Environmental and Firm Level Influences on Inter-­‐Organizational Trust and SME

A psychological contract is a set of unwritten and unspoken expectations that exist between individual employees and their employers230_{. It is a metaphor representing actions that} employees believe are expected of them by their employers and equally what employers expect from their employees. These promises, expectations and obligations range from those that are explicit and close in nature to a formal employment contract such as financial rewards for better performance, to others that are more informal and implicit in nature such as employer- employee concessions about flexible working hours to accommodate extenuating domestic circumstances231. They are also re-negotiated and/or modified overtime and influenced by various contextual factors232. While both parties should be aware of the exchanges that occur

228 _{Pearce, Jone L. "Job Insecurity is Important, but not for the reasons you might think: The example of} contingent workers." Trends in Organizational Behavior 5 (1998).

229 _{Kraimer, Maria L, et al. "The Role of Job Security in Understanding the Relationship Between Employees'} Perception of Temporary Workers and Employees' Performance ." Journal of Applied Psychology 90.2 (2005). 230 _{Armstrong, Michael. Armstrong's Handbook of Human resource Management Practice. 11th. London:}

Kogan Page, 2009.

231 _{Guest , David. "HRM: Towards a new psychological contract." Boxall, Peter, John Purcell and Patrick} Wright. Oxford Handbook of Human Resource Management. Ed. Peter Boxall, John Purcell and Patrick Wright. Oxford: Oxford University Press, 2007. pp. 128-146.

232 _{Guest, David. "The Psychology of the Employment Relationship: An Analysis Based on the Psychological} Contract." Applied Psychology: An International Review 53 (2004).

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along this relationship spectrum, there is always a predisposition, especially with the more informal aspects of the psychological contract for misunderstanding and disagreement. This is primarily due to the subjective nature of human interpretations.

Furthermore, to fully understand the potential consequences of the psychological contract, Guest suggests it is imperative to take into account issues of fairness and trust233. This is because colleagues of an employee may perceive their psychological deals as unfair and make their judgements based on the context of deals made to their colleagues. Rousseau refers to this as ‘idiosyncratic deals’. Idiosyncratic deals arise when workers have the privilege to negotiate different treatment from their employers than that received by comparable others. Such differential treatments are capable of precipitating feelings of unfairness and favouritism and may hamper efforts to build a positive psychological contract234. The climate within which these deals and negotiations take place and the level of trust within the organisation has a significant bearing on how these perceptions thrive and fester, and their implications on the relationship between individuals and organisations235.

Rousseau conceptualizes the psychological contract as a continuum with transactional contracts at one end and relational contracts at the other end. Transactional contracts are those that are more explicit, monetized, economically focused, clearly defined, time bound, and easy to monitor. Relational contracts on the other hand are more implicit and less easy to monitor. They are socio-emotional, open-ended, pervasive, and inherently subjective and are developed over time236. Guest is critical of the duality of conceptualizing psychological contracts, arguing

233 _{Guest, 2004.}

234 _{Rousseau, D. "The Idiosyncratic Deal: Flexibility Versus Fairness." Organizational Dynamics 29 (2001).} 235 _{Guest, 2004.}

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that the distinctions between transactional and relational contracts are not clear cut237. Consequently, there is a possibility that certain exchanges between an individual and an organisation may be inclined towards the transactional alone, for example employees who are on zero-hour employment contracts. Such employee-employer relationships may be largely absent of relational psychological contracts and this could influence their level of commitment and performance towards the organisation. For example, UK employees on zero hour contracts for instance may not expect job security and career prospects from their employers238. There is also the question as to whether these organisations are obligated to provide any kind of relational exchange with employees, considering that employment relationship is purely economic. For the purpose of consistency in this research, the transactional-relational psychological contract continuum is adopted.

The challenges for employers trying to keep up with employee expectations have become increasingly more complex in the face of the changing nature of employer-employee relationship, especially with the ever growing interest in work-life balance239. As a result of this, it becomes increasingly likely that expectations are not met and obligations left unfulfilled ultimately leading to the violation and breach of psychological contracts. For instance, Conway and Briner found that psychological contracts are breached almost on a daily basis and may have a negative effect on employee mood and performance240. However, their findings also indicate that this breach is contingent on whether the broken promise is implicit or explicit. They also raise the question about who bears responsibility for broken promise; a particular

237 _{Guest, 2007.}

238 _{Coyle-Shapiro, J and I Kessler. "Consequences of the Psychological Contract for the Employment} Relationship: A Large-Scale Survey." Journal of Management Studies 37.7 (2000).

239 _{Guest, 2007.}

240 _{Conway , Neil and Rob Briner. "A Daily Diary Study of Affective Responses to Psychological Contract} Breach and Exceeded Promises." Journal of Organizational Behavior 23.3 (2002).

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person or the organisation as a whole. The implications of the issues raised above on employee- employer relationships is that there is a need to re-examine the processes that lead to standoffs between individuals and organisations within the context of the perpetually unstable socio- political and economic environment.