Research Shows That When An Organization Breaches A Psychological Contract

Research Shows That When an Organization Breaches a Psychological Contract…

The psychological contract, an unspoken agreement between an employee and their employer outlining reciprocal obligations, is a crucial, yet often overlooked, aspect of the employer-employee relationship. When this invisible contract is breached, the consequences can be devastating for both the individual and the organization. Extensive research highlights the significant negative impact of psychological contract breaches, ranging from decreased job satisfaction and performance to increased turnover and even legal ramifications. This article delves deep into the research surrounding psychological contract breaches, exploring their causes, consequences, and strategies for mitigation.

Understanding the Psychological Contract

Before examining the ramifications of breaches, it's crucial to understand the very nature of the psychological contract. Unlike a formal, written employment contract outlining specific tasks and compensation, the psychological contract encompasses implicit expectations, beliefs, and promises. It's a dynamic agreement shaped by perceptions, experiences, and the broader organizational context. For employees, this might include expectations of fair treatment, development opportunities, job security, and a sense of belonging. For employers, it involves providing competitive compensation, creating a supportive work environment, recognizing contributions, and offering opportunities for growth.

Key Components of the Psychological Contract

Several key components consistently emerge in research regarding the psychological contract:

• Relational Contracts: These emphasize long-term commitment, mutual trust, and loyalty. Employees expect ongoing development and support, while employers anticipate dedication and discretionary effort.
• Transactional Contracts: These focus on a short-term exchange of services for compensation. Employees primarily expect fair pay and clear job descriptions, while employers prioritize efficiency and task completion.
• Promises: These are the explicit and implicit assurances made by both parties, shaping their mutual expectations. A breach occurs when these promises are perceived as broken.
• Obligations: These are the responsibilities and duties both parties feel obligated to fulfill. A breach can occur when one party fails to meet their perceived obligations.

The Detrimental Effects of Psychological Contract Breach

When an organization breaches the psychological contract, the consequences are far-reaching and often severe. Research consistently demonstrates a strong correlation between perceived breaches and negative employee outcomes.

Decreased Job Satisfaction and Engagement

A significant body of research indicates a direct link between perceived psychological contract breaches and decreased job satisfaction. When employees feel betrayed or undervalued, their emotional investment in their work diminishes, leading to reduced engagement and a decline in overall job satisfaction. This is especially true when breaches involve promises related to career development, fair treatment, or recognition.

Reduced Organizational Commitment

Psychological contract breaches significantly erode organizational commitment. Employees who feel that their employer has failed to uphold its end of the bargain are less likely to be loyal or committed to the organization's goals. This decreased commitment can manifest in reduced effort, increased absenteeism, and a greater propensity to seek employment elsewhere.

Increased Turnover Intentions and Actual Turnover

Perhaps the most alarming consequence of psychological contract breaches is the increase in employee turnover. When employees feel their employer has violated their implicit agreements, they are more likely to actively seek alternative employment. Studies have repeatedly shown a strong positive relationship between perceived breaches and turnover intentions, ultimately leading to higher employee turnover rates, which is costly for the organization.

Decreased Job Performance

Research shows a direct relationship between perceived psychological contract breaches and reduced job performance. When employees feel let down or disrespected, their motivation and productivity suffer. They may withhold effort, decrease their commitment to quality, or engage in counterproductive work behaviors.

Increased Stress and Negative Affect

The emotional toll of a psychological contract breach can be substantial. Employees experiencing breaches often report increased levels of stress, anxiety, and job-related strain. This negative affect can extend beyond the workplace, impacting their overall well-being and mental health.

Increased Counterproductive Work Behaviors

As a response to perceived injustice, employees may engage in counterproductive work behaviors (CWBs). These behaviors, which range from minor infractions like absenteeism to more serious offenses like theft or sabotage, represent a direct attempt to retaliate against the organization for the perceived breach. The cost of these behaviors can significantly impact organizational productivity and reputation.

Causes of Psychological Contract Breach

Understanding the causes of psychological contract breaches is critical for developing effective mitigation strategies. Several factors contribute to these breaches:

Organizational Restructuring and Downsizing

Major organizational changes, such as downsizing, mergers, or restructuring, often lead to perceived breaches. Employees may feel betrayed if promises of job security or career progression are broken during these turbulent periods. The lack of transparency and communication during such changes exacerbates the sense of breach.

Unfulfilled Promises and Broken Commitments

The most direct cause of psychological contract breaches is the failure of the organization to uphold its implicit or explicit promises. This can involve broken promises regarding promotions, training opportunities, work-life balance, or even basic fairness and respect.

Perceived Injustice and Unfair Treatment

Employees are highly sensitive to perceived unfairness. If employees believe they are being treated unfairly compared to colleagues, or that organizational policies are biased, they are more likely to perceive a psychological contract breach.

Lack of Communication and Transparency

Poor communication and a lack of transparency from management contribute significantly to psychological contract breaches. When employees lack information or feel excluded from decision-making processes, they are more likely to feel uncertain and distrustful, leading to a perception that the organization has not fulfilled its obligations.

Discrepancies between Expectations and Reality

A mismatch between the employee's expectations and the reality of their work experience can also lead to perceived breaches. If employees enter a role with certain assumptions about the work environment, company culture, or management style, and these assumptions are not met, they may feel the organization has breached the psychological contract.

Mitigating the Negative Effects of Psychological Contract Breaches

While breaches can't always be avoided, organizations can significantly mitigate their negative consequences through proactive strategies:

Enhanced Communication and Transparency

Open and honest communication is crucial. Employers should clearly communicate organizational changes, policies, and expectations, ensuring employees feel informed and involved. Transparency builds trust and reduces uncertainty, minimizing the likelihood of perceived breaches.

Fair and Consistent Treatment

Implementing fair and equitable policies and procedures is essential. Organizations should strive to treat all employees fairly and consistently, avoiding actions that could be perceived as discriminatory or biased.

Fostering a Positive Organizational Culture

Creating a supportive and respectful work environment is vital. Organizations should prioritize employee well-being, fostering a culture of trust, recognition, and mutual respect. This strengthens the psychological contract and increases employee loyalty.

Investing in Employee Development

Providing opportunities for training, development, and career progression demonstrates a commitment to employees' growth and well-being. Investing in employee development reinforces the psychological contract and enhances employee satisfaction.

Active Listening and Feedback Mechanisms

Establishing robust mechanisms for gathering employee feedback is crucial. Organizations should actively listen to employees' concerns, addressing them promptly and fairly. This shows employees that their opinions matter and strengthens the employer-employee relationship.

Timely and Honest Responses to Employee Concerns

When breaches occur, organizations must respond promptly and honestly. Addressing employee concerns directly, acknowledging mistakes, and offering appropriate solutions demonstrate a commitment to repairing the damaged trust.

Conclusion

Research overwhelmingly demonstrates the significant negative consequences of psychological contract breaches. From decreased job satisfaction and performance to increased turnover and counterproductive work behaviors, the impact on organizations can be substantial. However, by understanding the causes of these breaches and implementing proactive strategies to foster open communication, fair treatment, and a supportive work environment, organizations can significantly mitigate these risks and build stronger, more sustainable relationships with their employees. The focus should be on nurturing a culture of trust, transparency, and mutual respect, ensuring that the implicit promises inherent in the psychological contract are consistently upheld. Investing in the psychological contract is not merely a matter of ethical responsibility; it is a strategic imperative for organizational success.