Psychological contract

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What is a psychological contract?

For your initial response you must fully define and explain the concept AND cite from ONLY the textbook and the article section that is contained in and under articles and examples on home page and post by

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WEEK ONE Psychological ContractEnabled:Statistics Tracking Just read the section of the article below for more on the psychological contract Beginning of article In light of trends toward globalization, restructuring, and downsizing, psychological contracts are playing an increasingly important role in contemporary employment rel

Statistics Tracking

Just read the section of the article below for more on the psychological contract

Beginning of article

In light of trends toward globalization, restructuring, and downsizing, psychological contracts are playing an increasingly important role in contemporary employment relationships. Organizations, under pressure to make rapid and constant changes, have had to alter employment relationships and the psychological contracts that underlie them. Psychological contracts refer to employees’ perceptions of what they owe to their employers and what their employers owe to them. In this climate of change, the traditional contract of long-term job security in return for hard work and loyalty may no longer be valid (Sims, 1994), and employees and employers alike are now reconsidering their mutual obligations. More importantly, these changes have increased the likelihood of psychological contract breach. Organizations must now repeatedly manage, renegotiate, and alter the terms of the employment agreement continually to fit changing circumstances (Tichy, 1983; Altman and Post, 1996) and thus may be less willing or less able to fulfill all of their promises. In addition, constant contract change means increased opportunities for employees and employers to misunderstand the agreement and to perceive a contract breach even when an actual breach did not occur. It should not be surprising, therefore, that the majority of employees currently believe their employer has breached some aspect of their employment agreement (Robinson and Rousseau, 1994).

Given the apparent prevalence of perceived contract breach, it is imperative that we develop a solid understanding of this phenomenon. Unfortunately, empirical study of psychological contract breach remains in its infancy. Prior research has thus far demonstrated that psychological contract breach and violation is relatively common (Robinson and Rousseau, 1994) and that it is associated with various negative outcomes such as a decrease in perceived obligations to one’s employer, lowered citizenship behavior, and reduced commitment and satisfaction (Robinson, Kraatz, and Rousseau, 1994; Robinson and Rousseau, 1994; Robinson and Morrison, 1995). A fundamental and important unanswered question is what role trust plays in the experience and effects of psychological contract breach. Rare is the theoretical paper on psychological contracts that does not mention the word trust or note its central role in psychological contracts (e.g., Rousseau, 1989; Rousseau and McLean Parks, 1994; Morrison and Robinson, 1997). Despite the repeated mention of trust in the psychological contract literature, however, there has been virtually no theoretical explication or empirical examination of trust in relation to the experience of psychological contract breach. This lapse of systematic attention to the function of trust is found not only in the study of psychological contracts but in organizational science in general (Mayer, Davis, and Schoorman, 1995). As Gambetta (1988: unnumbered foreward) suggested, “scholars tend to mention (trust) in passing, to allude to it as a fundamental ingredient or lubricant, an unavoidable dimension of social interaction, only to move on to deal with less intractable matters.” The purpose of this study is to develop and test a relatively parsimonious theoretical model of the role of trust in the psychological contract breach experience by exploring the multiple roles played by past and current trust in influencing the detection, interpretation, and impact of psychological contract breach.

Psychological Contracts Defined

The psychological contract is defined as an individual’s beliefs about the terms and conditions of a reciprocal exchange agreement between that person and another party (Rousseau, 1989). Although the psychological contract was originally defined by Argyris (1960), Levinson (1962), and Schein (1980) to characterize the subjective nature of employment relationships, the present conceptualization focuses on individuals’ beliefs in and interpretation of a promissory contract. Unlike formal or implied contracts, the psychological contract is inherently perceptual, and thus one party’s understanding of the contract may not be shared by the other.

Psychological contracts, comprising perceived obligations, must be distinguished from expectations, which are general beliefs held by employees about what they will find in their job and the organization. For example, a new manager may expect to receive a high salary, to be promoted, to like his job, or to find the walls of his office painted a neutral color. These expectations emanate from a wide variety of sources, including past experience, social norms, observations by friends, and so forth. Psychological contracts, by contrast, entail beliefs about what employees believe they are entitled to receive, or should receive, because they perceive that their employer conveyed promises to provide those things. Thus only those expectations that emanate from perceived implicit or explicit promises by the employer are part of the psychological contract. For example, if a new manager believes she was promised pay commensurate with performance at the time of hire, it creates an expectation, but it also creates a perceived obligation that is part of the psychological contract. Although psychological contracts produce some expectations, not all expectations emanate from perceived promises, and expectations can exist in the absence of perceived promises or contracts.

Psychological Contract Breach and Trust

Psychological contract breach is a subjective experience, referring to one’s perception that another has failed to fulfill adequately the promised obligations of the psychological contract (Rousseau, 1989). Psychological contract breach can and does occur in the absence of an actual breach (i.e., whereby one party deliberately reneges on another party’s contract and that fact can be determined by a neutral third party) (Morrison and Robinson, 1997). It is an employee’s belief that a breach has occurred that affects his or her behavior and attitudes, regardless of whether that belief is valid or whether an actual breach took place. Thus the focal point of interest in this study is not actual breach, but employees’ perception of a breach, and subsequent use of the term psychological contract breach in this study refers to employees’ perceptions of contract breach, not actual breach. In this study, psychological contract breach is operationalized as an employee’s perception of the extent to which the employer has failed to fulfill the following promised obligations: high salary, promotions and advancement, pay based on performance, long-term job security, sufficient power and responsibility, training and career development.

Psychological contract breach is a subjective experience based not only (or necessarily) on the employer’s actions or inactions but on an individual’s perception of those actions or inactions within a particular social context. Thus the experience of psychological contract breach should depend on social and psychological factors specific to the employment relationship in which it occurs (Morrison and Robinson, 1997). One such factor of particular importance is that of trust and, more specifically, trust in one’s employer. Integrating various definitions of trust found in the literature (e.g., Frost, Stimpson, and Maughan, 1978; Barber, 1983; Gambetta, 1988), trust is defined here as one’s expectations, assumptions, or beliefs about the likelihood that another’s future actions will be beneficial, favorable, or at least not detrimental to one’s interests. As a social construct, trust lies at the heart of relationships and contracts, influencing each party’s behavior toward the other (e.g., Deutsch, 1958; Blau, 1964; Zand, 1972). As a general positive attitude toward another social entity, trust acts as a guideline, influencing one’s interpretation of social behaviors within a relationship. Trust is thus likely to play a significant role in the subjective experience of psychological contract breach by one’s employer: Trust in one’s employer may influence an employee’s recognition of a breach, his or her interpretation of that perceived breach if it is recognized, and his or her reaction to that perceived breach.

Prior Trust as Cause of Psychological Contract Breach

As a prior positive attitude, trust in one’s employer at the time of hire may influence psychological contract breach by reducing the likelihood that a contract breach will be perceived. A long history of research on cognitive consistency and attitude change has found that people act in ways that preserve their established knowledge structures, perceptions, schemata, and memories (Greenwald, 1980). Cognitive consistency is maintained through selective perception, by seeking out, attending to, and interpreting one’s environment in ways that reinforce one’s prior knowledge, beliefs, and attitudes (Fiske and Taylor, 1984). A rich body of empirical evidence has identified a variety of encoding and decoding biases that tend toward confirming, rather than disconfirming, prior beliefs (Snyder and Swann, 1978; Lord, Ross, and Lepper, 1979). Greenwald (1980) reviewed much of this literature, citing evidence of confirmation bias in responding to persuasion (e.g., Hovland, Janis, and Kelley, 1953; Greenwald, 1968; Petty, Ostrom, and Brock, 1981), in information search (e.g., Mischel, Ebbesen, and Zeiss, 1973; Snyder and Swann, 1978), in memory and recall (Mischel, Ebbesen, and Zeiss, 1973; Snyder and Uranowitz, 1978), and in the effects of first impressions (review by Schneider, Hastorf, and Ellsworth, 1979).

One aspect of selective perception is that of selective attention. People tend to seek out and focus on information that confirms prior cognitions, and they tend to avoid or ignore information that disconfirms them (Cohen, Brehm, and Latane, 1959; Olson and Zanna, 1979; Eagly and Chaiken, 1993). In psychological contract breach, selective attention could operate such that prior trust in one’s employer will influence the likelihood that an employee will perceive a breach by his or her employer. Thus an employee with low prior trust is more likely to look for, find, and remember incidents of breach, even in the absence of an objective breach, because it is consistent with his or her low prior trust. Conversely, an employee with high prior trust will be less likely to perceive a breach when one does not occur and more likely to overlook, forget, or not recognize an actual breach when it does occur. Thus, the first hypothesis is as follows:

Hypothesis 1: An employee’s initial trust in his or her employer (at Time 1) will be negatively related to perceiving a contract breach by his or her employer (at Time 2).

Outcomes of Psychological Contract Breach

Consistent with prior studies finding psychological contract breach to be negatively correlated with various work behaviors (e.g., Robinson and Rousseau, 1994; Robinson and Morrison, 1995), it is likely that employees who experience a psychological contract breach will reduce their subsequent contributions to the firm. Katz (1964) identified several distinct forms of employee contributions, all of which are important to an organization’s well-being: (1) performing prescribed roles as part of one’s job; (2) engaging in innovative and spontaneous behaviors that are not specified by job requirements but that facilitate organizational effectiveness; and (3) joining and remaining in the organization. Thus, the second hypothesis is as follows:

Hypothesis 2: Psychological contract breach (at Time 2) will be negatively related to all three types of employees’ contributions to the organization (at Time 3).

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