contract has shifted towards a more collaborative and transparent relationship, we are now expected to provide regular feedback and opportunities for employee input. Additionally, we are tasked with creating a workplace culture that values employee autonomy and input, with flatter organizational structures and less emphasis on hierarchy.


To summarize, the psychological contract between employers and employees has evolved from a paternalistic, job-security-focused relationship to a more collaborative, flexible, and skills-based one that emphasizes autonomy, meaning, and communication.


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Khurram Rana