INFOGRAPHIC: The 3 Employee Experience Contracts

Handshaking partners

INFOGRAPHIC: The 3 Employee Experience Contracts

(As conveyed in the book, The Employee Experience: How to Attract Talent, Retain Top Performers, and Drive Results)
The Contract is a concept, a mental construct that we use to understand and tweak the expectations at stake in any relationship, whether it’s business or personal. Every relationship has a Contract. The Contract is the totality of explicit and implicit expectations that define the operating rules of the relationship, whether we are aware of them or not––every relationship comes with a Contract. The Employee Experience Book Cover

The Contract is the totality of explicit and implicit expectations that define the operating rules of the relationship. Every relationship has a Contract.

Some Contracts are explicit, visible, and understood by all parties in a relationship, such as a written statement of work from a vendor or the offer letter to a new employee spelling out the job description, benefits, bonus structure, and the you-do-this-I-give-you-that details. Like the tip of an iceberg, these Contracts are seen by all parties and well-understood. The expectations are out in the open and clearly defined. We call these the Brand Contract and Transactional Contract, but what’s underneath the water. We all know the iceberg has a larger mass that dives deep into the water yet remains unseen. We call this the Psychological Contract. These are the implicit expectations that aren’t openly or clearly defined yet exist within every organization and relationship.

The Three Contracts

Every contract is made up of three sub-contracts, as mentioned earlier:

  1. Brand Contract

    The Brand Contract is how we are viewed publicly or are seen by others. It consists of the promises that our brand identity––what we profess to be and what we stand for as an organization or team––makes to the people who are exposed to it.

  2. Transactional Contract

    The Transactional Contract is the mutually accepted, reciprocal, and explicit agreement between two or more entities that defines the basic operating terms of the relationship.

  3. Psychological Contract

    The Psychological Contract is the unwritten, implicit set of expectations and obligations that define the terms of exchange in a relationship.

Why is The Contract between employee and employer like an iceberg?

Like an iceberg, only part of the Contract is openly visible to all parties involved. Not every expectation makes its way into the written Contract. The implied part of any Contract is what carries the weight of the subconscious, unspoken expectations that each party brings to the relationship. These implied Contracts are the type your grandfather meant when he talked about doing business based on a handshake back in the day––nothing formal, other than the mutual belief that each party would act with the best interest of both sides at heart. With this Psychological, or implicit, Contract, trust is everything. Without it, there’s no deal.

Read the Book: The Employee Experience

So a Contract is really like an iceberg: You might see the written, express part bobbing above the water, but the larger part––the implied part––is submerged. The implied component is the most important section of any Contract, and that’s where things can go sideways. This is where Expectation Alignment Dysfunction runs rampant.
Infographic: Employee Experience Contracts

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Podcast: Understanding The 3 Employee/Employer Contracts

Employee Experience Triangle Model

DecisionWise CEO and author, Tracy Maylett discusses his upcoming book. He also talks about the three types of contracts employees experience when working for an organization including answers to the following:

1. What are the three types of contracts?
2. What are transactional components of The Contract and how do they work?
3. What are brand components of The Contract and how do they work?
4. What are psychological components of The Contract and how do they work?
5. How does a business leader manage these components to create a better work environment?

See how these contracts form your Employee Value Proposition (EVP). Download a sample survey and report.

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How Steve Jobs Changed the Employee Contract at Apple

Young Steve Jobs

There is a scene in the 2008 animated movie, Kung Fu Panda, which makes me think of Steve Jobs. Most pundits compare him to geniuses or narcissists. Not me. I am going to compare him to a fat panda named Po. In this film, a Kung Fu master nKung Fu Panda Poamed Tigress explains to the jocular Po the nature of a messianic character that will save the people – the “Dragon Warrior.” Po had been selected by a wise turtle to become the Dragon Warrior. Tigress’s exchange with Po goes something like this:

Tigress: “It is said that the Dragon Warrior can survive for months at a time on nothing but the dew of a single gingko leaf and the energy of the universe.”

Po: “I guess my body doesn’t know I’m the Dragon Warrior yet. Gonna take a lot more than dew, and universe… juice.”

So, how is Steve Jobs related to this scene? Well, with Steve’s passing it’s as if Steve has become the Dragon Warrior of business – able to drive billions in revenue with nothing more than his yogi mind and the energy of a glowing apple encased in aluminum.

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There are a lot of explanations for Steve’s success. Many of them have merit and should be studied. I would like to add another reason to the growing list. My proposition is that Steve’s success was not mystical; it was simple and practical. When he came back for his second tenure at Apple, he changed Apple’s contract. Which contract? Apple has signed thousands of contracts during its lifecycle, and if you consider each consumer sale a contract, then billions. Those are not the contracts I am talking about. I am talking about “the” contract; the one that is written with a capital “C”. I am referring to the tacit three-party Contract between Apple, its employees, and its customers. Some might call it Apple’s psychological contract. Every organization has a Contract, and the parties are usually the same. They consist of the organization, its workforce, and those that buy the organization’s products or services.

Our research suggests that a key driver in an organization’s success is whether the organization’s leaders take the time to build and nurture this ever-important Contract.  Sometimes leaders aren’t even aware they have a Contract, let alone understand what it means. Good leaders, however, take the time to understand, build, and carefully define their Contract. They focus not just on slogans and catch-phrases, but also on culture, value propositions, and whether the terms and exchanges contained in the Contract are fair to all three parties. They grasp the concept that their Contract is like an iceberg. Some of the Contract is explicit (i.e. above the water), like the exchange of compensation for an employee’s time and effort at work. But, the vast majority of the Contract’s terms are implicit – or as is the case with an iceberg – below the water. Successful leaders take the time to make sure the implicit terms (the psychological contract) are aligned with where they want to take the organization.

When Steve took over for the second time, nothing much changed, and yet everything changed too. The employees were the same, the inventory was the same, the sales channels were the same, and the pipeline of future products was set. Nonetheless, the moment Steve’s indomitable personality walked through the door everything was transformed. That’s because Apple’s Steve JobsContract was turned on its head. Steve’s iconoclastic presence made everyone know that the ground-rules for what it means to be an Apple employee were now different. The new requirements were: precision, commitment, love of design and aesthetics, thinking differently, exactness, and a passion for really great products, among other things.

Returning to Kung Fu Panda and the story of Po. Po is able to save the village from the ravages of psychopathic leopard. Not because he became an amazing Kung Fu artist; rather, it was because the people “believed” that, as the Dragon Warrior, Po had the power to save them.  For those that know the movie, that was the “secret ingredient” – the belief that Po was the Dragon warrior. I suppose when you look at it this way, Steve Jobs really is the Dragon Warrior of business. Steve made the most of his second chance at Apple by redefining Apple’s Contract. He made his employees believe they were going to build the very best products and that Apple really would become what is now the world’s most valuable company.
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