Psychological Contract A Historical Perspective Management Essay

This chapter reviews the literature on the psychological contract, with emphasis on the perspectives and viewpoints, conceptual framework, types of psychological contract, features and violation of the psychological contract. It also examines the changes affecting the nature of the psychological contracts with emphasis on the environmental changes which includes the market trends and the organizational changes.

Recently, because of the movement in the type of organization from manufacturing to service based economy, employees and their organization are facing challenges of continuous development of strategy in order for them to keep at pace with the fast changing and complex environment. In the opinion of (Cappelli, 1999; Hitt, 1998), the present landscape of employment and the economy continues to pressurize organizations on how to structure their organization, motivate their employees and retain key staffs as new technologies, markets, competitors and products are rolled out, there will be an increased need for the employees and their organization to have a good-working relationship and mutual understanding of one another at every level of the organization (Neilson, et al., 2000), and gaining a better understanding of what individuals desire for their employment relationship is critical to the success of these efforts. Meanwhile, the pursuit of increased responsiveness, productivity, competitive advantage, flexibility, and innovative capacity have been the defining characteristics of the human resource management (HRM) movement that has emerged over the past 20 years (Sheehan, 2005; Vogel 2006; Wright & Snell 1998). However Afiouni (2007) in addition recognized that the ability of both academics and practitioners alike to integrate set of effective HRM policies has a significant positive impact on organizational performance and the development of sustainable competitive advantages. Relatively, in order for organizations to operate effectively in this contemporary business environment, it is crucial that sound psychological contract management strategies are implemented to attract and retain the specialist knowledge based workers that provide the means of sustainable advantage. Coyle‐Shaprio et al (2002) as seen in the work of Sonnenberg (2006) , posited that “interest in the psychological contract emerged during, or partly as a consequence of a period of organizational restructuring and downsizing on employment relationship which is as a result of amongst others a rise in global competition, more intense product market competition, changes in ownership of organizations, growing use of contingent employment, developments of technology and production techniques and the changing nature of the relationships between employers and employees”. These series of changes that have taken place in the organization have made it necessary that the traditional employment relation and the psychological contract have to be reassessed. Guest (2004a) articulates the view that workplaces have become increasingly fragmented because of newer and more flexible forms of employment.

Meanwhile results from existing literatures shows that in spite of the increased interest and wealth of literature pertaining to the psychological contract, there remains no one or accepted universal definition (Anderson and Schalk 1998). There has been various opinions on the nature of Psychological contract, some laid emphasis on the mutual social exchange and reciprocity on the part of the organization and the individual. For others, narrower emphasis is only placed on the employee’s perception about this mutual obligation. But as recently conceptualized, the psychological contract is an inherently subjective perception, in that,every employee posses a different and unique psychological contract depending on his/her own understanding of his roles and duties for the organization, and also what to expect in return for his services to the organization (Turnley and Feldman 1999; Maguire 2002). According to Turnley et al, (2002), the psychological contract comprises of what the individual believes about what obligation he owes to the organization and vice versa. Sparrow (1999) cited in Armstrong 2006) defined the psychological contract as an open‐ended agreement about what the individual and the organization should expect to give and receive in return from the employment relationship psychological contracts represent a dynamic and reciprocal deal. The level of expectation changes as the employee continues to work in an organization and as he/she starts to commit to the organization and possible build a good working relationship with the employer. The psychological contract is concerned with the unwritten expectations and emotion between the employer and the employee .Levinson et al. (1962) cited in Coyle‐Shapiro and Kessler, 2000) opined that psychological contract has to do with some mutual expectation between the employer and the employee that regulates the relationship between both parties without either really knowing it exist. Reduction of uncertainty is its major purpose, enhancing workers predict what to expect from their employers (McFarlane Shore and Tetrick 1994; Rousseau, 1994). In stable conditions, the psychological contract is being emphasized by repetition of contributions and reciprocity over time and also there is cooperation between the employer and the employees about their understanding of their contract (Pascale, 1995). According to shore and shore (1998), history of beneficial acts by the employer and the employee adds to wide open‐ended agreements represented by a high level of exchange, which enhances the strength of the psychological contract. The greater the level of mutual obligation perceived by both the employer and the employee, the better the relation between them will be and also the greater the possibility that both parties will continue to work toward the improvement of their relationship (Shore and Shore 1995). The psychological contract suggests that there are important aspects of the nature and functioning of the employment relationship that are not accounted for by the formal, legalistic employment contract. In other words, formal contracts lack the specificity, detail and comprehensiveness to explain the complex mutual expectations and obligations inherent in an employment relationship (Westwood et al., 2001).

Morrison and Robinson (1997) summarize the defining characteristics of psychological contracts thus:

They are internal cognitions of individuals formed and held individualistically.

They are founded upon perceived promises ‘where a promise is defined as any communication of future intent’.

They are held by individuals with respect to the employing organization in the abstract. That is, they are not formed with respect to any specific agent within the organization.

They can be transactional or relational in nature. Although individuals may hold both elements in cognition at the same time, their formation, impact and dynamics are different.

The notion of psychological contract is grounded in the theory of social exchange (Aselage & Eisenberger, 2003) which suggests that employees are motivated to increase their work outcomes when their employment relationship is based upon a fair social exchange (Moorman, 1991). A psychological contract contains the unwritten beliefs of one party in an employment relationship about the reciprocal contributions of the other party (Robinson & Morrison, 1995). These relationships are maintained by voluntary actions in which n individual will reciprocate the receipt of benefits in the future (Homans, 1961).


Traditionally, the concept of psychological contract was first utilized by Argyris (1960) who used the concept `psychological work contract’ to describe the relationship between the employees and the foremen. But comprehensively, he did not propose a clear definition of the concept, thus Levinson et al. (1962) clarified the concept and described the psychological contract as the unwritten contract. Stating further, the psychological contract is the sum of mutual expectations between the organization and the employee which is used to highlight implicit and unspoken expectations that antedate the relationship between employer and employee. Relatively, Schein (1965, 1980) buttressed that the psychological contract is a set of unwritten expectations which exist between each member of the organization towards other members in that organization. He further added that the psychological contract has two levels which include the individual and organizational level. He also acknowledged that although the psychological contract is unwritten, it is an important determinant of behavior in organizations. In the opinion of Herriot and Pemberton (1995), psychological contract is viewed as the perception of both parties (employer and employee) of their relationship and the things they offer each other in this relationship. Meanwhile, Rousseau (1990) took a more narrow perspective on the concept of psychological contract and its definition. She conceives the psychological contract to be the individual’s beliefs about mutual obligations, in the context of the relationship between employer and employee. In that view, the psychological contract is a subjective, individual perception of obligations of the employee towards the organization and of the obligations of the employer towards the employee (Schalk and Freese, 1993).


Stone (2001) posited that the old psychological contract came from the Scientific Management, Fordism and some other workplace movements which held in the early parts of the 1900s which dominated the employment relations process during the twentieth century. The old psychological contract which did offer the employees job security, pay based on length of service, a predictable and orderly promotional process and a long term pension scheme was able to obtain the commitment and attachment of the employees to organizations (Stone 2001). The psychological contract in organizations use to be understood as mutual corporation and understanding between employees to work together towards the success of their organization (Capelli, 1999). Such a dependent relationship virtually assured employee loyalty (Singh 1998). Majority of the organizations in the old workplaces use to have a hierarchical form of authority and was also bureaucratic in nature (Singh 1998).the organizational structure was clear and every employee in the organization was able to see their current position in the company and where they will be in the organization in the future. There was job security career progression oppourtunities, training and development of skills for employees, benefit packages as a reward for the employee’s commitment to the organization, and for all their hard works toward the organizational success (Capelli 1997; Sims, 1994). Employees did welcome bureaucracy as the way in which the organization was to be operated and managed (Blancero, 1997). The clarity in the organizations enabled employees to be able to see the long term success of the organization as being to their own interest as it means long term success for them as (Hiltrop, 1995). Employers, on the other hand, were reasonably confident that their employees’ skills would not be immediately lost to another company”. In present workplaces or organizations, employees are expected to be multi skilled and to be able to work across a range of task, promotion is merited and is based on performance and not on length of service, there isn’t job security but instead the best and most valuable employees are retained in organizations by good pays and promotion (Cappelli 1999). Loyalty of employees in such organizations is gained by giving them opportunity for long-term development and career progression. Employee commitment was the norm and employees when joining an organization expects progression and advancement in their career. Sims (1994) believes that in organizations today, opportunity for advancement is limited and also there isn’t job security for anyone in the organization and even the good performers are not guaranteed that they will keep their job for life as organizations are constantly looking to bring in new talents as this is the main source of competitive advantage for organizations in the present highly competitive environments. Relatively, Spindler (1994) believes that the old psychological contract which is based on job for life employment for commitment and compliance no longer exist as the new psychological contract has now taken over.

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Considerable agreement can be found in the literature for such a proposition. For example:

• ‘The old cradle‐to‐grave psychological contract…is gone’ (Waxler & Higginson


• ‘the bond between employer and employee has significantly changed, if not weakened’ (DeMeuse & Tornow, 1990:246).

• ‘the traditional bond between employers and employees rested upon a premise

that has been revealed as unworkable’ (Sorohan 1994).

• ‘Loyalty to the company has given way to looking out for oneself’ (Kanter & Mirvis, 1989).

• “The psychological contract between employer and employee in terms of reasonably permanent employment for work well done is truly being undermined as more and more employees no longer regarded their employment as secure and began to realize that their careers and futures were in their own hands and not in the human resource departments of the large corporatists” (Cooper 2002).


Environmental changes such as increased market competition, increased product innovation, economic globalization, changing customers taste, increased technological advancement, changes in the labour market etc. has made it mandatory for organizations for build a flexible structure in order for them to be able to respond to these changes that are happening in the environment. For example, in the present global economy, the competition level increases day by day and customers are demanding for goods with good quality and effectiveness and at the same time with low prices, fast delivery of their orders etc. Meanwhile as related by (Robinson 1996), during the process of organizational change, having well motivated workforce with good psychological contract is very important to the success of the change. The terms and conditions of employment agreement is continuously modified to comply with the changing nature of the environment (Altman & Post 1996). Within such a dynamic environment, organizations may become less willing and/or less able to fulfill all of their promises to employees. Failure to fulfill a promise made is called breach of contract and majority of employees believe that their employers have not fulfilled some parts of their employment agreement therefore breaching some parts of their contracts (Robinson & Rousseau 1994). The interpretation of the different types of the psychological contract suggests some of the reasons for the contemporary changes on the psychological contract. More so, the terms of formal legal employment contracts have undoubtedly changed in most western economies in recent decades as deregulation of labour markets and working conditions, decentralization of bargaining and de‐unionization have accelerated, many of the changes have occurred behind or beyond the formal employment contract. It is often observed that contemporary work arrangements offer employees a very different ‘deal’ than traditional work arrangements. In all of the aspects of the changing nature of employment relationship, More attention has been paid to the decline in the level of job security which is believed to be associated to lower level of employee commitment to their organizations which has been claimed to be caused by restructuring of the organizations (Hiltrop, 1996). There is widespread believe in the literature that employees have not benefited from the changes that has taken place on the psychological contract between employees and their organization (Turnley & Feldman 1998). According to Hiltrop (1996), employers are wanting to get employee’s commitment and involvement to the organisation but are not willing to offer employees assurance over them keeping their jobs or even getting a promotion, these puts the employees at a disadvantage over this situation.”While employee’s entitlements appear to be decreasing, competitive pressures are leading organizations to demand greater commitment, initiative and flexibility from their employees” (Schor 1992: 20). As the HR practices of the organization is responding to the environmental changes and the employees are gaining experience doing their jobs, the existing psychological contract is assessed by the employees to re-evaluate their obligations to their organization and that of their organization to them (Rousseau & McLean Parks 1993). The information obtained by the employee through the process of observing their own behavior and that of their employer will change what the employee feels he/she owes to the employer and what he/she expects in return from the employer (Robinson et al. 1994). Rousseau & Greller (1994b) Believe that changes in the society could also bring about a modification in what an employee feels he owes the organization and vice versa.. Researchers such as (Armstrong 2006; Guest and Conway 1997; Martin et al., 1999) have identified various changes in the employment relationship (starting from the late 1970’s) that has brought about a renewed interest in the concept of the psychological contract. The following are some of the transformations that have occurred in the employment relationship.


De Cuyper et al., (2008) asserted that the first indication of a fundamental change in the employment relationship was the rapid growth of temporary agencies. Researchers such as (Brewster et al. 1997; Burgess and Connell 2006 😉 have observed that the growth in temporary employment is driven mostly by employers’ demand for more flexibility and innovation, and by their wish to reduce labour costs and administrative complexity.


Guest and Hoque (1994) observes that an increasing proportion of people do not have the protection and representation of trade unions. Also, Cullinane & Dundon (2006) posited that as collective bargaining continues to decline in workplaces, there will be increase in the significance of individualist values between the workers, and also informal arrangements becomes more important. Coyle‐Shapiro and Kessler (2000: 910) argue that ‘a progressive tightening of financial regimes, the introduction of competitive market forces and a closer monitoring of organizational performance through the use of a battery of measures and targets have challenged the traditional features of employment’. This shows that the traditional features of employment are gradually fading away and are being taken over by the modern way. Other researchers such as Hollinshead et al., (2007) and Bennet and Taylor (2001) did cite changes in technology, increased legal protection for employees, efforts from employers to kill unionism etc. as some of the reasons for the decline in unionism.

2.4.3 LOSS OF JOB SECURITY According to Lawler (2005) an increase in the use of agency workers, casual workers, contractual employments, contingent employment, employment outsourcing programs etc. has lead to employees redefining their expectations concerning their career with their organization. Also the process of downsizing by organizations has made employees feel less secured on their job as they know that if this happens, some of the employee will have to leave. Armstrong (2006) notes that organizations are therefore unable to provide job security for its employees, thus, people are employed as long as they are able to add value to the organization and help improve the productivity of the organization. Employers are constantly looking to bring in new talent into the organization to give them a competitive advantage over their competitor so as new talent are brought into an organization, the risk of some employees in that organization losing their job increases.


Armstrong (2006) notes that Customers are constantly requesting for improvement in the quality of goods and services delivered by organizations therefore companies are always looking to upgrade their technology and product to enable them meet up with the customer’s expectations. Lawler (2005) adds that the source of gaining competitive advantage is changing rapidly, and technology and finance are becoming less important sources of competitive advantage: human resources is becoming more vital to organizational performance in the knowledge‐based economy. Kessler (1994) as seen in Maguire (2002) identified a number of distinctions between the old and new psychological contract. The key differences between the “traditional” and the ‘new” psychological contract relate to the decrease in expectation of paternalistic human resource practices, the concept of organizational worth is being replaced with “self worth”, personal accomplishment is being substituted for promotion as a way of measuring growth, and also there has been decrease in the importance of years spent in an organization instead the impact that has been made in the years spent in the organization (Maguire, 2001).

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Recently, due to the rapidly changing market and technological advancement, there have been pressures on firms to create more adaptability and seek to focus on core competencies in order to achieve excellence. Certainly in situations of change, organizational change is inevitable and will often have consequences for the existing pattern of expectations, it is clear to managers and employees that the psychological contract is an important issue (Cartwright and Cooper, 1994; Rousseau, 1996). Thus, for organizations to operate successfully in the current nature of the environment, attention of the organization will have to be focused on core competencies, human capital, organizational flexibility, and structure of the organization (Hitt et al, 1998; Whittington et al, 1999). Also, Brown & Eisenhardt, (1998) argued that organizations learn how to adapt to the new environmental conditions and, thus, create surviving strategies that will help them cope with the changes taking place in the environment. Concurring with the above view, Whittington et al, (1999) posited that the driving forces for change lead organizations to develop new forms and new management logics. According to Brewster et al (1997), employement of temporary and agency workers has been on the increase as a replacement for permanent workers and this is so as an attempt to improve the flexibility of the labour force. Organizations are focusing less on long term performance and are more interested in the immediate and short-term performance of their employees, thus employees are retained or brought into the organization on how they can contribute to the success of the organization on a short-term (Herriot and Pemberton, 1996; Pascale, 1995). According to Sims (1994), the demand for a better capital deployment, reduction in the layers of management, performance related pay schemes, reduced number of grade jobs, outsourcing minor job, etc. has been on the increasing side and this has been acting as a strategy to adapt to the external changes. These external changes have led to the job description of the worker to be broadened by management (Sims 1994). Organizations need to keep training and developing its employees so as to keep at pace with the technological advancement and to avoid the obsolescence of it employee’s skills need. Organizations now expect their workers to have a very good knowledge about the company’s products and services and also they are expected to have sound communication skills, diagnostic and problem solving skills. Also, Prahalad and Hamel, (1990) argued that organizations focus on their core competencies by dealing with their preferred suppliers with whom they develop strong links, delayering, downsizing and focusing upon the invisible assets like product market knowledge, competitor intelligence as a source of competitive advantage. Furthermore, Capelli, (1997) also believes that many investors and employers have gained from the changes that have taken place in employment relationship: high profit return to share holders , increase in productivity and executive compensation levels have multiplied. The gains and success to adaptation depends on the type of organization whether mechanistic or organic (Burns & Stalker, 1966) and also on the extent of exploration or exploitation adaptation of organizations to changing conditions (March, 1991; Lewin et al, 1999).


It is generally accepted by scholars that two types of contracts, connecting both ends of a contractual whole (MacNeal, 1985). However, the nature and policy of any organization will sorely determine the type or combination of psychological contracts that will be in practice. This shares the opinion of Rousseau (2004) that even though every psychological contract shares some key features with one another, the forms in which they take may vary depending on the nature of the job such as the desire of the employees and strategy for human resources which is in place. Maguire (2002) assert that even though the countless details of a psychological contract can be unique to every individual, there are still some pattern that differentiate the behavior of employers and employees towards one another. There exist two types of psychological contracts which are the transactional and relational contracts.

2.6.1 TRANSACTIONAL PSYCHOLOGICAL CONTRACTS According to Herriot and Pemberton (1997) the exchange between employee and employer in transactional contracts focuses on specific monetary economic exchanges which are typically short‐term. An employee with transactional does tend to follow the laid down terms and is ready to seek for employment in another organization if the working terms and conditions change or when with employer does not comply with their agreement (Rousseau, 2004). Contracts are being characterized by “a fair day’s work for a fair day’s pay” (Maguire, 2002). the transactional psychological contract can be said to be side by side with the “effort bargain” which providing rewards in form of wages and salaries is seen as the main responsibility of the employer which is a crucial part of psychological contract (Zhao et al., 2007). The description of transactional and relational psychological contract can be linked to the nature of different types of employees (McLean Parks et al., 1998). They posit that transactional psychological contracts can be seen more amongst temporary workers, while relational psychological contracts are thought to be dominant for permanent workers. In the work of (Coyle‐Shapiro & Kessler, 2002; Van Dyne & Ang, 1998) they proposed that temporary workers sees there psychological contract as being narrower than that of full time or permanent workers. Rousseau (2004) posits that employers in organizations receive a specific level of contribution from their employees and incur few, if any at all, future responsibilities to them. Arrangements of such can be effective when workers are individual contributors, performance can be explicitly monitored, and there is little need to coordinate with others (Rousseau 2004). Employees with transitional contract tend to weight their duty and obligation for the organization with amount of money they do receive.


According to O’Donohue et al., (2007:303) the relational psychological contract is mainly made up of exchange of social-emotional feeling and understanding and does not have any certain performance terms. The focus of relational contract is built on a long term basis involving investments by both parties from which withdrawal is difficult. Relational contracts are based on trust, belief, good faith so have longer term frameworks such as the exchange of employee commitment for job security. Rousseau (2004) asserts that relational psychological contracts include loyalty from employers and employees working together and meeting the needs of one another and stability, working hand in hand to ensure the success and survival of the organization. Employees with relational contracts are more willing and ready to go the extra mile to ensure the success of the organization as they see the organisation as their own and will do anything necessary to see it succeed (Dabos and Rousseau, 2004). Although workers with relational contract get really angry when their contract is breached by the employer but because of their commitment to the organization, they are always ready to take necessary steps with their employers to help preserve the existing relationship between them (Dabos and Rousseau, 2004).


Rousseau (2004) argued that the dynamics of the psychological contract are shaped by its defining features. He identified six key characteristics of the psychological contracts which include:

Voluntary Choice

Rousseau (2004) posits that Psychological contracts motivate employees to fulfill their commitments to their organization because the employee has not been made by the employer to go into this promises but instead he has chosen to participate voluntarily. Commitments that have been made voluntarily are tend to be kept.

Mutual Agreement

According to Rousseau (2004), the psychological contract is an individual employee’s belief that there is a mutual obligation between them and their organization. Meanwhile, Mullins (2007) asserts that the importance of psychological contract is to the extent to which the organization and the employee perceive the psychological contract to be fair.


Rousseau (2004) argued that the psychological contracts cannot be spelt out by neither the employee nor the organization therefore it need to be figured out as time goes on so it is said to be incomplete at the time which both parties go into it.

The multiple Contract Makers

Rousseau (2004) opined that the way employees interpret their psychological contracts with the organization is shaped by the information which the employee has gathered from the multiple contract maker which includes top management officers, employee’s immediate superior and the representative of the human resource department about the job, the organisation itself, its policies and procedure of work etc. Rousseau (2004) added that the use of human resource practices such as performance appraisal system and training programs can be used by organizations to show rewards that could be earned and what is expected of the employees to earn it. The performance appraisal clarifies what is expected of the employee and how he will be rewarded for good performance.

Managing Losses When Contracts Fail

When the actions of workers or employers are being entrusted to psychological contract to guide it, then the failure of the other party involved to accomplish what is expected of them could then result in losses i.e. what they expected had failed to happen Rousseau (2004). Researchers such as Maguire (2002) argued that losses like that are reasons why when psychological contract is violated, it can result into outrage, anger, stress, resignation and other negative reactions. It is important that both the workers and organization ensure they fulfill the commitment of their psychological contract but at the same time, they should also be prepared to manage losses when in occurs.

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The Contract as Model of the Employment Relationship

Psychological contract has established an existing mental model in the process of employment relationship. As shown in figure 1 below, this model helps in providing a solid understanding of the future expectations and helps to guide stable understanding of what to expect in the future and guides proficient action without much requirement for practice. According to Bratton and Gold (2007), the employment relationship is a changing mutual relationship that exists between the employee and their employer in an organization. The model also suggests an open‐ended agreement about what the individual and the organization expect to give and receive in return from the employment relationship. Furthermore, Rousseau (2004) posits that psychological contract as a mental model does help employees and employers to work together in an organization despite one not knowing the intention and expectation of the other. Meanwhile, Guest (2001) suggests that the fundamental of the contract can be measured in terms of its trust, fairness of treatment, and the extent to which the explicit contract is seen to be delivered.

Causes Content Consequences

Figure 1 Surviving Mental Model of the Employment Relationship. Source: Guest (2001)


Johnson & O’Leary‐Kelly (2003) argued that downsizing, outsourcing, organizations using temporary workers has triggered many changes in employment relationship. these changes that has taken place over the years often lead to employers’ or employees’ expectations not been met by the other party leading the them feeling violated (Morrison and Robinson, 1997). However, (Wolfe Morrison & Robinson, 1997) further added that the feeling of betrayal on a psychological contract is often accompanied by a negative emotional feeling of anger, stress, injustice and betrayal. In addition, Ortony et al., (1988) affirmed that feeling of bitterness, outrage, anger, and resentment are central to the feeling of violation. According to Coyle‐Shapiro & Kessler, (2002), the methods that have been used to operationalize the breach of contract have limited the studies on psychological contracts. They posit that a breach is often operationalized by deducting what the employee expects to get from the employer from what he is actually getting from the employerand the difference is called the difference scores.

Morrison and Robinson (1997) buttressed that there are two reasons for employer breach or violation of the psychological contract and they are reneging and incongruence. Reneging occurs when an organization does not fulfill expected promises either because they were unable to or because they were just not willing to. While incongruence occurs when both parties involved have different interpretations or understanding to what is expected of each other. Psychological contract violation is defined by Robinson & Morrison, (1997), as the perception that one’s organization has not carried-out some of its obligations that makes up one’s psychological contract. This infers that violation is cognitive, reflecting an employee’s calculation of what has received when compared to what had been promised to him. Furthermore, Robinson & Morrison (1997) also argued that breach of psychological contract will most likely have a negative effect on the behavior and attitude to work of the employee because his expectations from the organization have been met.


Deery, Iverson and Walsh, (2006) opined that respect for the terms of the contract has a positive effects for both the employees and the organization. These effects a better feeling that one is been valued by the organisation, increased perception of organizational justice, trust in the employer and a sense of belonging (Robinson and Morrison, 2000). But Sturges et al, (2005), cited in Battisti et al., (2007) argued that workers respond to a feeling of this psychological contract violation by reducing their commitment to the organization, lack of trust in their employer, and a drop in their job satisfaction. Research by Suazo (2005) suggests that psychological contract violations could have negative effects on the organization. Some of the effects are discussed below:


Turnley and Feldman (1999) argued that voice is seen as a constructive effort directed at amending the employment relationship between employees and their organization. Suazo (2005) added that the voice involves an appeal that is made directly to higher authorities and it is described as the primary method through which an employees can make positive changes happen. Workers may react to violation of their psychological contract by voicing their grievances to their supervisors or other superior worker and this is because changes to psychological contract will not be welcomed by the employee as these may cause them to lose valued reward (Rousseau, 1995).


Violations of the psychological contract are likely cause an employee to have perceptions of inequity (Morrison & Robinson, 1997). This perception could cause the reduction in belief that the continuous stay in the employment relationship is of mutual benefit and may turn to leaving the organization as a last resort. When the perceived inequity is great, employee’s response to the failure of their organization to fulfill its part of the psychological contract could be to leave the organization voluntarily by resignation (Turnley and Feldman 1999).


Researchers such as Robinson and Rousseau (1994) hypothesized that psychological contract violations are negatively related to employee loyalty in an organization. Their result showed that violation of psychological contract is negatively related to the perception of employees of how much commitment and loyalty they do owe to their workplace. Furthermore, Parks and Kidder (1994) do suggest that extra effort behavior may be the first thing to be dropped by employees if psychological contract is violated. Supporting this idea, Robinson and Morrison (1995) believes that employees that feel violated in their psychological contract will refuse to go the extra mile for the success of the organization and will only do the minimum required of them.


Turnley and Feldman (1998), posits that this involves an employee disregarding his duties for the organization. Employees whose psychological contract has being violated may see no point in working hard for an organization that they cannot trust to keep its promises to them so they just do the minimum required standard of job without showing concern on how well the job as been carried out (Turnley and Feldman, 1998). Examples of the attitudes of neglect include lateness to work, doing personal business at work, time wasting on a particular work etc.

Organizational Cynicism

According to Dean, Brandes, & Dharwadkar, (1998), cited in O’Leary‐Kelly& Johnson (2003), Organizational cynicism occurs when workers in an organization believes that their employer (organization) is not reliable and they cannot be trusted. They continued by saying that this perceived lack of integrity may be as a result of violation of some expectations which has to do with honesty or sincerity. Psychological contract breach has been suggested by suazo (2005) to be a fundamental determinant of employee cynicism and will result in a change in employee behavior, such as reduced effort and withdrawal of citizenship.

SUMMARY This chapter reviewed the literature on the psychological contract, with particular reference to the perspectives and viewpoints, conceptual framework, features and violation of the psychological contract. It also examined the old psychological contacts and the organizational changes which led to the new contract. The major observations from the literature have shown that the psychological contract has no one definition because of the effort by different authors and researchers (e.g. Rousseau 2004; Mc Lean et al., 1998) in defining it. Various views have been put forward by authors on the concept of the psychological contract. Researchers such as (Mullins 2007; Herriot and Pemberton 1995) consider the psychological contract as a mutual social exchange where there are perceived two ways obligations between the organization and its workers. The psychological contract is also perceived to be an intrinsically subjective phenomenon (Battisti 2007; Dabos and Rousseau 2004) in that, every individual have their personal opinions on the way they see the psychological contract. It was observed that the external changes and the competitive global market have impacted on the psychological contract. Certainly in situations of change, organizational change is inevitable and will often have consequences for the existing pattern of expectations, thus the changing nature of the psychological contract is due to growth in the use of temporary workers (Cuyper et al., 2008; Brewster et al. 1997), decline in trade union representation (Cullinane & Dundon 2006), emphasis on lateral career development (Stone 2001; Armstrong 2001), loss of job security (Lawler, 1995) and changes in market trends (Maguire2002). Furthermore, two conceptual frameworks of the psychological contract have been proffered which are: The relational and transactional contracts (Rousseau, 2004). Transactional contracts focuses on specific monetary economic exchanges which are typically short‐term (Herriot and Pemberton 1997) while relational contracts are based on social emotional exchanges that has no certain terms of performance (O’Donohue 1997).

Lastly, another important aspect of the psychological contract lies on the violation of the psychological contract. The effects of the psychological contract breach have been fully discussed in this study and include neglect (Turnley and Feldman (1998), organizational cynism (O’Leary‐ Kelly & Johnson 2003), exit (Morris and Robinson 1997), voicing (Turnley and Feldman 1998) and silence (Suazo 2005).

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