Promises Made, Promises Broken: Equity Sensitivity as a Moderator Between Psychological Contract Breach and Employee Attitudes and Behavior Jill Kickul DePaul University Department of Management Email:
[email protected]
Scott W. Lester University of Wisconsin – Eau Claire Department of Management & Marketing
Promises Made, Promises Broken: Equity Sensitivity as a Moderator Between Psychological Contract Breach and Employee Attitudes and Behavior Organizations have undergone substantial changes and transformations during the last two decades in order to compete successfully within their respective markets. Companies must find creative and innovative ways to increase levels of efficiency, lower costs, and improve processes throughout the entire organization. Strategies must also be formulated that are flexible and allow for the continual redesign and reconfiguration of the organization as it grows and matures (Cappelli, 1999; Hitt, 1998). These types of pressures and forces have affected the internal structure of many organizations by not only modifying work arrangements but also changing the nature of the psychological contract between the employee and employer. A psychological contract, in general, is an employee's belief about the mutual obligations that exist between the employee and his/her organization (Rousseau, 1989, 1998). This employee's belief is based on the perception that an employer promise has been made (e.g., competitive wages, promotional opportunities, job training) and an employee obligation offered in exchange for it (e.g., giving the organization his/her energy, time, and technical skills; Rousseau and Tijoriwala, 1998; Roehling, 1996). Because of the changing conditions within the current business environment, most of the research on the psychological contract has investigated employees' negative reactions to unfulfilled organizational promises (i.e., contract breach). Whenever promises and obligations have been exchanged in the context of the employment relationship, the breach extends beyond the sense of unmet expectations of specific rewards or benefits to include more general beliefs about trust and respect for employees (Rousseau, 1989). Psychological contract breaches deny individuals desired outcomes and benefits. On a broader level, the employee believes that he/she has been treated unfairly. This prompts employees to make attempts at restoring equity (balance) in the relationship. In terms of perceptions of inequity, recent research has suggested that individuals may differ in their reactions to unfair outcomes and situations. According to Huseman, Hatfield, and Miles (1985, 1987), individuals have a unique sensitivity to equity that can thereby affect their attitudes and behaviors to perceptions of equity (or inequity). The equity sensitivity construct was developed to offer predictions about how individuals may react when they are denied or given rewards or outcomes. By incorporating equity sensitivity as an individual difference variable, researchers (King & Miles, 1994; King, Miles, & Day, 1993; Miles, Hatfield, & Huseman, 1989, 1994) have been able to increase the utility of equity theory in understanding behavior in organizations. The purpose of this paper is to explore how individuals differ in their attitudes and reactions to an inequitable outcome, such as a contract breach. More specifically, we propose that relationships between psychological contract breach and the employee attitudes and reactions of negative affect, job satisfaction, and organizational citizenship behaviors are moderated by equity sensitivity. Because the psychological contract is multidimensional (Rousseau, 1990), we examine the moderating role of equity sensitivity across multiple components of the contract.
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Broken Promises: Psychological Contract Breach According to Morrison and Robinson (1997), perceived contract breach “represents a cognitive assessment of contract fulfillment that is based on an employee’s perception of what each party has promised and provided to the other” (p. 230). This type of breach can cause the employee to have intense attitudinal and behavioral reactions toward their employer (Rousseau & McLean Parks, 1993; Robinson, Kraatz, & Rousseau, 1994). In many cases, the employees believe that they have lived up to their promises while the organization has failed to reciprocate its obligations. From an equity theory perspective (Adams, 1965), individuals try to find an equitable balance between what they receive from the organization and their own contributions. When employees perceive that their employer has failed to fulfill promised inducements, they may withhold their own designated contributions (Robinson and Morrison, 1995). Shore and Barksdale (1998) found that employees expressed higher levels of perceived organizational support, affective commitment, and lower levels of turnover intentions when their employment relationships were characterized by mutual high obligations (both employee and employer obligations were consistently perceived to be high). Research on psychological contract breach has focused on organizational circumstances that have created changes in the employment relationship. It is these changes that subsequently increase the likelihood that the psychological contract between the employee and employer will be violated. Robinson and Rousseau (1994) found that approximately 55% of employees (MBA graduates) believed their psychological contract had been violated by their organization during the preceding two years. In addition, the authors examined the impact that breaches or violations of the psychological contract can have on the employment relationship. Employee trust and satisfaction were negatively related to violations of the psychological contract. In addition, contract violations were positively related to actual employee turnover. Robinson (1996) also investigated specific types of contract breaches and employee reactions, attitudes, and behaviors. Robinson examined seven different types of employer obligations and promises. These promises were drawn from Rousseau’s (1990) measure of psychological contracts. In her research, Rousseau interviewed human resource managers from 13 engineering, accounting, and manufacturing companies. She identified the following seven obligations that are most commonly promised by recruiters and organizations to applicants: promotion and advancement, high pay, pay based on current level of performance, training, longterm job security, career development, as well as sufficient power and responsibility. Robinson (1996) found moderate relationships between specific breaches and trust, civic virtue, performance, and intentions to remain with the organization Differing Reactions to Contract Breach: The Role of Equity Sensitivity Morrison and Robinson (1997) have recently noted that the strength of the emotional and behavioral reactions that follow a contract breach may be moderated by an individual’s sensitivity to equity. The equity sensitivity concept (Huseman et al., 1985, 1987; King et al., 1993; Miles et al., 1989) proposes that individuals have a unique sensitivity to fair and unfair situations that can thereby influence their attitudes and reactions, either positively or negatively.
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Huseman and his colleagues (1985, 1987) argue that there are three types of individuals who have varying degrees of sensitivity to equity: (a) benevolents, (b) equity sensitives, and (c) entitleds. Miles et al. (1994) have asserted that the concern for the relationship between the employer and employee and the desire for outcomes differentiates one type of individual from another. At one end of the spectrum are the benevolents who place their emphasis on the relationship with their employer. Benevolent individuals find satisfaction when they can give their talents and expertise to the organization. At the opposite end of the spectrum are the entitleds who believe that their personal outcomes are of primary importance when dealing with their organizations. Entitleds are constantly looking for ways to improve their situation and maximize the rewards given by the organization. In the middle of both benevolents and entitleds are the equity sensitives who place the same emphasis on having a good employment relationship and achieving desired outcomes. Research investigating the equity sensitivity construct has shown that individuals can differ in their responses to inequity situations (King & Miles, 1994; King et al., 1993; Miles et al., 1989, 1994). In a validation study by King and Miles (1994), the equity sensitivity construct was positively related to organizational commitment, job satisfaction, and negatively associated with intentions to leave the organization (i.e., higher scores represented more benevolence while lower scores represented more entitlement). In a similar study, King et al. (1993) found that benevolents had higher levels of satisfaction than entitled and equity sensitive individuals in situations where they were underrewarded. King et al. argue that benevolent individuals have a greater tolerance for situations in which they are underrewarded. “This tolerance for underreward can spring from the same sources suggested to be the root of benevolence: Calvinistic heritage, altruism, empathy, or disguised self-interest” (p. 303). Finally, Miles et al. (1994) found that entitleds prefer extrinsic tangible outcomes (e.g., pay, benefits, job security). Additionally, they found that benevolents placed higher importance on intrinsic outcomes related to the nature of the job and work (e.g., doing meaningful and challenging work, a sense of accomplishment, a feeling of achievement, and personal worth). However, Miles et al. did not find support that any of the equity sensitivity groups differed regarding the importance placed on intrinsic tangible outcomes (e.g., appreciation of others, a feeling of belonging, and recognition for good work). This study further examines the influence of equity sensitivity by studying how specific forms of psychological contract breach (a form of inequity) interacts with equity sensitivity to determine attitudes and reactions to employment discrepancies. Specific forms of psychological contract breach can be related to the extrinsic outcomes of pay and benefits, or intrinsic characteristics that emphasize the significance and worthiness of a certain job. When the contract factors dealing with pay and benefits are unfulfilled, it would be expected that entitleds would react more negatively in their attitudes (e.g., negative affect toward the organization and job dissatisfaction) and would be less likely to partake in organizational citizenship behaviors. Benevolents, on the other hand, would have more negative attitudinal reactions (e.g., negative affect toward the organization and dissatisfaction) and would be less likely to engage in organizational citizenship behaviors when contract factors that deal with their employment relationship and the intrinsic nature of the work are violated. Thus, we propose the following: Hypothesis 1: Equity sensitivity will moderate the relationship between psychological contract breach and negative affect toward the organization. 4
1a: Entitled individuals will have greater increases in negative affect toward their organization than benevolent individuals following an extrinsic contract breach. 1b: Benevolent individuals will have greater increases in negative affect toward their organization than entitled individuals following an intrinsic contract breach. Hypothesis 2: Equity sensitivity will moderate the relationship between psychological contract breach and job satisfaction. 2a: Entitled individuals will have greater decreases in job satisfaction than benevolent individuals following an extrinsic contract breach. 2b: Benevolent individuals will have greater decreases in job satisfaction than entitled individuals following an intrinsic contract breach. Hypothesis 3: Equity sensitivity will moderate the relationship between psychological contract breach and organizational citizenship behaviors. 3a: Entitled individuals will have greater decreases in organizational citizenship behaviors than benevolent individuals following an extrinsic contract breach. 3b: Benevolent individuals will have greater decreases in organizational citizenship behaviors than entitled individuals following an intrinsic contract breach. METHOD Participants were 183 employees who were enrolled in a part-time MBA (Master of Business Administration) program at a large, Midwestern university. Only those students who were currently employed by an organization were included in the study. Of the 183 participants, 54.1% were male and 45.9% were female. The average age was 26.92 years with a standard deviation (SD) of 7.97 years. The average tenure of employees within their respective organizations was 3.41 years (SD=3.86). Approximately 68% were Caucasian, 7% were African-American, 9% were Asian, and 16% were Hispanic. Over 23% of the respondents were in supervisory positions. Participants had worked in an average of 3.29 (SD=2.06) organizations before joining their current employer. Employees came from a variety of occupational fields including: sales and marketing, finance and banking, accounting, engineering, management information services, and human resources and staffing. Overview and Procedure All information was gathered from employees, utilizing a new methodology for data collection: on-line survey completion (i.e., Internet-based). All participants were told that we are conducting research to better understand the relationship that an employee has with his/her organization. The employees were told that all answers would be kept confidential and would not affect their employment relationship with their employees and/or organization in any way. In addition, they were informed that participation in this research project was voluntary and they could, at any time, decide not to participate. When the employees completed the on-line questionnaire, they submitted their information and responses to a secured Internet database.
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Table 1 Principal Components Extraction with Promax Rotation Items
Autonomy and Control
Organizational Rewards
Organizational Benefits
Growth and Development
Freedom to be creative .85 A job that provides autonomy and .80 control Participation in decision making .71 Increasing responsibilities .60 Opportunity to develop new skills .58 Enough resources to do the job .53 Adequate equipment to perform .50 job A reasonable workload .46 Pay and bonuses tied to .42 performance Flexible work schedule .88 Job security .82 Competitive salary .73 Safe work environment .68 Well-defined work responsibilities .56 Challenging and interesting work .42 Meaningful work .42 Recognition of my .39 accomplishments Health care benefits .93 Retirement benefits .90 Vacation benefits .84 Tuition reimbursement .59 Continual professional training .74 Opportunities for personal growth .70 Career guidance and mentoring .67 Job training .45 Opportunities for promotion and .37 advancement Eigenvalue 11.22 2.18 1.37 1.10 Percentage of Variance 43.15 8.39 5.25 4.23 Note: Items were retained in each factor if they met the following criteria: .45 or higher on one of the factors and were .32 or lower on the other factors.
Measures Psychological Contract. Participants were asked to indicate those obligations that the organization has promised to them. This set of twenty-six items was adopted from Kickul, Neuman, and Parker (1999) and includes the following promises: competitive salary, health care benefits, adequate equipment to perform job, challenging and interesting work, and increasing responsibilities. They were informed that this set of obligations may have been communicated to them explicitly (verbally or in writing) or implicitly (simply implied through other statements or behaviors).
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After specifying the promises that their organization had made to them, respondents were asked to indicate how well their organizations have fulfilled each of those promises. Participants indicated the extent to which their employer fulfilled each of the marked promises. They rated these promises using a five-point Likert scale (1 = ‘not at all fulfilled’; 5 = ‘very fulfilled’). All rated items were then reverse coded in order to represent psychological contract breach. In order to better understand the underlying factors in the psychological contract, the data were submitted to a factor analysis using principal components extraction with promax rotation. Since the items were correlated with each other, factors were rotated without imposing the orthogonality condition. The data were those promises specified prior to rating the extent of fulfillment; coded as 0 (not promised), or 1 (promised). A four-factor solution resulted from the interpretation of the scree plot. Although the first factor accounted for 43.15 percent of the variance, the other three factors accounted for an additional 17.87 percent and each had a eigenvalue greater than 1.0. Specific items were then chosen from the loadings on these four factors to form specific types or forms of psychological contract breach. Comrey (1973) suggests that loadings in excess of .71 (50% overlapping variance) are considered excellent, .63 (40% overlapping variance) very good, .55 (30% overlapping variance) good, .45 (20% overlapping variance) fair, and .32 (10% overlapping variance) poor. Using this framework and criteria, items were chosen that were .45 or higher on one of the factors and were .32 or lower on the other factors. In this four-factor solution, nineteen items were chosen and were therefore used in further analyses. As shown in Table 1, Factor 1 (7 items) was labeled autonomy and control: it measures those intrinsic promises related to employee freedom and participation as well as having increased responsibilities. Factor 2 (4 items) is organizational rewards, and it assesses the extrinsic promises of competitive salary, job security, and flexibility in scheduling work. Factor 3 (4 items), organizational benefits, measures a variety of extrinsic benefits related to health care, retirement, vacation, and education. Finally, Factor 4 (4 items), growth and development, measures those intrinsic promises associated with continual professional training, opportunities for personal growth, and career guidance and mentoring. Cronbach’s alpha (internal consistency) for these four factors was: .85, .62, .83, .83, respectively. A composite score for each of the four factors was then formed by taking the sum of the ratings within each factor and dividing this total by the number of promises marked within that particular factor. For example, for the autonomy and control factor, if an employee rated 5 breach items and the sum of these ratings totaled 22, then this employee's composite score on this factor would equal 4.40 (22/5 = 4.40).
Equity Sensitivity. To assess each participant’s equity sensitivity, King and Miles (1994) Equity Sensitivity Instrument (ESI) was used (five items). This forced-distribution scale measures responses on a continuum from benevolent to entitled. For each item, participants must allocate 10 points between two statements. One statement represents a focus on personal outcomes and the other statement focuses on fostering a good employment relationship. A sample item was “It would be more important for me to: A. Help others. B. Watch out for my own good.” The points assigned to the statements emphasizing good employment relations are added together. This results in participant scores that range from 0 to 50 with 50 being highly benevolent and 0 being highly
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entitled. Instead of separating equity sensitivity into three distinct groups, this study used the full ESI scale, regarding it as a continuous measure. Cronbach’s alpha of the scale was .83. Negative Affect Toward the Organization. Employee’s negative affect toward the organization was measured by using fourteen items from Watson and Tellegen’s (1985) study. They identified several clear markers of negative affect from nine different studies. Sample items include angry, frustrated, spiteful, distressed, disappointed, and hostile. For each of the items, participants were asked to indicate if that adjective was representative of how they feel toward their organization on a five-point Likert scale (1 = ‘very slightly or not at all’; 5 = ‘very much’). Cronbach's alpha of this scale was .94. Job Satisfaction. Job satisfaction was measured by a single item from the Michigan Organizational Assessment Questionnaire (MOAQ; Cammann, Fichman, Jenkins, & Klesh, 1975). It reads: "All in all, I am satisfied with my job.” Research has shown that a single global item can be a valid measure of job satisfaction (Scarpello & Campbell, 1983). Participants indicated how much they agree or disagree with the statement on a five-point Likert scale (1 = ‘strongly disagree’; 5 = ‘strongly agree’). Organizational Citizenship Behaviors. To measure organizational citizenship behavior, a four dimensional scale from Moorman and Blakely (1995) was used. They assessed four specific types of citizenship: interpersonal helping, individual initiative, personal industry, and loyal boosterism. Sample items for each dimension include: “I go out of my way to help co-workers with work-related problems” (interpersonal helping), “For issues that have serious consequences, I express my opinions honestly even when others may disagree” (individual initiative), “I rarely miss work even when I have a legitimate reason for doing so” (personal industry), and “I defend the organization when other employees criticize it” (loyal boosterism). Participants were asked to indicate the extent to which they agree with the statements using a five-point Likert scale (1 = 'strongly disagree'; 5 = 'strongly agree'). Cronbach’s alpha for each of the citizenship dimensions were: .79 (interpersonal helping, 5 items), .84 (individual initiative, 5 items), .79 (personal industry, 4 items) and .84 (loyal boosterism, 5 items). Control Variables. This study included control variables that could influence many of the attitudes examined in this study. Previous work has found that breach perceptions and employee attitudes to be significantly related to demographic and position variables (Robinson, 1996; Rousseau, 1995). Thus, individual age and tenure were included as control variables. Results The means, standard deviations, zero-order intercorrelations, and internal consistency for the measures used in the study are reported in Table 3. With the exception of organizational
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rewards, internal consistency reliabilities were above .70 as recommended by Churchill (1979) and Nunnally (1978). Table 2 Descriptive Statistics, Correlations, and Internal Consistency Reliabilities Variables 1. Age 2. Tenure 3. Autonomy And Control 4. Organizational Rewards 5. Organizational Benefits 6. Growth and Development 7. Equity Sensitivity 8. Negative Affect 9. Job Satisfaction 10. Interpersonal Helping 11. Individual Initiative 12. Personal Industry 13. Loyal Boosterism Variables 6. Growth and Development 7. Equity Sensitivity 8. Negative Affect 9. Job Satisfaction 10. Interpersonal Helping 11. Individual Initiative 12. Personal Industry 13. Loyal Boosterism
Mean 26.92 3.41 2.62
SD 7.97 3.86 1.51
1 (---) .58** .00
1.84
2
3
4
5
(---) -.06
1.00
.15*
.03
.26**
1.61
1.33
.10
.02
.14
.42**
1.72
1.38
.23**
.13
.17*
.63**
24.85
6.69
.15*
.18*
-.24**
2.18
0.83
.00
.00
.37**
.30**
3.52
1.12
.02
.06
-.38**
-.32**
-.17*
3.85
0.68
.18*
.02
-.19*
-.26*
.00
(.84) (.62)
-.18*
(.83) .52** -.01 .22**
3.85
0.73
.16*
.06
-.15
-.18*
.12
3.59
0.83
.06
.10
-.32**
-.32**
-.02
4.10
0.72
.02
-.04
-.07
-.08
6 (.83)
7
-.11
(.83)
.26**
-.33**
8
9
10
11
12
13
(.94)
-.25**
.12
-.56**
(---)
-.12
.33
-.15
.13
.25**
-.02
.22
.59**
-.25**
.26**
-.37**
.38**
.53**
.56**
-.07
.08
-.19*
.13
.54**
.41**
.00
.00
(.79) (.84) (.79) .44** (.84)
Note: N = 183; Internal consistency reliabilities are provided along the diagonal in parentheses. **p
