RESEARCH
includes research articles that
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research
Effects of Psychological Contract
Breach on Organizational Outcomes:
Moderating Role of Tenure and
Educational Levels
Upasna A Agarwal and Shivganesh Bhargava
Executive
Summary
In contemporary knowledge-intensive organizations, which are characterized by short product life cycles and unhindered access to information and resources, organizational survival,
let alone success, necessitates higher-than-average performance. Engaged and committed
employees are considered critical resources for organizational survival and business success. Research suggests that the quality of employment relationship significantly impacts
employee attitudes.
Psychological Contract is a useful framework for examining the quality of employee-organization relationship. Psychological Contract Breach (PCB), defined as the cognition that
one’s organization has failed to meet one or more obligations within one’s psychological
contract in a manner commensurate with one’s contributions has deleterious effects of employee motivation. Previous research has shown that breach is a norm, not an exception.
However, given that PCB is an organizational reality, little effort has been made to examine
the impact of PCB on critical behaviours of work engagement and commitment. Further,
extant research on psychological contract has primarily tended to adopt main effects approach in examining the psychological contract-outcome relationship and not addressed
various individual and situational variables which can alleviate/aggravate our reactions.
Finally, most previous research on psychological contract breach has been conducted in
Western countries where cultures are typically individualist and low in power distance.
This work is significant for three reasons:
• It examines the effect of PCB on two critical organizational outcomes: work engagement
and affective commitment.
• It tests the role of individual level variables – tenure and educational level on PCBOutcome relationship.
• It examines PCB in novel geographical context.
Respondents to a survey were 1,302 Indian managerial employees working in eight organizations in India. Results suggest that
KEY WORDS
Psychological Contract
Breach
Work Engagement
Affective Commitment
Tenure
Education
• Tenure moderates the PCB-affective commitment relationship
• Education level moderates the effects of PCB on affective commitment
• Education level moderates the effects of PCB on work engagement.
Most of the research on psychological contracts has focused on direct effects of breach on
organizational outcomes. By examining the moderating effects of employee tenure and
educational levels, this study has unmasked some interesting findings in the PCB-outcome
relationship. The results of this study suggest that much like their counterparts in the West,
Indian employees perceive their psychological contracts to have been breached. The negative ramifications of PCB challenge organizations not to ignore the situation but to approach it.
VIKALPA • VOLUME 38 • NO 1 • JANUARY - MARCH 2013
13
P
sychological contract comprises employees’
‘beliefs about what they are entitled to receive, or
should receive, because they perceive that their
employer conveyed promises to provide those things’ in
exchange for their contributions (Robinson, 1996, p. 575).
However, sometimes (perhaps unwillingly), organizations are unable to meet all the promises conveyed (explicitly or implicitly) to their employees. This results in
the state of psychological contract breach (PCB), which
has been found to have detrimental effects on employee
attitudes and behaviours (Raja, Johns & Ntalianis, 2004;
Robins, Kraatz & Rousseau, 1994; Tekleab, Takeuchi &
Taylor, 2005; Conway & Briner, 2002; Parzefall &
Hakanen, 2010). Literature on PCB has blossomed progressively over the past decade and a half and there has
also been a recent meta-analysis on the subject (Zhao, et
al., 2007); yet review indicates that there are deficiencies
in the extant literature, which need to be addressed.
First, although the effects of PCB on organizational outcomes are well documented, these studies seem to have
been ‘stuck’(p.78) in terms of examining only specific
group of outcome variables (Taylor & Tekleab, 2004) such
as - intention to quit, job satisfaction, and organization
citizenship behaviour. While these outcomes are very
pertinent for organizational effectiveness, scholars point
out the need to examine the effects of PCB on other critical
behaviours as well (Parzefall & Hakanen, 2010). Second,
extant research on psychological contract has primarily
tended to adopt main effects approach in examining the
psychological contract-outcome relationship. Research
suggests that our attitudes and behaviours towards our
jobs do not change in a linear fashion (Rigotti, 2009).There
are various individual and situational variables which
can alleviate/aggravate our reactions. Indeed, previous
work has demonstrated that not all individuals react
equally to contract breaches (Coyle-Shapiro, 2002;
Restubog & Bordia, 2006). Finally, most previous research
on psychological contract breach has been conducted in
the Western countries (Hui, Lee & Rousseau, 2004;
Restubog & Bordia, 2006) where cultures are typically
individualist and low in power distance (Hofstede, 1984).
This study seeks to address the preceding limitations of
the extant literature and contribute to managerial knowledge by addressing the above mentioned literature gaps.
First, the current study examines the effects of PCB on
two critical organizational outcomes: work engagement
and affective commitment. Second, the moderating effects
14
of two relatively less explored individual level variables
– tenure and educational level — on PCB-outcome relationship is also tested. Finally, examining the phenomena of breach in a relationship-based collectivist culture
is rare in extant literature and thus this study significantly contributes to existing compendium of knowledge
on the subject.
The conceptual model representing the proposed relationships is depicted in Figure 1. The model suggests that
PCB will decrease employees’ affective commitment and
engagement with their work. Furthermore, it proposes that
the PCB-outcome relationship (affective commitment and
engagement) will be moderated by individual variables –
tenure and education level of employees.
PSYCHOLOGICAL CONTRACT
Psychological contract consists of employee’s expectation about what they owe their employers (such as hard
work, loyalty, and commitment) in exchange of what their
employers owe them (such as opportunities for skill development, career growth, competitive compensation,
healthcare benefits, among others) (Coyle-Shapiro &
Kessler, 2000). There has been phenomenal growth in the
literature on psychological contract in the recent years.
The increasing number of journals covering the subject of
psychological contract as well as special issues of Human
Resource Management (1994), Human Resource Management
Journal (1994), European Journal of Work and Organizational
Psychology (1996), and Journal of Organizational Behaviour
(1998; 2003) reflect the trend.
Psychological contract breach and its consequences are
the most extensively studied aspect of psychological contract literature. Psychological contract breaches occur
when employees perceive that their employers have failed
to fulfil obligations or promises implied by their employers (Morrison & Robinson, 1997; Restubog, Bordia & Tang,
2006; Turnley, Bolino, Lester & Bloodgood, 2003). On experiencing breach, employees are more likely to see themselves in a state of inequity. Employees restore equity by
altering their attitudes and behaviours such as lowered
job satisfaction (Raja, et al., 2004; Robinson & Rousseau,
1994; Tekleab, Takeuchi, & Taylor, 2005), organizational
commitment (Conway & Briner, 2002; Coyle-Shapiro &
Kessler, 2000; Raja et al., 2004), health and well-being of
employees (Gakovic & Tetrick, 2003; Johnson & O’LearyKelly, 2003), work engagement (Parzefall & Hakanen,
EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH ON ORGANIZATIONAL OUTCOMES...
2010), innovativeness (Ramamoorthy, Flood, Slattery, &
Sardessai, 2005) as well as increased turnover intentions
(Robinson & Rousseau, 1994; Tekleab et al., 2005) and
organization citizenship behaviour (OCB) (Coyle-Shapiro
& Kessler, 2000).
Social exchange theory and the norm of reciprocity have
been used as overarching theoretical frameworks to examine the affect of contract breach on outcomes (Robinson
& Morrison, 1995; Rousseau, 1995). Social exchange theory
postulates that when one party provides something to
another, it expects reciprocation. Breach occurs when
employees perceive a discrepancy between what they are
promised and what they actually receive (Morrison &
Robinson, 1997).
Effects of Psychological Contract Breach on
Affective Commitment and Work Engagement
In this study, we examine the impact of PCB on affective
commitment and work engagement. We chose to focus on
affective commitment because it has been one of the most
investigated responses of breach (Zhao, Wayne,
Glibkowski & Bravo, 2007) and this relationship needed
to be replicated in a novel social context. Work engagement is a high-leverage concept that has attracted increasing academic and practitioner interest in the recent years
(Schaufelli, Bakker & Van Rhenen, 2009) for its significant implications on critical organizational outcomes.
Affective commitment refers to the degree to which employees experience an emotional attachment with their
organization (Allen & Meyer, 1996). Research suggests
that the extent to which individuals’ needs and expectations about an organization are matched by their actual
experiences influences their levels of affective commitment (McDonald & Makin, 2000). Employees tend to view
their social exchange with the organization as less valuable if they perceive the organization to inadequately fulfil its commitments. According to the norm of reciprocity,
employees reciprocate the unmet promissory expectations
by decreasing their affective commitment to the organization (e.g., Bunderson, 2001; Turnley & Feldman, 1999;
Restubog, Bordia & Bordia, 2009; Deery, Iverson & Walsh,
2006; Dulac, Coyle-Shapiro, Henderson & Wayne, 2008;
Huang , Shi, Zhang & Cheung , 2006). Replicating the
past findings, in this study we hypothesize that:
Work engagement is defined as a persistent and positive
affective-motivational state. It consists of three components: vigour, dedication, and absorption (Schaufeli et
al., 2002). The first dimension of engagement, vigour, refers to a high level of positive energy at work, resilience,
and willingness to invest one’s efforts even in the face of
difficulties. Dedication is characterized by inspiration, a
sense of significance, and enthusiasm about one’s work.
Absorption is characterized by being fully concentrated
and happily engrossed in one’s work, whereby time
passes quickly and it becomes difficult to detach from
work. Empirical studies have provided evidence for a onefactor structure of work engagement to be more parsimonious (Wefald & Downey, 2009). Parzefall and Hakanen
(2010) examined the effects of psychological contract
fulfilment on work engagement. Building on the job demand resource model, the authors argued that perceived
contract fulfilment could be viewed as a resource that the
employees expected the employer to provide in the exchange relationship which fostered work engagement.
However, work engagement has not been examined as a
possible behavioural outcome of psychological contract
breach although its relationship with contract fulfilment
has been tested. For a long time, fulfillment of psychological contract was considered the opposite of breach. Lambert, Edwards and Cable (2003) have recently argued and
empirically validated that these are two distinct components of the psychological contract (Conway & Briner,
2005) and that breach and fulfillment do not reside along
a single continuum. They have unique effects on organizationally relevant outcomes and should be investigated
separately.
Commensurate to the social exchange theory, when employees receive resources from their organization, in reciprocation they bring themselves more fully to work roles
and devote greater amounts of cognitive, emotional, and
physical resources (Kahn, 1990; Saks, 2006). Conversely,
in situations of PCB, where employees perceive that an
organization is not living up to its commitments in terms
of providing promised inducements, they are motivated
to put in extra efforts and be engaged to their tasks
(Aggarwal, Thakore & Bhargava, 2010). Hence we posit
that:
Hypothesis 1b: PCB will be negatively related to
work engagement
Hypothesis 1a: PCB will be negatively related to
affective commitment.
VIKALPA • VOLUME 38 • NO 1 • JANUARY - MARCH 2013
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Moderating Effects of Individual Differences on
PCB Attitudes Relationships
Much of the available literature on PCB presumes that
the effect of breach on employee attitudes and behaviours
is similar across employee groups. Nevertheless, it is
widely accepted that since psychological contract consists of individuals’ beliefs about the terms and conditions of the exchange agreement between themselves and
their organizations (Rousseau, 1989; 1995), these individual differences can affect their responses to contract
breach. However, despite its long and widely acknowledged importance, studies examining the role of individual variables on psychological contract breach have
been rather insufficient (Reynolds, 2003; Coyle-Shapiro
& Neuman, 2004).
Scholars have argued that psychological contract breach
is an individual’s subjective evaluation of employer’s
promissory obligations rather than the objective existence
(Robinson, 1996; Robinson & Morrison, 2000; Turnley &
Feldman, 2000; Sparrow, 1996); and individual differences can potentially temper the severity with which
employees respond to incidences of breach (Robinson &
Morrison, 2000; Zhao et al., 2007). Thus there is need to
examine the effects of these variables.
Research suggests that the fundamental groups to which
individuals belong, such as age, gender, tenure, and level
of education, have profound influence on their perceptions, attitudes, and performance (Pfeffer, 1983; Hall &
Buttram, 1994; Williams & O’Reilly 1998; Kim, Murrmann
& Lee, 2009). Although studies have examined, albeit
sporadically, the role of age (Ng & Feldman, 2009; Bal,
Lange, Jansen & Velde, 2008; Bellou, 2009) and gender
(Bellou, 2009; Blomme, Rheede & Tromp, 2010) on the
PCB-organizational outcome relationship, unfortunately,
efforts to investigate the influence of education level as
well as tenure are rather insufficient (Bellou, 2007; 2009).
Researchers have stressed the importance of understanding these variables in gaining better insights into employment relationship. Therefore, the current study investigates the moderating role of relatively two less explored
individual variables – tenure and education-level — on
the relations between psychological contract breach and
engagement and affective commitment.
Theoretical (Jolson, 1974) and empirical evidence suggests that individual’s relationship to the job and work
organization changes as a result of socialization through
16
successive levels of organization tenure. However, in terms
of the impact of tenure on employee attitudes, there are
two contradictory schools of thought. The first school of
thought (Alutto & Hrebiniak, 1975; Staw & Ross, 1980;
Stevens, Beyer & Trice, 1978) suggests that longer tenure
has positive effects on employee attitudes and behaviours.
Spending longer time in the organization results in acceptance of authority, organizational policies as well as
organizational values (Schmidt & Posner, 1983). It has
been found that long tenured employees have limited attraction to the job market, and tend to demonstrate greater
internal work motivation, higher commitment, job involvement, and job security (Rhoades & Eisenberger, 2002).
However, there is a second school of thought which contradicts the aforesaid arguments. According to some
scholars, employees with a short tenure in the organization are generally more accepting, optimistic, and enthusiastic about the new work environment and tend to
demonstrate high levels of motivation to work in their
first few months which is referred to as the “honeymoon
period’’ than those with a longer tenure (Cropanzano,
James & Konovsky, 1993; Helmreich, Sawin & Carsrud,
1986; Wright & Bonett, 2002). According to Rainey (2003),
employees with long tenure become increasingly tired and
distrustful and consequently show lesser tolerance for
organizations’ decisions, policies, and actions (CoyleShapiro, 2002).
In the few studies which examined the effects of tenure
on psychological contract contents, results were contradictory. While some argued that employees with long tenure placed greater emphasis on relational contracts
(Rousseau & Mclean Parks, 1993; Rousseau, 1998;
Herriot, Manning & Kidd, 1997), Bellou (1997) found that
shorter the tenure, the less demanding were the employees.
All in all, the studies do not provide any clear direction of
relationship between tenure and psychological contract
contents; nevertheless the above evidence indicates that
organizational tenure of employees may be a potential
moderator of the effect of psychological contract breach
on organizational outcomes. Hence it is hypothesized
that:
Hypothesis 2: Tenure moderates the relationship
of psychological contract breach and affective commitment and work engagement.
EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH ON ORGANIZATIONAL OUTCOMES...
Education forms part of an individual’s total human capital endowments and improvises individual wisdom and
evaluation process. Like tenure, there are mixed findings
in terms of the effects of educational levels on outcomes.
Some scholars have argued that since highly educated
employees possess persistence, rationality, and thinking
power, they have the ability to understand situations better and tend to assess them positively. Higher levels of
study helps the individual to attain jobs which provide
him/her with autonomy, promotion, prestige, good employment conditions, and the possibility of developing
his/her professional capacities increasing the sense of
personal control (Glenn & Weaver, 1982). Individuals
with higher levels of education, it is argued, are less vulnerable to stress because of their greater ability to master
the tasks and manage the work. People with higher levels
of education have been found to be more satisfied with
their jobs (Ross & Van Willigen, 1997). Contradicting this
school of thought, Hall (1994) suggests that higher education induces higher expectations (Hall, 1994), which
could result in dissatisfaction, when they are not met. In
a study by Verhofstadt, Witte & Omey, 2007), people with
higher levels of education have been found to be less satisfied.
Studies examining the effects of education on PCB are
limited. Of the few studies examining the role of education on psychological contract, Sels, Janssens & Brande
(2004) found that as the educational levels increased, there
was a move from long-term relational psychological contract to transactional, short-term psychological contract,
suggesting clearly that individuals’ view of their employment relationship changed based on their level of education. Bellou (2009) found that individuals with at least
college education had relatively increased expectations.
However, the impact of education on perceptions of
employee’s psychological contract breach has not been
studied. Hence we hypothesize that:
Hypothesis 3: Education moderates the relationship of psychological contract breach with affective commitment and work engagement
Figure 1 schematically presents the conceptual framework.
RESEARCH METHOD
Sample
Psychological contract researchers have strongly recommended the need to collect data from diverse samples to
yield variability in responses (Guest, 1998; Turnley &
Feldman, 1999; Zagenczyk, Gibney, Kiewitz & Restubog,
2009; Restubog, et al, 2009). Researchers approached the
Human Resource heads of several organizations from
various sectors, telephonically or through e-mail and were
briefed about the study. Based upon their consent, a presentation about the objectives and scope of the study and
Figure 1: Conceptual Framework
Moderators
Tenure
Education
Affective
Commitment
Psychological
Contract Breach
Control Variables
Gender
Job Level
Age
VIKALPA • VOLUME 38 • NO 1 • JANUARY - MARCH 2013
Work
Engagement
17
the implications of the findings for the organizations was
made. Finally, data were collected from eight private companies in India representing eight different industries,
namely- investment bank, manufacturing, business process outsourcing (BPO), knowledge process outsourcing
(KPO), information technology (IT), pharmaceutical, telecommunication, and retail. Out of a final sample of 1,302
respondents, 56 (4.6 %) were from the knowledge process
outsourcing sector, 123 (9.4%) from retail, 267 (20.5%) from
business process outsourcing, 198 (15.2%) from information technology, 119 (9.1%) from investment bank, 216
(16.5%) from telecom, 229 (17.5%) from heavy engineering, and 94 (7.2%) from the pharmaceutical sector.
Profile of the Sample
This study focused on white-collared managerial population of these organizations. Managers are an important
group to investigate because they play a key role in organizations by making important economic contribution to
their organization (Quick & Cooper, 2002).
The 1,302 respondents included 910 males (69.9 %). The
average age of employees was 30.4 years and the sample
consisted of respondents from a fairly well distributed
age-group varying between 21 and 62 years, with a predominance of respondents less than 30 years. In terms of
educational attainment, the sample population consisted
of employees with Diploma (8%), Graduates (30%), Professional Graduates (20%), Postgraduates (30%), Professional postgraduates (9%), and Ph.Ds (3%). With respect
to hierarchical levels, 42.1 percent respondents were in
junior management positions while 57.9 percent reported
to be in senior management positions.
Instrument
Based on the literature review, psychological contract
breach was measured by using Turnley and Feldman
(2000) scale, tapping sixteen dimensions of the employment relationship and additional five items as validated
by Aggarwal and Bhargava (2009) in the Indian context.
In total, 21 items were used to measure psychological contract of employees. Employees were asked to respond to
how much of the promises were fulfilled vis-à-vis what
was committed to them. The 21 items were averaged with
higher values representing greater degree of psychological contract breach. Affective commitment was measured
by using 6 item scale developed by Allen and Meyer (1990).
Work engagement was measured with the nine-item ver-
18
sion of the Utrecht Work Engagement Scale (UWES;
Schaufeli, Bakker & Salanova, 2006). All measures/scales
were adequately reliable and were above the prescribed
level of 0.70 (Nunnally, 1970). Organizational tenure was
assessed with one open-ended question which asked the
respondents the number of years they had worked in their
organizations. Tenure varied from ten months to thirty
nine years, the mean tenure being five years.
Since prior research has suggested that gender and age
may influence PCB, we controlled for the effects of these
variables. We used dummy variables to represent differences in gender (0 = male; 1 = female). Age was represented in years. Respondents were asked to indicate their
educational level as - 0= Diploma, 1=Graduate, 2= Professional Graduate, 3= Postgraduate, 4= Professional
Postgraduate, and 5= Ph.D. Tenure was represented in
years and was classified into five groups: 1-3 years, 4-6
years, 7-10 years, 10-15 years, and more than 15 years.
The average tenure of employees was 4.3 years.
DATA ANALYSIS
Confirmatory factor analysis (CFAs) was performed to
evaluate the distinctiveness of the measures used in the
study by employing Harmans’ one factor test. To do so,
the model fit of 3 factor measurement model (psychological contract breach, work engagement, and affective commitment) was assessed using AMOS 6.
To test the research hypotheses, a series of hierarchical
multiple regressions were performed. To identify the relationships between the independent, moderating, control variables and the dependent variable, Pearson
correlation analysis was performed.
Since data were collected broadly from eight different organizations in eight sectors, differences on rating of variables were likely to exist. Hence, one-way analysis of
variance (ANOVA) test was performed to examine these
differences. The ANOVA comparing the organizations
on the research variables showed that F values were significant for almost all variables. These mean differences
were on expected lines since these organizations represented firms in different sectors, having different business process and challenges. Further, post-hoc analyses
results based on Scheffe’s Test was conducted to test if
pairs of means differences among variables formed any
specific patterns. However, results did not yield any consistent pattern that could be used as the basis of cluster-
EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH ON ORGANIZATIONAL OUTCOMES...
ing of the organization for further analyses. Lack of support (from Scheffe’s Test) for cluttering the organization
into cohorts as well as the fact that these eight organizations represented eight broad sectors of the economy, did
not provide justification to do a sector-wise analyses.
Therefore in order to maintain the diversity of our sample
pool and capitalize on the statistical power, overall, we
combined the samples in analysing the hypothesized relationships. This kind of methodology has been followed
by researchers in recent literature (Restubog et al, 2009;
Behery, 2009).
RESULTS
suggests, as expected, that the effects of PCB on affective
commitment is significant (F= 50.1, p<.001) and the R2
change indicates that 14 percent of variance in affective
commitment is explained by PCB. PCB is significantly
and negatively related to affective commitment (β = -.038,
p<0.001), thus supporting Hypothesis 1a (Table 2).
Table 2: Stepwise Multiple Regressions
ΔR2
Affective Commitment
0.04 0.18 0.14
Work Engagement
0.05 0.16
0.11
Independent Variable
PCB
PCB
A confirmatory factor analysis using AMOS 5 was conducted to assess the affect of common method errors, since
PCB, work engagement, and affective commitment were
rated by the respondents. Results of model fit showed
that three -factor model yielded better fit (GFI = 0.90; CFI =
0.91; TLI = 0.90; RMSEA = 0.06) than the single-factor
model (GFI = 0.70; CFI = 0.42; TLI = 0.43l; RMSEA = 0.17),
suggesting that these three self-reported variables can be
differentiated from each other.
Means, standard deviations, reliabilities and correlations
for the study’s variables are presented in Table 1. The
relationships of PCB with affective commitment (r = -0.30;
p <0 .01) and work engagement (r = -0.22, p <0 .01) were
significant. Tenure exhibited significant positive relationship with psychological contract breach (r= 0.01, p<0.01)
affective commitment (r = 0.17, p < 0.01) and work engagement (r = 0.16, p < 0.01).
R2
R
F
P
50.1 0.001
43.8 0.001
Hypothesis 1b predicted a negative relationship between
psychological contract breach and work engagement. The
overall model for work engagement is significant (F= 43.8,
p<0.001) and the R2 change indicates that 11 percent of
variance in work engagement can be explained by PCB.
Results of regression analysis indicate that psychological contract breach is significantly and negatively related
to work engagement (β = -0.34, p<0.001), thus supporting
Hypothesis 1b. The results of the regression analyses are
shown in Table 2.
Hypotheses 2 and 3 each predicted a moderating effect of
tenure and education on PCB-outcome relationship. We
used moderated regression analysis to test these hypotheses, centring the independent variables around zero before creating the interaction terms . This was done in order
to reduce the multicollinearity associated with the use of
interaction terms, (Aiken & West, 1991)
Testing Hypotheses
Hypotheses 1a and 1b predicted a negative relationship
between psychological contract breach and affective commitment and work engagement. The regression analysis
At this point, Tukey HSD tests were adopted to trace the
differences among individuals with different levels of
education and tenure. Although the sample was classi-
Table 1: Correlation Matrix
1. Gender
2. Age
Means
SD
1
2
0.30
0.45
1
30
7
-0.19***
1
3
4
3. Education
2.1
1.1
-0.01
-0.09**
1
4. Tenure
4.3
5.7
-0.09***
0.71**
-0.17**
1
5. Job Level
1.5
0.49
-0.11**
0.31**
0.08**
0.19**
6. PCB
5
6
7
1
-0.65
0.68
0.01
0.05
-0.04
0.01*
0.04
1
7. Affective Commitment
5.4
1
-0.01
0.19**
-0.08
0.17**
0.10**
-0.30**
1
8. Work Engagement
4.7
1.2
-0.05*
0.20**
-0.03
0.16**
0.12**
-0.22**
0.48**
VIKALPA • VOLUME 38 • NO 1 • JANUARY - MARCH 2013
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1
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Tables 3 and 4 provide the results of hierarchical regression analyses that test the hypotheses for the moderating
role of tenure and educational level between PCB-outcome relationships. PCB and tenure were significant predictors of affective commitment and work engagement (β
= 0.29, p < 0.01; β = 0.16, p < 0.01 respectively) and the
interaction variables (PCB* tenure) had significant influence on affective commitment adding 1 percent to the explained variance. However, tenure did not emerge as a
moderator in case of work engagement. Thus, H2 is partially supported.
action variable had a significant influence on affective
commitment and work engagement adding 7 percent and
11 percent explained variance, respectively. Thus, H3 is
supported.
Table 4: Stepwise Multiple Regressions: Moderating
Effect of Education
PCB
Education
PCB* Education
PCB
Education
PCB* Education
PCB
Tenure
PCB*Tenure
PCB
Tenure
PCB*Tenure
R2
F
F
P
12.8 0.001
64.4 0.000
44.2 0.000
14.6 0.001
34.2 0.021
23.2 0.001
4.5
4
3.5
3
2.5
2
1.5
1
Low PCB
12.8 0.001
6.5
0.001
5.4
0.001
High PCB
Low Tenure
High Tenure
P
Figure 3: Moderating Role of Education on PCB
Affective Commitment Relationship
5
14.6 0.001
12.5 0.003
10.3 0.210
Table 4 reports the results of hierarchical regression analyses used to test the hypotheses for the moderating effects
of education level between PCB and two outcomes, affective commitment and work engagement. Education and
PCB were also significant predictors of work engagement
(β = 0.06, p < 0.05; β = 0.21, p < 0.01 respectively). When an
interaction term (PCB* Education) was entered, the inter-
20
R2
5
Affective Commitment
ΔR2
Affective Commitment
0.041 0.181 0.142
0.072 0.191 0.023
0.293 0.141 0.015
Work Engagement
0.038 0.161 0.021
0.230 0.001 0.051
0.238 0.057 0.014
R
R
Figure 2: Moderating Role of Tenure on PCB- Affective
Commitment Relationship
Table 3: Stepwise Multiple Regressions: Moderating
Effect of Tenure
Independent Variable
ΔR2
Affective Commitment
0.008 0.001 0.001
0.301 0.090 0.089
0.305 0.091 0.071
Work Engagement
0.038 0.001 0.102
0.227 0.052 0.023
0.234 0.055 0.110
Independent Variable
Affective Commitment
fied on five levels of education (0=Diploma, 1=Graduate,
2=Professional Graduate, 3=Postgraduate, 4= Professional postgraduate, and 5= Ph.D), employees who had
earned a diploma, graduation or professional graduation degree were found to have different response to breach
vis-à-vis those who had professional post-graduation, postgraduation, and a Ph.d degree. Hence the sample was
divided into two groups – those with graduation and
less than graduation degree and those with more than
graduation degree. Similarly, although tenure was assessed across six levels, results revealed that there were
only two groups with significant differences to perceptions of PCB. Thus employees with tenure of <5 and 5
years formed the first group while employees with tenure
of > 5 years were constituted as the second group for further study.
4.5
4
3.5
3
2.5
2
1.5
1
Low PCB
High PCB
Low Education
High Education
EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH ON ORGANIZATIONAL OUTCOMES...
Figure 4: Moderating Role of Education on PCB –
Work Engagement Relationship
Affective Commitment
5
4.5
4
3.5
3
2.5
2
1.5
1
Low PCB
High PCB
Low Education
High Education
DISCUSSION
Findings
Non-fulfilment of promised inducements is regarded as
the transgression of psychological contract and triggers
negative reactions from employees. When the organization is perceived to inadequately fulfil its commitments,
employees view their social exchange with the organization as less valuable and reciprocate by decreasing their
affective commitment to the organization and levels of
work engagement as well.
Since psychological contract breach is a subjective concept (Rousseau, 1995), individual traits can exacerbate or
buffer the negative effects of contract breach on outcome
(Morrison & Robinson, 1997; Rousseau, 1995). The results of this study found moderating effects of education
and tenure on PCB-Outcome relationship. Contrary to
Bellou (2007), who found that employees with shorter
tenure are less demanding of employment relationship,
the results of this study suggests that the negative effects
of PCB on employee’s affective commitment were stronger and more intense for employees with shorter tenure
in the organization. This is in line with the social impact
theory (Latane, 1981), which suggests that the extent of
social influence that any individual has over others is a
function of, among other factors, the proximity in time
and space between the relevant parties, which has been
labelled “immediacy.” The longer member remains in an
organization, the more he/she gets attached to it and this
continuity and long tenure in the organization dampens
the intensity of employee’s negative reaction to incidences
VIKALPA • VOLUME 38 • NO 1 • JANUARY - MARCH 2013
of breach. A possible reason for this could be that long
tenured employees, are more likely to accommodate and
interpret contract breach as a natural lapse which will be
rectified over the course of time.
This study also found that education level of employees
significantly influences their response to psychological
contract breach. Employees with higher education respond more emotionally to their incidences of breach in
terms of affective commitment and work engagement.
These findings corroborate with the school of thought
which suggests that employees with higher education
tend to have greater expectations in terms of inducements
from their organization (Bellou, 2009) and are also ‘less
tolerant’ to procedural inadequacies (Fryxell, 1992; Nurse
& Devonish, 2006). On the contrary, individuals who have
been exposed to education to a lesser extent are willing to
settle with organizational provisions, even if these are
not in accordance with the commitments made, perhaps
because they have lesser job alternatives.
Theoretical Contributions
The findings of this study significantly contribute in advancing the body of knowledge on psychological contract. In addition to confirming the more traditional
outcomes associated with psychological contract breach
such as affective commitment, the present study promisingly expanded the outcome variables of psychological
contract to include work engagement. Further, numerous
writers have implicated the role of demographic characteristics in influencing social dynamics. With few exceptions (e.g., Turnley & Feldman, 1999; Bellou, 2009, among
others), to date, most of the research on psychological
contracts has focused on direct effects of breach on organizational outcomes which has been recognized as a critical literature gap. By examining the moderating effects of
employee tenure and educational levels, this study has
unmasked some interesting findings in the PCB-Outcome
relationship. This new conceptual framework offers a
more sophisticated explanation of the link between PCB
and employee attitudes in a novel geographical context.
Practical Implications
The results of this study suggests that much like their
counterparts in the West, Indian employees perceive their
psychological contracts to have been breached. The negative ramifications of PCB (e.g., lack of affective commitment and work engagement) challenge organizations not
21
to ignore the situation but to approach it proactively. Organizational agents (e.g., human resource staff, supervisors, and managers), particularly those responsible in the
recruitment process, should exercise caution in conveying promises to the job applicants and clearly establish
the parameters and conditions of employment during recruitment. In order to have a common interpretive framework, organizations can make realistic job previews (RJPs)
an important part of their recruitment strategy. RJPs accurately depict the behaviours expected within the specific position on entry into the organization, lower
grandiose expectations, thereby improving the fit between
indivi-dual’s expectations and organizational ability
(Ilgen & Seely, 1974). Organizations should also focus
employee’s attention on the most important terms of the
deal and promote a common frame of reference. By doing
so, they would enable applicants to make a more informed
choice about whether or not to accept an offer of employment (Wanous & Reichers, 2000), thus reducing the probability of unmet promises.
The results of this study also suggest that the desirable
form of psychological contract differs based on membership in fundamental groups, namely tenure and level of
education. Organizations should therefore be aware that
employee work attitudes are influenced by the employee’s
tenure as well as education level. The findings can be
used as a basis to define and to execute HRM in organizations for highly-educated and low-tenured employees.
Specifically, utmost care should be taken in living up to
the promises conveyed implicitly or explicitly to employees with high educational background and those with
short tenure in the firm. Companies and policy makers
should frequently and candidly share organizational
priorities with employees in this bracket and expose as
many people to planning process as possible in order to
give them a sense of understanding. Further, social accounts should be frequently offered by the organization
and its agents to explain job-related decisions. Such communication could also serve to mitigate against employees decreasing their commitment to the organization and
their efforts on its behalf (Rousseau & Tijoriwala, (.1999)
Limitations
Despite the strengths and new relevant results, this study
has certain limitations. Since the results of this study are
based on cross-sectional data, it is impossible to draw
conclusion regarding causality. For example, employees
who experience lower levels of engagement at work may
perceive more contract breach. Longitudinal research is
needed to examine the causal direction of relationships.
Moreover, studies in future should examine the difference in perceptions of breach across individual dimensions - such as education and tenure, and other factors
such as gender, job level, and age concomitantly. These
are prospective directions and avenues for future
research.
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Upasna A Agarwal is an Assistant Professor at S.P Jain Institute of Management and Research, Mumbai. A Ph.D. in Organization Behaviour from IIT(B), she has over ten years of
corporate and academic experience. Her research interests lie
in the areas of Employees’ extra-role behaviours, Trust, Organization power and politics, and Uncivil behaviour at work.
She has to her credit publications in reputed national and
international journals and has presented her research findings in various national and international conferences within
and outside the country.
Shivganesh Bhargava, (Ph.D.) is Professor of Management at
the SJMSOM, IIT Bombay. He has been the Founder Director
of JK Lakshmipat University Jaipur. In recognition of his contributions, he received the VKRV Rao Award (2003) in Management by the ICSSR, New Delhi, MPCOST Young Scientist
Award (1988) by the MP Young Science Congress Association, & MP Council of Science and Technology as well as
ISCA Young Scientist Award (1986) by the Indian Science
Congress Association. His research, teaching, consulting and
training fields are Organizational behavior, Human resource
management, and Entrepreneurship.
e-mail: [email protected]
e-mail: [email protected]
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