The SAGE Handbook of Organizational Behavior

Volume One: Micro Approaches

Julian Barling, Cary L Cooper, Julian Barling, Cary L Cooper

• Publisher: SAGE Publications Ltd
• Year: 2008
• Print ISBN: 9781412923859
• eBook ISBN: 9781446246047
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

This milestone handbook brings together an impressive collection of international contributions on micro research in organizational behavior. Focusing on core micro organizational behaviour issues, chapters cover key themes such as individual and group behaviour.

The SAGE Handbook of Organizational Behavior Volume One provides students and scholars with an insightful and wide reaching survey of the current state of the field and is an indespensible road map to the subject area.

The SAGE Handbook of Organizational Behavior Volume Two edited by Stewart R Clegg and Cary L Cooper draws together contributions from leading macro organizational behaviour scholars.

PART ONE

Individual Attachment to, and Disengagements from, Work

1

Psychological Contracts

Jacqueline A - M. Coyle - Shapiro and Marjo - Riitta Parzefall

The psychological contract has captured the attention of researchers as a framework for understanding the employment relationship. In terms of research, there has been an exponential growth in publications on the topic in the last 15 years (following the publication of Rousseau’s 1989 article) giving the impression of a relatively new concept. Its introduction can however be traced to the 1960s. The concept developed in two main phases: its origins and early development covering the period 1958 to 1988, and from 1989 onwards. This chapter begins with a review of the initial phase in the development of the psychological contract highlighting the commonalities and differences amongst the early contributors. We then review Rousseau’s (1989) reconceptualization of the psychological contract, as this has been very influential in guiding contemporary research. The two distinct phases in the development of the psychological contract have given rise to a number of key debates, which we discuss prior to outlining an agenda for future research.

HISTORICAL DEVELOPMENT OF THE PSYCHOLOGICAL CONTRACT

In tracing the development of the psychological contract, we focus on the seminal works of Argyris (1960), Levinson et al. (1962) and Schein (1965). We also review the work of Blau (1964) and Gouldner (1960) as these represent the foundational ideas of social exchange theory upon which subsequent theorizing on the psychological contract draws.

Classical early studies

Although Argyris (1960) was the first to coin the term ‘psychological contract,’ the idea of the employment relationship as an exchange can be traced to the writings of Barnard (1938) and March and Simon (1958). Barnard’s (1938) theory of equilibrium posits that employees’ continued participation depends upon adequate rewards from the organization. Here lies the idea of a reciprocal exchange underlying the employee-organization relationship. This was elaborated upon by March and Simon (1958) in their inducements-contributions model. They argued that employees are satisfied when there is a greater difference between the inducements offered by the organization and the contributions they need to give in return. From the organization’s perspective, employee contributions need to be sufficient to generate inducements from the organization, which in turn need to be attractive enough to elicit employee contributions. The work of March and Simon (1958) is rarely acknowledged in the psychological contract literature (Conway and Briner, 2005) but the idea of a reciprocal exchange bears a remarkable resemblance to a core tenet of the psychological contract.

Argyris (1960) viewed the psychological contract as an implicit understanding between a group of employees and their foreman, and argued that the relationship could develop in such a way that employees would exchange higher productivity and lower grievances in return for acceptable wages and job security (Taylor and Tekleab, 2004). Argyris (1960) believed that employees would perform at a higher level if the organization did not interfere too much with the employee group’s norms and in return employees would respect the right of the organization to evolve. The defining characteristics of this first explicit conceptualization of the psychological contract viewed it as an exchange of tangible, specific and primarily economic resources agreed by the two parties that permitted the fulfillment of each party’s needs.

Subsequently, Levinson et al. (1962) introduced a more elaborate conceptualization of the psychological contract that was heavily influenced by the work of Menninger (1958). Menninger (1958) suggested that in addition to tangible resources, contractual relationships also involve the exchange of intangibles. Furthermore, the exchange between the two parties needs to provide mutual satisfaction in order for the relationship to continue (Roehling, 1996). Levinson et al. (1962) based their definition of the psychological contract on the data they gathered in interviewing 874 employees who spoke of expectations that seemed to have an obligatory quality. They defined the psychological contract as comprising mutual expectations between an employee and the employer. These expectations may arise from unconscious motives and thus each party may not be aware of their own expectations let alone the expectations of the other party.

The findings of Levinson et al.’s (1962) study highlighted the role of reciprocity and the effect of anticipated satisfaction of expectations. Specifically, the emphasis on the fulfillment of needs created a relationship in which employees would try and fulfill the needs of the organization if the organization fulfilled the needs of employees. Thus, the employee and organization held strong expectations of each other and it was the anticipation of meeting those expectations that motivated the two parties to continue in that relationship. Taylor and Tekleab (2004) note that the work of Levinson et al. (1962) contributed to the conceptualization of the psychological contract in the following ways: the two parties in the contract are the individual employee and the organization represented by individual managers; the psychological contract covers complex issues – some expectations are widely shared, others are more individualized and the specificity of expectations may range from highly specific to very general; the psychological contract is subject to change as the parties negotiate changes in expectations that may arise from changes in circumstances or a more complete understanding of the contributions of the other party.

Although Schein’s (1965) definition shares some similarities with Levinson et al. (1962), he placed considerable emphasis on the matching of expectations between the employee and organization. The matching of expectations and their fulfillment is crucial to attaining positive outcomes such as job satisfaction, commitment and performance. Consistent with this, Schein (1965) by implication highlighted the importance of understanding both the employee’s as well as the employer’s perspective. Schein went further than previous researchers in discussing how organizations might express the organization’s psychological contract through its culture.

Divergences amongst early contributors

The initial phase in the development of the psychological contract is marked by divergences between the early contributors. In particular, the work of Argyris (1960) stands apart in several ways. First, the psychological contract captures an implicit understanding of the exchange of tangible resources between employees and an organizational representative. As noted by Conway and Briner (2005), this view of the psychological contract was a simple although underdeveloped one. It is not clear, for example, how the implicit understanding developed and what it is based upon. Furthermore, Argyris (1960) presented the narrowest view of the psychological contract in terms of its focus on tangible resources. In contrast, Levinson et al. (1962) and Schein (1965) viewed the content of the exchange as including both tangible and intangible resources.

Second, although Schein (1965) and Levinson et al. (1962) conceptualized the psychological contract as encompassing expectations, Levinson et al. (1962) viewed these expectations as having an obligatory quality where the parties believe the other to be duty bound to fulfill those expectations. At the same time, however, Levinson et al. (1962) did not see these expectations as being based on promises but rather on needs (Conway and Briner, 2005). Schein’s (1965) primary emphasis was on the matching of expectations between the employee and organization. The outcomes (positive or negative) of the psychological contract were contingent upon the degree to which the two parties were in agreement in terms of expectations and their fulfillment. In addition, Schein (1965) gave greater prominence to the organization’s perspective and considered ways in which the organization could express the type of psychological contract it wished to develop. In fact, Schein’s (1980: 99) subsequent position on the importance of considering both perspectives is illustrated in the following: ‘We cannot understand the psychological dynamics if we look only to the individual’s motivations or only to the organizational conditions and practices. The two interact in a complex fashion that demands a systems approach, capable of handling interdependent phenomena.’

Thus, the early phase in the development of the psychological contract is marked by differing emphases and an absence of acknowledgment of how one conceptualization relates to prior work. This lack of cumulative work created ambiguities that come to the fore in terms of current debates in the field.

Social exchange as theoretical foundation of psychological contracts

Running parallel and independently to the early psychological contract work, the seminal works of Homans (1958), Blau (1964) and Gouldner (1960) characterized the beginnings of social exchange theory, and were themselves influenced by the earlier work of Mauss (1925) and Malinowski (1922). Homans (1958) provided a skeletal theory of exchange in the context of how individuals interacted within groups (Coyle-Shapiro and Conway, 2004) that was developed by Blau (1964). We focus on the work of Blau (1964) and Gouldner (1960) as, together, their work represents the foundational ideas of social exchange theory (for a more comprehensive review see Coyle-Shapiro and Conway, 2004; Cropanzano and Mitchell, 2005).

Blau (1964) differentiated social from economic exchange along a number of dimensions: specificity of obligations, time frame and the norm of reciprocity. In short, economic exchange is one in which the obligations of each party are specified typically in a formal contract, there is a mechanism in place to ensure fulfillment of those obligations and the exchange has a limited time frame. In contrast, social exchange involves unspecified obligations where one party needs to trust the other that the benefits received will be reciprocated. The reciprocation of benefits enhances trustworthiness which in turn facilitates the ongoing conferring of benefits and discharging of obligations over the long term. In short, social exchange theory examines how social exchange relationships develop in engendering ‘feelings of personal obligations, gratitude and trust’ (Blau, 1964: 94). The exchange of economic and socio-emotional resources and the adherence to the norm of reciprocity play a critical role – the actions of one party contingent upon the reactions of the other and it is this contingent interplay that characterizes how social exchange has been applied to the employment relationship.

The norm of reciprocity plays an important role in the development of social exchange relationships by perpetuating the ongoing fulfillment of obligations and strengthening indebtedness. Gouldner (1960) argued that the norm of reciprocity is universal and that individuals should return help received and not injure those who have previously helped them. He distinguished between two types of reciprocity: heteromorphic and homeomorphic reciprocity. The former captures an exchange where the resources exchanged are different but equal in perceived value; the latter captures exchanges where the content or the circumstances under which things are exchanged are identical. Regarding how the norm of reciprocity operates, Gouldner (1960) argues that the strength of an obligation to repay is contingent upon the value of the benefit received – highly valued benefits create a stronger obligation to reciprocate.

The work on social exchange theory shares some common elements with psychological contract theory. First and foremost, both view exchange relationships as comprising tangible and intangible resources governed by the norm of reciprocity. Second, each party brings to the relationship a set of expectations/obligations that they will provide in return for what they receive. However, the other party to the exchange (i.e. the organization) received more explicit consideration by psychological contract researchers while the norm of reciprocity was more prominent and theoretically refined by social exchange theorists.

RECENT RESEARCH

Rousseau’s (1989) seminal article on the psychological contract is credited with rein-vigorating research on the topic. We start by reviewing her definition and how it departed from earlier work. Three stands of contemporary research are presented: formation, content and breach of the psychological contract.

Rousseau’s reconceptualization of the psychological contract

Rousseau’s reconceptualization of the psychological contract signals a transition from the early work to what is now considered contemporary research. She defined the psychological contract as an individual’s beliefs concerning the mutual obligations that exist between the individual and the employer. These obligations arise out of the belief that a promise has been made either explicitly or implicitly and the fulfillment of promissory obligations by one party is contingent upon the fulfillment of obligations by the other. Therefore, the psychological contract comprises an individual’s perception of the mutual obligations that exist in the exchange with their employer and these are sustained through the norm of reciprocity.

This conceptualization differs from the early definitions in a number of ways. As Conway and Briner (2005) highlight, while the early work emphasized expectations, Rousseau defined the psychological contract in terms of obligations. This appears to be similar to what Levinson et al. (1962) had in mind in their use of expectations that had an obligatory quality which created a sense of duty to be fulfilled. The focus on obligations brings Rousseau’s definition of the psychological contract very close to Blau’s (1964) social exchange theory. However, although these researchers are conceptually close in capturing the nature of the exchange, they diverge in terms of its development. Rousseau (1989) is perhaps the clearest in presenting obligations arising out of a perception that a promise has been made to commit to a future action. The idea of obligation based on promise is very different from Levinson et al.’s (1962) position that expectations arise from need. Blau (1964) remains more ambiguous in terms of how obligations arise except that they are based on benefits received. Whether these benefits are based on the donor’s recognition of the recipient’s needs or the donor’s promises to provide benefits is unclear in Blau’s (1964) work.

A second point of departure, in particular with the work of Schein (1965), who emphasized matching of expectations between the employee and organization, was Rousseau’s (1989) emphasis on the psychological contract residing ‘in the eye of the beholder.’ The importance of the two parties having ‘matched’ expectations was downplayed by Rousseau (1989), who emphasized instead an individual’s perception of agreement. Therefore, the psychological contract shifted from the contingent interplay between two parties’ obligations in the exchange to an individual’s perceptions of both parties’ obligations in the exchange.

The emphasis on needs vs. promises has implications for the factors that shape the psychological contract. Given that Levinson et al. (1962) and Schein (1965) viewed expectations as arising from needs, the degree to ...

Table of contents

• Cover Page
• Title Page
• Copyright
• Dedication
• Contents
• About the Editors
• About the Contributors
• INTRODUCTION
• PART ONE INDIVIDUAL ATTACHMENT TO, AND DISENGAGEMENTS FROM, WORK
• PART TWO PRACTICES, PROCESSES AND PERFORMANCE
• PART THREE WORK, STRESS AND WELL-BEING
• PART FOUR INDIVIDUALS, ORGANIZATIONS AND SOCIETY
• PART FIVE FUTURE DIRECTIONS
• Index