The Psychological Contract: Violations and Modifications

1. The Psychological Contract: Violations and Modifications Article written by: Denise M. Rousseau Presented by: Katrina Keller

2. Denise M. Rousseau • Professor: • Organizational Behavior and Public Policy – Heinz School of Public Policy and Management • Tepper School of Business, Carnegie Mellon University • Degrees earned from the University of California at Berkeley • A.B. in Psychology and Anthropology (1973) • M.A. in Psychology (1975) • Ph.D. in Psychology (1977)

3. Denise M. Rousseau • Subjects of study: • Psychological contracts between employees and employers • Human Resource Management • Organizational culture, behavior, and theory • Books: • Psychological Contracts in Employment: Cross-national Perspectives (2000 with Rene Schalk) • Psychological Contracts in Organizations: Understanding Written and Unwritten Agreements (1995) • Author or co-author of more than 10 books and 100 articles • Editor-in-Chief: • Journal of Organizational Behavior from 1998-2007

4. What is a “psychological contract?” • Exchange agreement between employees and organization • Promises • Perceptions • Mutual expectations • Employee performance • Employee treatment

5. Violations to the psychological contract • Definition – Failure to comply with contract terms • Variable nature of psychological contract and violations • Employee interpretations • Employer interpretations • Basic facts of contract violation • Commonplace • Adverse reactions by the injured party • Does not have to lead to break in relationship

6. Forms of contract violation • Inadvertent violation • Able and willing • Disruption • Willing but unable • Breach of contract • Able but unwilling

7. Increased risk of violation • Low trust and history of conflict • Different lenses • External pattern of violations • High incentives to breach and lack of alternatives • Different value placed on the relationship

8. Responses to contract violation • Exit • Resignation • Termination • Remain • Voice/Complaint • Loyalty/ Silence • Destruction/Neglect

9. Responses continued… • Low value on the relationship by the victim • Exit • Destruction • High value on the relationship by the victim • Voice/Complaints • Loyalty/Silence • Shaped by organizational culture • Complaint vs. constructive criticism • Supervisor/Manager relationships

10. Exit Response • Active response • Break in the relationship • Termination • Resignation • Most likely • Transactional contract • Other potential jobs or potential employees available • Brief relationship • Other employees exiting • Previous violations go unresolved or failed solutions

11. Voice Response • Active response • Attempts to remedy the violation • Focus • Restore trust • Minimize losses • Most likely • Positive relationship and existence of trust • Voice channels exist • Other employees using “voice” response • Employees belief they can influence compliance • What happens to unresolved voice?

12. Loyalty Response • Passive response or no response • Avoidance • Loyalty • Willingness to endure or accept circumstances • Pessimistic vs. Optimistic loyalty response • Most likely • Ineffective voice channels • No voice channels or established ways to communicate • Lack of alternative opportunities

13. Destruction/Neglect Response • Active response • Destruction • Passive response • Neglect • Erosion of the relationship

14. Violations = End of contract? • Pattern vs. Isolated event • Violator’s motives • Violator behavior • Losses incurred • Treatment following violation

15. Reference 1 • Suazo, M. M., Turnley, W. H., Mai-Dalton, R. R. (2005). The Role of Perceived Violation in Determining Employees’ Reactions to Pyschological Contact Breach. Journal of Leadership and Organizational Studies, 12 (1), 24-36. • Referencing: • Morrison, E. W., Robinson, S. L. (1997). When employees feel betrayed: A model of how psychological contract violation develops. Academy of Management Review, 22, 226-256.

16. Psychological ContractBreach vs. Violation • Breach • Employee’s cognition that he/she has received less than promised (Morrison & Robinson, 1997) • Violation • Emotional state that may (but not always) result from the perception of the psychological contract breach (Morrison & Robinson, 1997)

17. Survey • 234 full-time employees • 108 employees of a New Mexico County Government • 126 professional participants of a PhD Project Conference (not PhD students) • 41% Male, 59% Female • 46% Hispanic-American, 40% African-American, 14% White-American • Mean age = 37 • Average organization tenure = 4.5 years • Average job tenure = 2 years • Seven point scale with 1 = Strongly Disagree and 7 = Strongly Agree

18. Survey Hypotheses - Breach • Positively related to intent to quit • Negatively related to professional commitment • Negatively related to in-role job performance • Negatively related to the performance of helping behavior • Positively related to psychological contract violation

19. Survey Hypotheses - Violation • Mediate the relationship between psychological contract breach and intent to quit • Mediate the relationship between psychological contract breach and professional commitment • Mediate the relationship between psychological contract breach and in-role job performance • Mediate the relationship between psychological contract breach and helping behavior

20. Survey Results • All hypotheses supported except: • Mediate the relationship between psychological contract breach and in-role job performance • Mediate the relationship between psychological contract breach and helping behavior • Breach drives the in-role job performance and helping behavior • Feelings/violation less important • Perception of breach itself more important for behavioral responses

21. Note • Suazo, Turnley, and Mai-Dalton researched: • Exit response • Destruction/Neglect response

22. Reference 2 • Turnley, W.H., Feldman, D. C. (1999). The Impact of Psychological Contract Violations on Exit, Voice, Loyalty, and Neglect. Human Relations, 52 (7), 895-922. • Referencing • Morrison, E. W., Robinson, S. L. (1997). When employees feel betrayed: A model of how psychological contract violation develops. Academy of Management Review, 22, 226-256. • Rousseau, D. M. (1995). Psychological contracts in organizations: Understanding written and unwritten ten agreements. Thousand Oaks, CA: Sage Publications.

23. Psychological Contract Violation Responses • Exit • Voice • Neglect • Loyalty • Do violations increase or decrease each behavior? • Do situational factors moderate employee responses?

24. Situational Factors Studied • Availability of attractive employment alternatives • Job market • Other options • Justification sufficiency of the violation • Voluntary violation • Involuntary violation • Degree of procedural justice in the organization’s decision-making process • Is the organization fair to all employees?

25. Causes of Contract Violations • Reneging • Incongruence

26. Survey • 804 managerial-level personnel • 55% Male, 45% Female • Mean age = 35 • Average organization tenure = 7 years • Average job tenure = 3 years • Average salary = $49,000 • All were U.S. citizens • Response rate = 33%

27. Survey Continued • 4 samples: • 213 recent MBA graduates • 263 international business managers and graduates of international business programs • 223 managers and executives from a Fortune 500 bank • Recently undergone mergers and acquisition • Widespread layoffs • 105 employees from a state agency • Restructured and reorganized in previous 2 years • 16 specific elements of the psychological contract • Personal ranking - Scale ranging from 1 (Not Important) to 10 (Extremely Important) • Organizational compliance – Scale ranging from -2 (Received much less than promised) to +2 (Received much more than promised)

28. Survey Hypotheses - Violations • Exit • Positively related to job search behaviors • Voice • Positively related to the amount of employee voice behaviors • Loyalty • Negatively related to an employee’s willingness to defend the organization to outsiders • Neglect • Positively related to neglect behaviors

29. Survey Hypotheses – Situational Moderators • Availability of Attractive Employment Alternatives • Will moderate the relationships between violations and employee responses • Exit, Voice, Neglect will be more likely • Loyalty will be less likely • Justification for Violation • Will moderate the relationships between violations and employee responses • Exit, Voice, Neglect will be more likely • Loyalty will be less likely

30. Survey Hypotheses- Situational Moderators *Cont. • Procedural Justice • Will moderate the relationships between violations and employee responses • Exit, Voice, Neglect will be more likely • Loyalty will be less likely

31. Survey Results • All violation hypotheses supported • All situational moderators hypotheses partially supported • Exit & Loyalty supported • Voice & Neglect – Not fully supported

32. Survey Results Continued • Sample differences • Bank managers • Lack of job security • Compensation • Experienced greatest levels of violations (with State agency employees) • State agency employees • Compensation • Experienced greatest levels of violations (with Bank managers)

33. Survey Results Continued • Sample differences • Recent MBA graduates • Lack of job challenge (misrepresented amount of responsibility, authority, or major tasks of job) • Experienced lower levels of violations • International business managers • Delays in obtaining promised overseas assignments • Employers failed to keep committed level of support they would receive when out of their home country • Most significant violations where restructuring and mergers had taken place

34. Survey Results Continued • Violations were strongly related to: • Exit • Loyalty • Less likely to experience negative consequences • Typically occur outside of employment organization

35. Survey Results Continued • Violations were less strongly related to: • Voice • Neglect • Why? • Increased likelihood of negative consequences • Occur at work • Exit is most consistently predicted response

36. Notes • Refercence 2 used psychological contract violation for all definitions. • No distinction made between breach versus violation.

37. Reference 3 • Pate, J., Martin, G., McGoldrick, J. (2003). The impact of psychological contract violation on employee attitudes and behaviour. Employee Relations, 25 (6), 557-573.

38. Research Items • “To what extent does psychological contract violation impact both attitude and behavior?” • Psychological breach vs. psychological violation • Psychological violation responses • Disappointment • Frustration • Anger

39. Organizational Justice • “Fairness” • Types of violations • Distributive violation • Perceptions of unfair outcomes • Procedural violation • Perception of unfair procedure application • Interactional violation • Perception of trust towards managers and organization

40. Attitudinal Responses • Reduced organizational commitment • Reduced job satisfaction • Increased cynicism • Break down in relationships

41. Behavioral Responses • Absenteesism • Reduced organizational citizenship • Reduced effort

42. Company information • Collected over 3 years • Mid-sized textile company in Britain • Company over 200 years old • Significant company changes from 1996-2000 • Reduced workforce from 660 to 600 and looking to further reduce to 500 over 2 year period • New culture based on customer service • Increased focus on specialized training • Plans to relocate 2 of the 4 facilities • Sale of 80% of company shares to Greek family-owned company

43. Survey Hypotheses • Triggers of psychological contract violation will result in a change in employee attitude • Lower job satisfaction • Lower organizational commitment • Triggers of psychological contract violation will result in a change in employee behavior • Reduced effort • Withdrawal of citizenship • Psychological contract violation will result in increased absenteeism

44. Research Method • Three areas • Quantitative attitude survey • Mailed to each employee at home address • Response rate = 52% • Analysis of absentee information • Qualitative interviews • Random sample • 50 employees • 45 minutes – 90 minutes in duration

45. Research Results - Attitudes • Job satisfaction linked to • Distributive justice • Procedural justice • Overall enjoyment related to fair outcomes and procedures • Employee commitment linked to • Distributive justice • Employee/Management relationship • Loyalty linked to • Procedural justice

46. Research Results - Behaviors • Effort was not affected by any of the 3 defined triggers • No direct relationship between absenteeism and violations • Exception in November 1998 – Psychological contract breach occurred with sale of the organization • Only behavior linked was organizational citizenship (reduced initiative by employees to work “beyond the written contract”)

47. Overall Analysis • Attitudes were effected by violations • Attitudes do not necessarily equate to behavior changes especially when • High job insecurity • Strong relationships between coworkers • Strong sense of pride of work • Employees see the organization and job as separate