Transformational leadership: the link between P-O fit, psychological contract & signature experiences.
Abstract:
The paper draws insights from various organizations of signature experiences which they provide to employees through their HR value chain, from job interviews through orientation, training and the appraisal process. Most of the incidences presented in the paper are drawn from experiences shared by students (having prior corporate experience of >2.5 years) at S. P. Jain Institute of Management & Research. Other incidences have been drawn from the experiences of the authors and also from published literature. For the purpose of confidentiality, the names of organizations have either not been used or have been substituted by pseudonyms.

Subject:
Employee turnover (Forecasts and trends)
Employee motivation (Analysis)
Corporate culture (Analysis)
Authors:
Aggarwal, Upasana
D'Souza, Keith C.
Pub Date:
01/01/2012
Publication:
Name: Indian Journal of Industrial Relations Publisher: Shri Ram Centre for Industrial Relations and Human Resources Audience: Academic Format: Magazine/Journal Subject: Economics Copyright: COPYRIGHT 2012 Shri Ram Centre for Industrial Relations and Human Resources ISSN: 0019-5286
Issue:
Date: Jan, 2012 Source Volume: 47 Source Issue: 3
Topic:
Event Code: 010 Forecasts, trends, outlooks Canadian Subject Form: Labour turnover Computer Subject: Market trend/market analysis
Product:
Product Code: 9911210 Motivational Techniques
Geographic:
Geographic Scope: India Geographic Code: 9INDI India
Accession Number:
284450243
Full Text:
Introduction

No organization can do better than the people it has, because more than physical, technical or financial resources, human resources are particularly difficult to emulate (Lado & Wilson 1994, Wright & McMahan 1992). A study conducted by McKinsey and Company in 1997, dubbed as the 'War for Talent', predicted, that the most important corporate resource over the next 20 years would be talent: smart, sophisticated business people who are technologically literate, globally astute, and operationally agile. Subsequent McKinsey Quarterly global surveys (the first conducted in 2006 and the second in 2007) further reaffirmed the trend and revealed that finding and retaining talented people was the single most important managerial preoccupation.

Although there has been an unequivocal consensus amongst scholars and practitioners that people are an important asset organizations also recognize that winning the war for talent means more than simply attracting people to the company. It is about attracting the 'right people'. Employees are an asset only when their work values are in alignment with organizational purpose and when they are emotionally and intellectually engaged with organizational objectives. If not rightly selected, employees could be an organization's biggest liability as well. As Sloan said: If we didn't spend four hours on placing a man and placing him right, we'd spend four hundred hours on cleaning up after our mistakes. Understandably, organizations are increasingly realizing the need for attracting the 'right people' (Collins 2001).

There has been considerable research in the fields of organizational behaviour and human resource management, on person-organization fit (P-O) or congruence between the characteristics of individuals and the organization, emphasizing the extent to which a person and the organization share similar characteristics and/or meet each other's needs (Kristof 1996). Research has indicated that the degree of fit between the person and the organization is related to both employee retention and psychological contract (Rousseau & McLean Parks 1992, Behery 2009). Psychological contracts comprised the obligations that employees believe their organizations owe them and the obligations the employees believe they owe their organizations in return. Fulfilment of the psychological contract contributes to positive outcomes such as commitment, organization citizenship behaviour, engagement, and intention to remain. Increasingly, firms differentiate themselves from their competitors by strengthening employees' psychological contract with the organization.

Studies have examined the relationship between person-organization fit and psychological contract. It has been found that employee fit with the job and with the organization, is affected by the failure of an employer to fulfil employee expectations (Behery 2009). Findings strongly suggest that employees in organizations which strive for P-O fit, and in which new entrants have a positive perception of the PC in the pre-entry phase, are more likely to continue to experience these fits after they enter the organization. This post-entry fit, in turn affects their subsequent work attitudes and behaviours.

Given the role of person-organization fit as well as psychological contract, organizations are increasingly looking at their socialization processes to enhance positive role-behaviours and attitudes at work. However not sufficient research effort has been done to examine the mechanisms which could increase employee-fit and psychological contract. In this paper we present the role of signature experiences in creating POF by communicating a clear message to potential recruits about the unique values of the organization and what it stands for. Using signalling theory as the theoretical foundation, the paper examines the linkages between signature experiences and psychological contract.

Psychological Contract

The employee-organization relationship is quintessentially a contract for exchange of resources between two parties--employees and employers. In a strictly legalistic sense, the employment relationship can be defined as an agreement entered into between an employer and an employee at the commencement of the period of employment which defines the exact nature of the relationship, for instance, the compensation the employee will receive in exchange for specific work performed. If either of the parties in the contract does not honour its side of the deal, it could be questioned in a court of law.

Although much of our understanding about the employment contract is from a strictly legal perspective, an employment contract is also behavioural/ psychological in nature (Anderson & Schalk 1998). Scholars have argued that not everything about employee-organization relationship, however, can be measured and reduced to dollars and cents (Rousseau 1995). In fact, critical legal scholars have acknowledged that "all contracts are psychological in nature" (Macneil 1985: 124) and the terms and conditions of contract are not only communicated in written terms (e.g. job offer letter) but are also communicated orally (e.g. promises of training, support and best efforts) and can also have other forms of expressions of commitment and future intent (e.g. traditions, customs and culture).

One of the psychological/behavioural perspectives of the employment relationship examined in recent years is psychological contract. A psychological contract is defined as an employee's beliefs, based upon promises expressed or implied, regarding an exchange agreement between the individual and the organization (Kotter 1973, Rousseau & Tijoriwala 1998). Originally, research on psychological contract focused on employee-employer mutual expectations (Argyris 1960, Herriot 1984, Schein 1980). More recently, there has been a shift toward examining the implications of a psychological contract breach (PCB), which may occur if employees perceive that their firm, or its agents, have failed to deliver on what they perceive was promised, or vice versa (Rousseau 1989, 1990, Rousseau & Parks 1993). Studies have found that breach of psychological contract is a norm, not an exception, and a majority of UK and US employees report high levels of breach (Coyle-Shapiro & Kessler 2000, Robinson & Rousseau 1994), with some estimates being as high as 85-90%.The instances of breach in India are quite similar; however its ramifications are far stronger (Aggarwal & Bhargava 2009).

Person-Organization Fit (POF)

Person-Organization fit (POF) can be conceptualized as the match between an applicant and broader organizational attributes (Judge & Bretz 1992). POF has been examined from four perspectives: the first is the degree to which individual knowledge, skills and abilities (KSAs) match job requirements; the second is the degree of congruence between individual needs and organizational structures; according to the third POF has been defined as the match between individuals' values and organizational culture and values; the fourth is the individual personality and perceived organizational image. It has been found that when the fit between the personal values and organizational values is high, employees are less likely to leave the organization and are more satisfied, committed and productive (Chatman 1989, O'Reilly et al. 1991).

Signature Experiences

The concept of signature experience has been given by Tamara Erickson and Lynda Gratton (2007) after over five years of their research. The researchers studied several companies which had highly engaged employees and found that these organizations excelled at expressing what makes them unique. One of the unique things about these organizations was that they knew what they were. They understood their current and future employees as clearly as most companies understood their current and future customers. They recognized that individuals work for different reasons and accomplish tasks in different ways. And they demonstrated what they were vividly, with stories and actual practices. Consequently, they only inducted employees whose value systems were in alignment with the organization's value system.

Defined as "a visible, distinctive element of an organization's overall employee experience" (Erickson et al. 2007: 232), a signature experience creates value for the firm, and it also serves as a powerful and constant symbol of the organization's culture and values. The experience is created by a bundle of everyday routines, or signature processes which are tricky for competitors to imitate precisely because they have evolved in-house and reflect the company's heritage and the leadership team's ethos.

The Role of Signature Experience

Employees whose post-entry experiences align with their pre-entry expectations have been found to experience higher consonance between the person and organization's values (Rousseau 2005). Further, it has been found that those who have a positive perception of the PC in the pre-entry phase are more likely to continue to experience these fits after they enter the organization (Behery 2009). This post-entry fit, in turn, affects their subsequent work attitudes and behaviours. Therefore, it seems essential that the entry of a new employee into the organization as well as his experiences thereafter which shape his/her psychological contract, should be managed well (Rowley & Bensonm 2000).

Psychological contracts develop through an interactive process (Rousseau 1990). Early experiences with an employer from recruitment and induction to initial work on the job have powerful affects on the psychological contract. Individuals construe many recruitment-related activities, such as the way it advertises for job positions to the way it conducts its screening and interview process, as signals of unknown organizational characteristics (Collins & Stevens 2002, Turban & Cable 2003). After joining the organization, human resource practices, organizational processes such as induction, training, performance management system, etc., also play an important role in signalling to employees, organizational intentions (Aggarwal & Bhargava 2008).

Organizations can manage employees' 'pre-entry expectations' and 'post-entry experiences' by communicating their expectations to their prospective or hired employees of what makes their firm unique, over various stages of organizational membership. This can be done by providing employees with right signals about the organization's philosophy, its expectations as well as opportunities and inducements.

The relationship between person-organization fit, signature experience and psychological contract can be explained using the signalling theory perspective. Signalling theory (Rynes 1991, Spence 1973) explains the relationship between human resource practices and employee attitudes and behaviours. Signaling theory, is rooted in the economics research by Spence (1973, 1974) on job market signalling. "The idea behind the job market signaling model is that there are attributes of potential employees that the employer cannot observe and that affect the individual's subsequent productivity and, hence, value to the employer on the job" (Spence 2002:436). Spence (1973) argued that employers rely on educational credentials as signals of applicants' abilities from the employing organization's perspective. Rynes (1991) and Wanous (1992) extended the thinking on signalling to include the applicant's perspective. Job applicants use cues or signals from the organization to draw conclusions about an organization's intentions, actions, and characteristics because they do not have perfect information about the organization (Rynes 1991). These signals provide information about what life might be like in the organization (Breaugh 1992, Turban 2001, Turban & Greening 1997). In the following paragraphs, we examine examples of signature experiences which organizations provide to employees through their HR value chain from job interviews, through orientation, training and the appraisal process.

Recruitment

Since recruitment is the beginning of the employment relationship, it provides the first opportunity for an organization to transmit the terms and conditions of the employment relationship. It is also the first opportunity for the job applicant to get an understanding of organizational beliefs and values. Therefore the organization needs to be aware of the signals that they transmit through the recruitment processes. PSS medical, a leading medical company in Europe, provides a unique recruitment experience to its prospective employees. The hiring process takes six to eight weeks. One of the PSS's methods is not to call people back for interviews. After the first recruiting contract, candidates are given a phone number to call for a follow-up interview. If they do not initiate the contact, the process ends. Next, the applicant will go to the local branch for interviews. Even if this interaction is positive, people from PSS will not call back. Rather, at the end of the interview, the candidate is invited to contact the manager of another branch.

The experience of an interested candidate in PSS medical stands in contrast with unique recruitment experience which interested candidates undergo at Subex. Every candidate called into Subex house for a scheduled interview is given a welcome letter. He/she doesn't have to go through the rigmarole of entering his/her details in the security register, thus being forced to reveal his/her identity to the public which he/she might not want to do. This makes a very significant difference to the way the company is perceived. Also, at the end of the interview the candidate (whether recruited or not) is given a memento for the time he/she has taken for the interview.

These two examples bring out how two organizations that have different business philosophies, business models and people philosophies communicate to prospective employees what they value and what they look for. In this case, for instance, while PSS communicates that it is interested only in people who are interested enough, entrepreneurial enough and aggressive enough, Subex conveys strong positive feelings about a caring, warm, people-sensitive organizational culture.

Another company, in India, with which the second author was earlier employed, had a practice by which candidates who were not selected for employment at the end of the selection interview process, were met by the interview committee once again, and--in a caring manner--given feedback about how they had performed, why they had not been selected, and what they could do to improve their chances of being selected in case they had the opportunity to apply for a job in the company in future. Many such candidates used to be overwhelmed by the experience and went away with very positive impressions about the company, despite their disappointment of not having been selected. Thus, the company converted many (even rejected candidates) into its goodwill ambassadors!

In contrast, the HR Department of another company in the same field of business, had a habit of keeping candidates called for interviews, waiting for hours after the appointed time, often with no information about the revised time of the interview, or for that matter, any communication at all. There were cases when candidates had walked away in anger without waiting any longer for the interview. Even those that did get through the interviews and joined the company did so with negative feelings and apprehensions about how else they would be treated in future. Not surprisingly, in contrast to the first company which had a very low employee attrition rate, the latter company had one of the highest rates of employee attrition in the industry! Evidently, negative signature experiences can have as powerful an effect as positive signature experiences!

Orientation Process

One reason people change jobs is because they never feel welcome or part of the organization they join. A thoughtful new employee orientation program however can reduce turnover and save an organization thousands of dollars. A well-thought-out orientation process takes energy, time and commitment; however it usually pays off for the individual employee, the department, and the organization. Such a process can solidify the new employee's relationship with the organization, and fuel his/her enthusiasm. One such example is UPA, an international accounting and consulting giant, which has a unique orientation programme. Here is what one of its employees shared.

"The UPA new hire orientation program is one of the most innovative orientation experiences. My learning began before I walked through the door. The on-boarding at UPA started as a journey through their robust mentoring and skill-building exercises during their new hire orientation which was designed to set us up for success. The entire on-boarding process was very smoothly designed which helped me to make an immediate and smooth transition from my college life to the new corporate culture. When I accepted the offer to join UPA, I was given instant online access to an interactive, Pre-Hire Centre website that took the pain out of the administrative paperwork. I was assigned an on- boarding advisor who was a peer-level professional in the same service line. He was assigned to me as my 'buddy' in order to help me with my general queries--both in relation to the organization as well as the new city where I would be living in. He helped me in building new networks within the organization and navigating through my role and also offered me an outlet for practical advice and informal learning. The centre piece of my signature new-hire experience was our innovative Day 1 and Day 2 "Welcome to UPA (W2D)" orientation. All the leaders (The Managing Director, the Directors and the Vice Presidents for different service lines, the senior managers) were there to welcome us and were easily approachable. Networking with such powerful and impact leaders on Day 1 of my job was a unique organizational practice that I still cherish. We also had lunch with the leaders of the organization. It was an overwhelming feeling to sit besides the corporate giants and have lunch with them on the first day of my job."

"One of the most unique and powerful policies in UPA is that any employee can approach any other employee (regardless of his designation) for any sort of help no matter how trivial it is. This practice helped build extremely cohesive teams in which more importance is given to team excellence than to individual acts of excellence. It is for this reason that UPA rewards team achievement more than individual achievements. We were introduced to this framework through participation in team games during our orientation. It also helped in knowing a lot of our colleagues early on and framing positive relationships with them. The highlighting part of the orientation was that it was done without a single PowerPoint slide! All our learning on the first 2 days occurred through gaming, videos and case studies in a social-learning environment that simulated on-the-job challenges and included personalized coaching from client service and talent leaders. I learnt a lot about UPA, not through a lecture, but by participating in an interactive board game--a 'discovery map'--where we explored UPA with supporting videos starring real UPA professionals throughout the game. They personalized their online profile on the internal talent networking site during orientation so that we could begin building our network. We experienced what it's like to work at UPA on Day 1 through the use of real client examples. I was greatly motivated with such a warm welcome at my first stint of a job."

Training

Training is intended to help employees understand their roles and develop skills and abilities (Goldstein 1993). Employee development is a common buzzword across the industry. But in the context of organizational structure and HR policies, this developmental practice has varying implications and elicits varying responses from employees. For in stance, MNC, a leading automobile company, has training as one of its unique characteristics. Here is what one of its employees shared about its signature training process at MNC: "MNC has a basic policy of 'recruit for correct attitude, and train'. Employees are encouraged to invest in their own professional development by developing individual development plans, or IDPs, to help to meet current and future goals while maximizing performance and growth. MNC Design Institute courses on core technical competency, leadership courses aligned with Harvard Business School were online, and upon successful completion, digital certifications were available. MNC incurred the online course expense for all the employees. A training plan was drawn-up and circulated on a monthly basis. Employees proposed the training requirements through and online process, and the supervisor would fill out an on-line document to approve or disapprove the requirement. Supervisors could propose an employee's name for any training in house or any where across the globe, subject to a certain number of hours per business cycle".

"In 2009, the company wanted me to shift permanently to MNC of South America, reporting to MNC of Brazil, in Rio de. I was not quite ready to shift to SA and also, was not quite happy about my value proposition in India. I had an offer from the largest Automobile OEM in India for their R &D Centre, and resigned from my post. After a series of discussions with my matrix reporting bosses across the globe, HR gave me my proposed release date. Although the notice period is considered to be a period of mental trauma for an employee, to my surprise I was nominated for a series of training programmes in the two months' notice period time! I approached my boss and requested him not to send me for any more training as it was embarrassing that I could attend training here to implement the same in some competitor company! 'So what?' was his reply, 'We are not paying extra for extra seats in an in house training. It's about value addition for employees, and you are still one!' I came back to my seat silently, remembered that the company had a 3% attrition rate, and lamented why I was leaving this company!"

Performance Appraisal

Among various HR practices, performance management processes, in particular has been identified as playing a key role in determining employee-employer expectations (Lester & Kickul 2001). ABS is a leading FMCG organization in India which believes in a long-term employment relationship with its employees. People join ABS to leave only after they retire. The company believes in fostering only relational, long-term psychological contracts with its employees. The following narrative, describes employees' signature experiences of their appraisal process at ABS: Annirman, senior manager sales, who had recently joined ABS, gave a bad appraisal to one of his subordinates during the annual appraisal cycle. A few days later Annirman was summoned by the Chief People Officer and was asked to explain the reason for rating his subordinate low. Annirman was surprised at the Chief Peoples Officer (CPO) involvement in the case of a sales officer's appraisal, and responded saying that although he had tried his best for long time, the subordinate showed no signs of change or willingness to improve his performance. Annirman added that the subordinate was not good at his job and that the employee was not even worthy of continuing to work at ABS, since he had been getting a low feedback consistently for the previous 3 years. Expressing some discomfort at Annirman's statements, the CPO responded that since the organization was very stringent about its selection process and recruited only from the best of the best institutes, the subordinate was probably facing some other problems which might be having an impact on his job performance. The CPO further added that being his supervisor, it was Annirman's duty to see that the person was back on track. Annirman was also advised not to give a low grading to the subordinates, as it was not the done thing at ABS!

Rewards & Recognition

Recognition is an integral component of the need for esteem. Employee recognition is a communication tool that reinforces and rewards what organizations consider as the most important outcomes people create for the business. UBA has a unique program which aims to recognize those employees who at some point of time had lent a helping hand or demonstrated care for a fellow employee. By doing so, this programme has been successful in establishing bonds that are created out of compassion and zeal to help the co-worker.

The buddy program starts with employees going beyond the call of the duty to give another co-worker a helping hand. The co-worker, who is the recipient of this benefit, submits a buddy 'thank you card' in HR's 'Buddy Box'. At the end of the month, a buddy facilitation ceremony is organized and the recognized buddies are facilitated with a goody bag. The thank you cards are displayed on the office soft boards; people also have a good time reading the experiences of employees with their buddies. This also communicates that organization values employees who believe in synergy rather than individual effort.

Employee Communication

Communication is a vital management process in any organization. Below is a narrative of how, BBF, a leading automobile company, signals its philosophy through its communication strategy. BBF India has a unique way of starting the day with a two-minute warm-up exercise followed by 10-15 minute Morning Meeting. This meeting is different from the typical meetings in that it has no agenda and no deliverables. This meeting allows the employee to settle down and relax before starting his work. The purpose of this meeting is to share broad activities planned for the day in the department. Typically the meeting is conducted by the department head who starts by sharing his schedule for the day and some important communication on behalf of the top management. Members of the department also share their learning's and experiences from previous day's activities at the work place. This includes a wide range of activities like technical problem solving, administrative learning at the work place, insights on new technologies, current happenings in the world, etc. Different sub groups in the department also get updated with the activities of other groups and also incorporate the best practices of other groups in their working. The scope of the meeting extends much beyond the discussion related to the work and encompasses other aspects like work-life balance, managing self, birthday celebration, sharing of informative articles and news paper clippings, etc. Accomplishments and achievement of the employees are recognized and rewarded in this forum which motivates them and fosters a healthy environment for growth. The meeting is usually informal; sometimes seniors crack jokes based on their daily experiences. This not only emotionally gears the employees up for the whole day but also makes the work environment lively and energetic. For young members, this meeting serves as a platform to share and communicate their ideas in front of the department, helping them build confidence for public speaking and effective communication in the presence of seniors. Young members also get to appreciate the big picture underlying their job roles, and obtain a holistic view of the overall functioning of the company. In some way it gives them a sense of pride and stronger attachment to their job roles.

Conclusion

The absence of clear expectations or unmet expectations between the employee and the organization has been recognized as one of the potential causes of high attrition and low levels of work engagement among employees. This paper provides anecdotal evidences suggesting how some organizations successfully create and communicate signature experiences to their employees through the HR value chain. A well-defined, well-communicated signature experience that conveys to potential hires the attributes and values of the organization, helps the organization attract and retain the right people.

Before or at the moment of entry into an organization, positive signature experiences tend to have a determining impact on employees' assimilation into the organization and a long-term effect on their engagement with the organization. Conversely, negative signature experiences would deter potential employees from joining or would ensure that those who do join the organization for other compelling reasons, remain psychologically disengaged and stay with the organization only as long as they are unable to find any suitable or convenient alternative. Empirical research also suggests that people will become long-term, deeply engaged employees of a company if their work experience is what they expect it to be, and if the firm's values and attributes match theirs. Right people are intrigued and excited by the work environment which a firm can realistically offer and reward employees with their loyalty.

Organizational agents (e.g. human resource staff, supervisors, and managers) responsible in the recruitment process need to be cautious about the messages which they consciously or unconsciously convey, which serve to establish the parameters and conditions of employment during recruitment. Thereafter the organization should reiterate its philosophy and culture throughout the employee's tenure, by providing signature experiences.

In terms of its managerial implications, the paper suggests that organizations can make realistic job previews (RJP) an important part of their recruitment strategy. RJP accurately depicts the behaviours expected within the specific position on entry into the organization and lowers grandiose expectations, thereby improving the fit between individual's expectations and organizational ability (Ilgen & Seely 1974). By doing so, they enable applicants make a more informed choice about whether or not to accept an offer of employment, thus resulting in a lower probability of breach. For instance, an organization can present a detailed job description that defines roles and responsibilities involved in the job. Organizations can also assign the prospective employee a 'buddy' from the team with whom he/she would work to learn about the aspects of the job and can get to know more about the team. After recruitment also, organizations should be cautious of the signals that it sends to its employees through its human resource processes and policies by giving employees signature experience.

There is an important caveat, though: while positive signature experiences have a long-term positive impact on employee engagement, they could later result in disillusionment, bitterness and anger if they are followed by severe contrary experiences at a later stage in the employee's relationship with the organization. While the halo effect of an earlier positive signature experience may help an employee cope with some amount of subsequent negative experiences, the severity of a subsequent negative experience, or a prolonged series of them, can convert a positively inclined employee to a negatively inclined one, with an attitude similar to that of the fanatic new convert. The crucial implication of this is that signature experiences may work in the long-run, only if they are congruent with other organizational variables, most importantly, management style, organizational culture, structure and processes, particularly HR policy and practices. Meaningful, positive signature experiences, therefore, need to be crafted with the support of top management and the involvement of all relevant decision-makers who influence organizational design.

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Upasasa Aggarwal (E-mail:drupasana.aggarwal @gmail.com) is Assistant Professor and Keith C D'Souza is Professor at S.P. Jain Institute of Management & Research, Mumbai
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