Wednesday, October 7th, 2015

Psychology of Organisations
Psychology, 2nd Year

lvaro Melndez Gutirrez

Universidad de Sevilla

Problem 1:
Why are we losing all our good people?
On Psychological Contracts
Introduction
During the first PBL session we were proposed a case in which we were presented a company
that was losing their best employees, them being fleeing away to bigger and more potent firms.
As a team we agreed that in order to solve the former situation in a satisfactory way we would
need to carry out individual researches (based on PBL methodology) on the following
statements, a.k.a. learning goals:
1.
2.
3.
4.
5.

Psychological Contract (PsyC from now on).

Relationships between PsyC and Personal Expectation.
Consequences of Unreached Expectations.
On violation of Contracts.
Company Management Methods (improvements in the company when employees are
fleeing).

As a way of structuring the learning goals, I have decided to present the results of my readings
in three different sections:
I.
II.
III.

Psychological Contract: which will include the definition of PsyC and its relation to our
problem. This reunites learning goals 1 and 2.
Breach and Violation: in where I will discuss the findings on consequences of violating
or breaching PsyC, and of course relate it to our problem. This part will reunite learning
goals 3 and 4.
Solving the Conflict: which includes learning goal 5, and gathers together the entire
research work to present my personal conclusions.

This document, again, will present my own research on the learning goals and will discuss the
possible solutions based on the resulting knowledge of such investigation. These results are not
definite or immutable answers as they are meant to be complimented and combined, if not
rejected, by my teamworks answers, opinions and researches during our next PBL meeting. I
hope, at least, that they will be seen as a useful, though humble, contribution to the problem we
have been entangled to resolve.

I. Psychological Contracts
When speaking about Psychological Contracts, Rousseaus 1989 work was the first appropriate
approach to term, being the most cited in nowadays studies (Guest, 2009).

Psychological contracts are beliefs based upon promises, expressed or implied, regarding an
exchange agreement between an individual and, in organisations, the employing firm and its
agents (Rousseau, 1995). She describes six features for such a concept:
1. Voluntary Choice: commitments made voluntarily and explicitly tend to be kept.
2. Belief in Mutual Agreement: individuals have subjective approaches to psychological
contracts, existing better agreement between sides when working with experienced
employees.
3. Incompleteness: not all contingencies can be foreseen. If reinforced periodically, PsyC
get fleshed and become increasingly convergent, therefore effective, between sides.
4. Multiple Contract Makers: workers receive feedback from different sources. Those
signals can come from bosses or co-workers, so it is important to keep that information
consistent and coherent.
5. Managing Losses when contract Fails: promised benefits that fail to materialise, in
any of both sides, rapid and precise attention should be given in order to ensure mutual
understanding and impaired work progress.
6. Model of Employment Relationship: or mental scheme of such a relationship as a firstline reference of workers and employers to know where are they standing. It is sensitive
to evolve along time.

On their side, Morrison and Robinson understand the PsyC as a shared understanding of
employers and workers of what they expect from each other. These two authors go beyond
Rousseaus proposal by outlining the importance of the PsyC in improvement and reductions of
well-being. They also distinguish, from the researches of Morrison and Robinsons (1997),
violation of the PsyC and breaches of the PsyC, being the later presented on daily basis, and
the former what Rousseau actually means when she uses the term to violate the PsyC. They
also outline the importance of understanding the consequences of fulfilling or breaking a PsyC,
going beyond Rousseaus first sketch.
So what we have is an outline of the psychological relationship between employers and
employees, which as a team we belief it was one of the main causes for the employee flee.
These involve not only the up-down manager-worker relationship but also the feedback
received from the fellow workers, involving in our case a lack of team feeling and an
appropriate work environment.
The main objections that this base theory on Psychological Contracts present are outlined by
Guest and Conway (2004):
-

The utility of the transactional-relational distinction with clear outcomes.

The focus on violation of PsyC leaves a vacuum in its fulfilments theoretically positive
outcomes. In other words, we only have the certainty that violating PsyC has a negative
outcome, but fulfilling it at least avoids such negative conclusions.
The need of extend the studies in these areas in order to provide effective techniques
and policies for promoting enterprises employers and employees well-being based upon
the construct of Psychological Contract.

The difference between relational and transactional PsyCs, although explained in detail in
Rousseaus 2004 work, its enlarged by the recompilation J. George (2009) does. He explains
that transactional and relational PsyC correlate inversely, being the second one usually linked to
stronger emotional reactions when broken. We seem to have a case of relational breach and
violation in Toms case leaving the company that we will analyse in part II of this work.
There is a significant difference which I would like to outline. I think its important to focus how
the employee sees his or her work: as a job, a career or a calling. Its the difference between
economical maintenance and personal fulfilment? As George (2009) explains, this difference
will explain causally the strong emotional response Tom has when leaving the company, and his
inability to communicate openly with his CEO. He clearly presents a case of unreached
expectations and its consequent lost of trust in the firm.
Rousseau (1998) explains that trust is a psychological state comprising the intention to accept
vulnerability based upon positive expectations of the intentions or behaviour of another.
Conditions are risk, which creates the opportunity of trust, and interdependence, where
interests of one party cannot be achieved without the other. Therefore, its extremely related to
PsyC as we are trying to resolve the problem presented. She also explains that identity-based
trust is relational trust at its broadest, and a breach at this level of trust develops in employees
quitting as its already happening.

II. Breach and Violation

Breach, by definition, implies a discrepancy between promises and delivery, which mirrors
several discrepancy evaluations such as job dissatisfaction (Guest, 1998). These usually trigger
feelings of insecurity and mistrust, which affect the well-being outcome of employers and
employees. On their research paper they study the effect of breaching the PsyC and its effect
on employees well-being and health, and they find statistical significance between both
variables, though theres not the same result for its positive effect by fulfilment. This shows the
effect of making promises and breaking them on an individuals health and well-being, arising
the question of which practices and policies are more likely to fulfil and not breach the
psychological contracts.
Rousseau (1989) explains PsyC breach is the subjective experience based on a persons
perception that another has failed to fulfil adequately the promised obligations of the PsyC,
while Robinson et al. 1994 expose PsyC violation is the failure of one party to fulfil the
obligations to the other. It is also the emotional and affective state that is left when PsyC is
violated (Morrison and Robinson) accompanied by feelings of anger, resentment, bitterness,
indignation and even outrage, all coming from the perception of betrayal. Causes are reneging
(skipping a promise, one-sided) and incongruence (different beliefs upon the same promise)
(Morrison and Robinson, 1997). Then there is disruption, or impossibility for one or both parts
to fulfil the PsyC, but we will treat this last one no further because its not related to our case.
The key message that you can extract from these researches is not to make promises that you
cannot keep. It also outlines why psychological contract is a good variable for measuring
employees well-being and health. In our problem we have a company that offered to its

employees a series of goals such as innovation with the promise of creativity and freedom of
work when in practice this liberties, implicit in the contract and explicit (as they may be) in the
PsyC, are not being conceded. These variables have led to a situation of breach (perception)
and violation of the PsyC. As Rousseau explains, such losses are the basic reason why
psychological contract violation generates strong negative reactions, including anger, outrage,
termination, and withdrawal of support (Rousseau, 2004).

III. Solving the Conflict

Gathering all together, we have a case of psychological contract breach on Toms side, the
employee, and a violation of it from the firms side. Consequences are outlined in the problem
itself: employees quitting, dissatisfaction, lack of vertical communication between managers
and workers and uncomfortable work environment. The solutions I will propose are a
recompilation of what was researched up to this point:
First, following Rousseau again, the company needs to understand that creating mutuality is
the gold standard for maintaining psychological contracts and professional development
excellence. In other words, they ought to keep the tacit promises made during the birth and
development of the PsyC to reach full potential.
Second, and active participation of the CEO in figuring out the current state of their employees
PsyC is utterly recommended, as one of the main features of psychological contracts is that
they often only become explicit when its breached, causing feelings of violation and
consequences already explained. These might be achieved by creating a space in which
employers and employees are encouraged to express themselves freely, without fear of
consequences, in an atmosphere of cooperation. This would allow the CEO to monitor the
current state of the PsyC, and will make workers feel theyve got a voice and purpose in the
company, reinforcing trust and favouring the appearance of a relational long term psychological
contract that our firm strikes for.
We have to understand that Psychological Contract remains to be a larger under-researched
construct, and therefore it cannot by itself account for the complexity of organisational
relationships. Yet it has been proven a useful concept to propose solutions to the conflict we are
dealing with by showing some of the weaknesses that ought to be addressed if we want to
understand the phenomenon presented from a psychological perspective. These two solutions
that I present can be summarised in building up trust and creating a channel to receive
feedback with which to plan the directions that this trust is taking, allowing both employers and
employees to work in a more comfortable, and eventually productive, environment. I hope that
following the research and the expositions these solutions came to be clear and will be a useful
contribution to our teamwork.

Bibliography
- George, J. (2009). Psychological Contract: Managing and Developing Professional Groups.
Maidenhead, GBR: McGraw-Hill Education.

- Guest, D. & Conway, N. (2009). Health and Well-Being: The role of Psychological Contract.
In Cooper, C.L., Campbell, J., & Schabraq (pp. 9-23). International Handbook of Work and
Health Psychology. Chichester, MA: Wiley-Blackwell.
- Rousseau, D. M. (2004). Psychological Contracts in the Workplace: Understanding the Ties
That Motivate. Academy of Management Executive, 18(1), 120-127.
- Rousseau, D.M., Sitkin, S.B. Burt, R.S., & Camerer, C. (1998). Not so different after all: A
cross discipline view of trust. Academy of Management Review, 23(3), 393-404.