Psychological Contract Breach & Violation

Dr. David McGuireNapier University Business School

Agenda

Rousseau Model of Psychological Breach/ViolationDistinguishing Breach and ViolationPate et al. Psychological Contract Violation ModelResponse to Psychological Contract ViolationRole of Trust Outcomes of Psychological Contract Breach/ViolationLayoffs & Psychological ContractExpatriate Psychological ContractPsychological Contract Drift

Rousseau’s (1995) model of contract breach/violation

ContractOutcomeDependency

PerceivedSize of Loss

Violation

MonitoringRelationshipStrength

Sources of Contract Violation

Inadvertent– Able and willing

• Divergent interpretations made in good faith

Disruption– Willing but unable

• Inability to fulfil contract

Breach of Contract– Able but unwilling

• Reneging

Failure to keep commitments

Opportunism– Active, self-serving behaviour by one party at the expense of

another (e.g. quitting an employer with whom there is an agreement to stay)

Negligence– Passive: Failure to perform specified responsibilities (e.g.mentors

who fail to follow through on support to those they counsel)Failure to cooperate– Behaviour that undermines ability of parties to maintain their

relationship (e.g. refusing to participate in attempts to resolve disputes)

Types of Violation

Absence of training, training not as promised 65%Discrepancy between promised and actual pay 61%Promotion schedule not as promised 59%Misrepresentation of the nature of the job 40%Promises regarding job security not met 37%Feedback inadequate compared to promised 35%Ees not asked for change input or told about it 29%Ees given less responsibility than promised 27%

Psychological Contract Breach

Psychological Contract Breach is relatively commonMorrison & Robinson (1997): Breach is “the cognition that one’s organisation has failed to meet one or more obligations within one’s psychological contract”May be a relatively short-term phenomenonMay result in an individual returning to returning to a relatively stable psychological contract state

Psychological Contract Violation

Morrison & Robinson (1997): Violation is “an emotional and affective state that may follow from the belief that one’s organisation has failed to adequately maintain the psychological contract”Violation response more intense than breach as respect and codes of conduct are called into question as a “promise” has been broken and it is more personalised

Guest & Conway Psychological Contract

IndividualAge

GenderUnion MemberLevel in Org.Type of workHours workedMarital Status

Children

OrganisationalSector

Org. sizeLocation

Background Factors

HR Policy & PracticeDirect

ParticipationJob AlternativesOrganisational

SupportWork Centrality

SurveillanceOrg. Change

Suitably qualifiedPromises made

PolicyInfluences

Fairness

Trust

Delivery of the Deal

Behavioural Consequences:

Intention to stayor quit

Knowledge Sharing

Attitudinal Consequences:

Org. commitWork & Life sat.

Job SecurityMotivation

State of PsychologicalContract

The Outcomes

Pate et al. Psychological Contract Violation Model

OrganisationalJustice Triggers

Distributive Justice Issues

Procedural Justice Issues

Interactional Justice Issues

Attitudinal OutcomesLower Job Satisfaction

Lower Org. CommitIncreased Cynicism

Behavioural OutcomesLower Org. Citizenship

Lower effort

Understanding Psychological Contract Violation

Violation is most likely when:There is a history of conflict and low trustSocial distance exists between the partiesIncentives to breach contracts are highOne party places little value in the relationship

Factors that cause resistance to violation include:Strong relationshipsFrequent interactionsSacrifice and previous investments

Responses to PsychologicalContract Violation

Voice Neglect Destruction

Loyalty Exit Silence

Constructive Destructive

Active

Passive

Type of Ee Response

Nature of Ee Response

Exit & Neglect/Destruction

Exit is most likely following violation when:– Contract is transactional– Many other potential jobs or potential employees exist– Relationship is brief– Other people are leaving– Attempts to address issues have failed

Neglect/Destruction is most likely when:– History of conflict, mistrust and violation– No voice channels exist– Other people demonstrate neglect and destruction

Voice & Loyalty/Silence

Voice is most likely when– A positive relationship and trust exists– Voice channels exist– Other people are using voice– People believe they can exercise influence

Loyalty/Silence is most likely when:– There are no voice channels or ways of complaining– No alternative opportunities exist elsewhere

Role of Trust in Environmental Turbulence

Trust influences the likelihood that an action would be perceived as a psychological breachTrust acts as a mediator of the relationship between the psychological contract and employee’s subsequent contributionEmployees with low initial trust will experience a greater decline in their trust following a perceived breach

Types of Trust

Calculus Based Trust: Individual rationally weighs up the value of sustaining the relationship. Usually economically basedKnowledge Based Trust: This concerns the predictability of the other party’s behaviour and their likely future course of actionIdentification Based Trust: Involves identification with other party’s values, desires and intentions. Violation of this form of trust engenders strongest reaction

Outcomes of Psychological Contract Breach

After a breach Employees are motivated to reduce their commitment to the organisation or to contribute less to the organisation in terms of in-role of extra-role performance (Turnley et al. 2003)Negatively influences employee attitudes towards organisations and their jobs (Lester et al. 2002)Leads employees to believe that organisation does not care about their well-being & cannot be trusted (Robinson 1996)Negatively related to affective commitment & positively related to intention to quit (Raja et al. 2004)

Outcomes of Psychological Contract Breach

Less motivated to restore balance to the employment relationship in some way (Lester et al. 2002)Organisational Citizenship Behaviour (OCB)– discretionary, extra-role behaviour intended to benefit the organisation not formally recognised or rewarded during performance reviewIn cases of breach, employees will reduce OCB, because it is discretionary and likely to go unpunished (Robinson & Morrison 1995)

Outcomes of Psychological Contract Violation

Psychological Contract Violation will be a key intervening variable that will explain (mediate) when psychological contract breach will influence intention to quit (Suazo et al. 2005; Turnley & Feldman 2000)Psychological Contract Violation will mediate the relationship between psychological contract breach and professional commitment (Suazo et al. 2005)

Layoffs & Psychological Contract

Edwards et al. (2003): Organisations with Ee ideology of self-reliance perceived less of a breach of contract following a layoffHigh levels of work ethic and self-esteem influence reactions of survivors to layoffs (Brockner et al. 1985; 1988)Astrachen (1995): Layoff announcement induces separation anxiety and degree of this depends on size of layoffsMone (1997): Trust decreases following a layoff

Layoffs & Psychological Contract

Leana et al. (1992; 1987): Victims experience overwhelming pessimism, anger, stress and feelings of learned helplessnessInterpersonal Treatment/Interactional Justice accords layoff victims increased perceived justice (Naumann et al. 1998; Bennett et al. 1995)Marks & Mirvis (1998): The way in which a merger is handled by top mgt. affects Ees feelings about their jobs and sense of personal stability.

Psychological Contract Change

Internal Change– Contract Drift: Changes to the contract without any

formal effort to change the termsExternal Change– Accommodation: Mutually acceptable adjustments

within the existing contract– “We must adjust to changing times and still hold to

underlying principles”– Transformation: Redefinition and renegotiation of the

contract

Psychological Contract Drift

WorkingContractModel

MaturationCognitive

Tendencies

ContractSchema

Gradual External Change

Zone of Acceptance

Managing Psychological Contract Drift

Periodic Conferences: Discussions and reminders of contract terms can prevent erosion or expansion of contract terms due to driftTraining & Development Exercises: Identifies manager and subordinate expectations and allows highlighting of differences/similaritiesUpdates: Resigning of contract on a regular basis allows renewal and re-examination of terms and conditions as well as reciprocal expectations