The Changing Employment Contract

Sun on Horizon“May you live in interesting times” goes the Chinese blessing/curse. We certainly do live in those times and there are few things more impactful and more interesting than the changing nature of the employment contract between employees and their employers. That contract has been evolving for decades – moving from a paternalistic, stable labor system to a dynamic, entrepreneurial employment network.

In the past, an employee was able to join an organization, safe in the company’s promise that they would be employed as long as they came to work and did what they were told. That model has changed over time to become a new system where contracts between employees and employers are more dynamic, more temporal, and more transparent. The changes can best be defined across four dimensions: Tenure, Loyalty, Trust, and Most Effective Player Profile. The following chart outlines the major differences between the traditional employment contract and the emerging model:





Long and Stable

Shorter and Flexible


Bilateral and Inert

Multi-Faceted, Dynamic, and Intense


Given readily in a paternalistic relationship

Earned over time and through actions

Most Effective Player

“Company Man”

“Entrepreneurial Spirit”

 The changes in these dimensions outline the significant shifts in the employment contract that we all face in the coming years.

Tenure. The age of lifetime employment is over. The last glowing embers were crushed out by the latest economic downturn. No longer can companies offer the promise of lifetime employment; nor can employees expect their careers to be made up of one year of experience repeated multiple times. New tenures are much shorter and much more flexible. Employment lasts as long as the employee and company are exchanging and creating real value from the relationship. When the value ends, so does the engagement.

HandshakeLoyalty. In the past, loyalty was entwined with tenure. Companies promised a job, employees traded their freedom for security, and that created a definition of loyalty based on this long-term, stable trade. Loyalty was an assumed part of the employee-company transaction and took on the inert form you would expect as the result of an unchanging relationship. The new loyalty behaves independently of any job tenure. It usually is connected to a person, a project, or a cause. It changes over time, and burns much more intensely than a loyalty based on a contract. This loyalty unleashes a higher level of energy and commitment, but requires much more care and attention.

Trust BuildingTrust. An unchanging part of this changing dynamic is that a solid layer of trust underlies the strongest relationships and helps the best organizations operate quickly and effectively. In a paternalistic system, trust can be given much more readily because of realtionships’ stability (created by longer tenures), and clear rules for behavior and response. Today, dynamic conditions make trust an earned quality, based on expectations and actions over time. We learn whom to trust under what conditions, and others learn when and where they can trust us.

Gray FlannelMost Effective Player. The man in the gray flannel suit was the icon of the perfect employee in the 1960s. He was an integral and interchangeable part of the company: One of the gears in a large machine. His role was defined and he was expected to play the role according to the script. Today, the emerging profile of the most effective player is much more entrepreneurial than her predecessor. Customers demand more than ever before and expect organizations to react quickly and effectively. Employees today are much more likely to be players in an improvisational theater. Themes and directions are set; but specific paths are not clearly defined and they change frequently. The most effective players deal quickly and flexibly with change and ambiguity; making the mesh between company and market tight, flexible, and effective.

The new employment contract offers more opportunity than ever before. The balance of power between employers and individual employees has never been more even. Technology makes possibilities transparent, allowing employees the opportunity to move from opportunity to opportunity and companies to communicate clearly, quickly, and effectively. The relationships built on this new transparency and authenticity are more honest, balanced, and satisfying.


2 Responses to “The Changing Employment Contract”

  1. 1 markaleo
    December 29, 2009 at 9:36 pm

    The generals don’t win the wars. The sargents and corporals do. The coaches don’t win the games. The players do. Most managers in companies pay lip service to this concept, but few implement the concept into their compmay. The employee contract hasn’t evolved naturally. It was affected by outside forces. The financial sector has been loosening credit all through the 90’s which has turned companys into cash registers to be raided for as much money that can be taken from it instead of gardens to be grown and nurtured. There’s plenty of blame to go around for this. Everyone wants their stocks to go up as fast and as much as it can. However, ALL bubbles burst. The bigger the bubble, the bigger the burst. Everyone has been chasing bubbles instead of avoiding them. What’s called “Entrepreneurial Spirit”, is more like a gambling addiction. The entreprenure takes a good idea,risks his own money, and succeeds or fails by his/her own merits. What’s been going on in many businesses is taking over companies,risk other people’s money, organise the company for short term profits instead of long term growth then cashing out if they succeed or parachute out if they don’t. This has caused a boom and bust atmosphere rather than a natural ebb and flow. So most employees see this and have very little trust or loyalty to their companies

  2. December 29, 2009 at 11:19 pm


    I certainly share your frustrations — especially as I was one of the people trying to make things happen the right way. While these guys were raiding the piggy bank, many of us were fighting the good fight on the front lines.

    That being said, the core changes in the relationship are more the result of permanent changes in the economic structure and our interconnectedness as a world economy. No longer is my market price as a worker set purely in the US. Now workers in emerging economies can provide many of the same skills and services as white-collar workers in developed countries.

    Add to that the inability of any company to be able to provide its workers long-term security. Only one firm remains from the original DJIA — GE! Even size and longevity can no longer save a company.

    The new economy is forcing all of us to come to grips with our true talents and genuine value. It’s a time of extreme change and extreme opportunity. We all must be ready to change and grow and make our own place.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

Enter your email address to subscribe to "Change for the Better!" and receive notifications of new posts by email.

Join 11 other followers

October 2009
« Sep   Nov »

%d bloggers like this: