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When The “Loyalty Contract” Gives Way to the “Development Contract”

by Duncan Ferguson on

When I entered the workforce (more than a few years ago, I hesitate to admit), there were different rules governing how we managed our careers than there are today. Employees were expected to be loyal, and this expectation came not only from your employer, but from the marketplace as well. In exchange for your loyalty, the employer provided security, benefits and in most cases, a job for your working life.  Then, after about forty years, you would retire with a pension, gold watch, and lots of leisure time.

Based on this ‘loyalty contract’, an indelible, long-term relationship existed between the individual and the organization. It was not perfect, but it was how the world worked, and it provided some sense of balance and security.

But the business world has changed dramatically since those ‘good old days’ and we have all felt the fallout to some degree. Demands on everyone are relentless. Resources are diminished, performance expectations heightened. Technology has made life 24/7 and work-life balance is a daily challenge. Change is not something to be managed, it just is.  New words such as downsizing, rightsizing, restructuring, outsourcing and redundancy have become so commonplace in our work vocabulary it’s hard to remember a time before them.

These dynamics have transitioned all of us, from Baby Boomers to Millennials, to think differently about our relationship with employers. Long-term loyalty has been replaced by a short-term, free agent mentality.

The net result of this workplace churn is the replacement of the traditional ‘loyalty contract’ with a something we’ll call the ‘development contract’. This quote from Nick, a 28-year-old high potential employee at a global corporation, describes the essence of this new development contract:

 I don’t expect to (or even want to) stay with the same company for my entire career so I need to build my portfolio of skills to make me marketable for my next job and company. I want my company to invest in my learning and growth as a professional. And, in return, I will work as hard as I can.

Nick is telling us that he still wants a relationship with his employer, but one that will be perhaps shorter than the organization hopes. Nick wants this relationship to value equally development and performance. Finally, he wants to build a portfolio of skills that will keep him competitive not only within his organization but in the marketplace.

So what can an organization do to meet the needs of Nick and others who are managing their careers with a development contract focus?

  • Culturally, organizations must adopt employee development as a key corporate value, and then integrate development into every aspect of their people processes.
  • Fully commit to the development and growth of its employees by adapting talent management processes, such as talent reviews, succession planning and high potential identification / development.
  • Revise performance management processes by placing a much stronger emphasis on employee development versus performance evaluation.
  • All leaders, especially immediate supervisors, should excel at coaching and mentoring (which, as we’ve talked about before, is a skill Best Bosses exhibit, and the organizational benefits of a Best Boss are many).

None of these actions will guarantee that employees like Nick will stay with his company for a long tenure. However, it is a good bet that he will stay longer than he would if his company ignored the new work and career rules that have taken root in the marketplace. That seems to be a bet worth making.

  • Does your organization espouse employee development as one of its corporate values?
  • How has your organization adapted its talent management processes to meet the needs of the emerging ‘development’ contract?
  • To what degree does your organization expect its leaders to be strong coaches and mentors?
  • How are organizational leaders held accountable for employee development?

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