An Investigation of the Relational Component of the Psychological Contract across Time, Generation, and Employment Status

Historically, a mutual understanding existed between employees and employers. It was expected that employees would work hard, cause few problems, and generally do whatever boss wanted. In return, it was expected that employers would provide good jobs with good pay, offer plenty of advancement opportunities, and virtually guarantee lifetime employment. It was a stable, predictable world; employee would be loyal to employer and, in return, employer would provide job security for employee. The Organization Man, written by William H. Whyte in 1956, portrayed this reciprocal understanding as an institution in American business. This belief in an unwritten agreement between employee and organization later came to be referred to as psychological contract and was described by Levinson et al. (1962) and Schein (1965). The corporate restructuring and downsizing strategies of 1980s and 1990s likely have this traditional employee/employer relationship. Some researchers have asserted that American workplace of today is one of increased workload and stress and decreased job security and commitment (Cascio, 1998; De Meuse et al., 1997; Jaffe and Scott, 1998). The popular press, as well as academic literature, proclaim that current work environment sends confusing signals that may lead to employee uncertainty, cynicism, fear, and anger (De Meuse and Tornow, 1990). Initiatives such as Total Quality Management (TQM), employee empowerment programs, and self-managed work teams convey to employees that employers value them and they are an integral corporate asset. However, at same time, employees are being exposed to strategies such as downsizing and reengineering that often are contrary to implications of such intervendons and ignore critical role that people play in organizational success (Pfeffe r, 1998). Ironically, few empirical investigations have examined whether employee perceptions of psychological contract actually have changed. The existing literature distinguishes between two components of psychological contract--transactional and relational (Macneil, 1985; Morrison and Robinson, 1997). These two components emphasize different types of exchange relationships between employee and employer. In a transactional exchange, organizations explicitly and/or implicitly promise to provide specific, monetary remuneration for certain services performed by employee. Consequently, a short-term, almost contract-like agreement between two parties results. In contrast, relational component emphasizes a socio-emotive interaction between employee and employer. Relational elements revolve around trust, respect, and loyalty developing over time. The relational component of psychological contract is becoming a more complex issue for companies as some are forced to downsize, while others face a tight labor market, making it difficult to find and retain qualified employees. In this competitive environment, an understanding of h ow to attract and retain critical talent will be increasingly important. Cavanaugh and Noe state that the academic and practitioner literature has suggested that psychological contract in United States has changed. In particular, literature emphasized that relational aspect of psychological contract has changed (1999: 324). How employees perceive relational component of psychological contract likely influences their future attitudes toward organization and their corresponding behaviors. While person on street may bemoan changes taking place in employee/employer relationship, few studies have gathered empirical evidence that employees believe traditional psychological contract as described by Whyte (1956) has been altered. The primary purpose of this investigation is to test extent to which perceptions of relational component of psychological contract have during past 50 years. …