Professional Documents
Culture Documents
www.emeraldinsight.com/0309-0590.htm
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Received 14 April 2008
Revised 23 July 2008
Accepted 31 August 2008
Introduction
In response to changes in the nature of employment and work, a large body of
literature focusing on exchange relationships between employees and their
organisation has emerged in the past two decades. Among the various employment
The authors would like to thank Professor James C. Hayton for his valuable inputs and critical
comments given during the conceptualisation of this paper.
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influencing their perceptions of the nature and depth of their relationship with the
organisation. Employee conception of employment relationship (PC) in turn influences
work force attitudes and thus has bearing on organisational outcomes. Building on this
premise, in the following section we elaborate how HR practices can contribute to
shaping of employee perceptions of the exchange relationship.
It is believed that traditionally research on HR has been conducted through
gathering data from individuals and drawing organisational level inferences based on
individual level results. Certain other studies have adopted an organisation-level
approach and empirically tested the linkages between HR practices and firm
performance (Arthur, 1994; Huselid, 1995; Wood and de Menezes, 1998; Ichniowski
et al., 1997; MacDuffie, 1995) and then extrapolated the results of organisational
effectiveness on individual-level attitudes and behaviours. However it is important to
note that relationship at one level of aggregation does not necessarily reflect similar
trends at the other level (Allen et al., 2003). It is wrong to presume that if HR practices
have positive impact on individual-level outcomes, it will concomitantly result in
organisational effectiveness too. Literature has described such an assumption as
erroneous and an ecological fallacy (Robinson, 1950).
Although studies have examined the impact of HR practices on organisational
performance and employee attitudes and behaviours, extant literature is silent on its
impact on individual level phenomena. As argued by Ostroff et al. (2000):
It is impossible to fully understand how the HR system influences firm performance without
considering mechanisms through which the influence occurs (like climate, culture and
employee attributes) (p. 256).
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with grounded ethnographic as well as case research to make the description thick
(Geertz, 1975). Further studies are primarily cross-sectional in nature, the need to have
longitudinal studies recognised (Grant, 1999, Martin et al., 1998). In terms of research
setting, most of the studies have been conducted in the US or the UK.
The studies vary with respect to the level of engagement (individual or
organisation) and nature (explicit or implicit) of the contract. Resultantly, the reviewed
studies reflect varying overtones of the concept of psychological contract. While
Rousseau (1990) gives emphasis on individuals (employees) perception regarding
mutual obligations and commitments, the advocates of a broad, multi-level approach to
the concept emphasise the need to consider the changing expectations and obligations
of both the organisation and the employee in framing PC (Guest and Conway, 2002;
Herriot and Pamberton, 1995). Further, while few studies believe that psychological
contract is explicit as well as implicit in nature (Baker, 1985; Lucero and Allen, 1994;
Singh, 1998; Rousseau, 1989; King, 2000; Lester and Kickul, 2001; Vos et al., 2003;
Rousseau, 1990; Freese and Schalk, 1996; Stiles et al., 1997; Hiltrop, 1995; Sims, 1994;
Grant, 1999) others studies consider PC to be implicit, unofficial and unwritten
promises (Kotter, 1973; Singh, 1998; Schein, 1980). Majority of the studies have adapted
Rousseaus (1989) conceptualisation of PC (e.g. King, 2000; Lester and Kickul, 2001; Vos
et al., 2003; Rousseau, 1990; Freese and Schalk, 1996; Stiles et al., 1997). Based on the
nature of promise and level of engagement, various definitions of PC used in the
reviewed studies can be categorised as PC as a set of implicit agreement, PC as implicit
as well as explicit agreement, and PC including two parties. The categorisation and
definitions of PC are provided in Table I.
Addressing the subjective nature of PC, studies have empirically examined the
differences in employees promissory expectations across various dimensions.
Literature suggests that employees vary in expectations, interpretation and
Category
Definition
PC as implicit agreement
PC as implicit as well as
explicit agreement
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assessment of PC. Two employees may read, interpret and react quite differently in
similar situation due to moderating affects of factors like gender (e.g. Singh, 1998;
King, 2000; Freese and Schalk, 1996), work status supervisory/non-supervisory, and
white/blue collared (e.g. Kotter, 1973; King, 2000; Guest and Conway, 2002),
employment category-full time and part time (e.g. Freese and Schalk, 1996),
hierarchical levels (e.g. Grant, 1999; Lester and Kickul, 2001; Freese and Schalk, 1996;
Winter and Jackson, 2006), occupational differences (e.g. Lester and Kickul, 2001),
employees age (Blancero et al., 2007; Herriot et al., 1997), length of service and size of
organisation (Herriot et al., 1997) were found to play an important role in influencing
employees expectations of psychological contract. The following paragraph illustrates
how the role of these factors on employees promissory expectations.
Singh (1998) proposed that past experiences of employees impact employee
attitudes at work. Employees who experience layoff are more likely to look out for
self-interests rather than for interests, goals, and objectives of their future employers.
In a study by Freese and Schalk (1996) gender differences with respect to personnel
development were found. Male employees were more dissatisfied with opportunities
for personnel development than female employees. Further, there were differences also
among various work-groups of the same gender. Female part-time employees differed
significantly from female full-time employees with respect to the experienced
opportunities for personnel development. Another study (Martin et al., 1998), found
differences in expectations or need of training as a function of their employment
category white vis-a`-vis blue collared. It was found that while blue collared
employees expectations of training was shaped by their desire to remain employable
with the current organisation, white-collared employees viewed training as a means of
making oneself more marketable outside the company. In a study by Blancero et al.
(2007) on the Hispanic population of the US, it was found that there was a significant
difference in perceived fairness due to age. There was a linear trend of fairness score by
age, i.e. as the Hispanic population got older they reported lower levels of fairness of
psychological contract. Similarly Winter and Jackson (2006) suggest the role of
hierarchical levels by illustrating that although managers and employees shared
similar responses to the state of PC, nonetheless, they attributed different causes to
these states. Managers tended to construct rational explanations and emphasis on
resource constraint, whilst employees constructed emotional explanations and
attributed this situation to an unfair, uncaring or distant management.
In terms of the theoretical foundations, the studies examining the impact of HRP on
PC are based on the conceptual foundation of social exchange theory (SET) (Blau, 1964),
equity (Adams, 1965), and expectancy theory (Vroom, 1964). SET maintains that
employment is an exchange of material and socio-emotional benefits and both employees
and employer enter into relationships with others to maximise their benefits (Blau, 1964).
Norm of reciprocity, which is the basic tenet of SET, rests on the caveats that when one
party benefits another, an obligation is generated (Gouldner, 1960, p. 174). Therefore
when organisations provide employees with what was promised and valued by
employees, latter reciprocate by forming positive attitudes and behaviours (in terms of
commitment, job satisfaction, no intent to leave the organisation and prosaically
behaviours) that aid an organisational to achieve its goals. Certain studies also draw
from expectancy (Vroom, 1964) that suggests that individuals expect that their
performance should result in outcomes which possesses a positive valence for the
employees. Based on equity theory (Adams, 1965) studies also suggest that perceived
inequity in work related employment promises results in alteration of attitudes and
behaviours (e.g. Baker, 1985; Rousseau, 1990; Sims, 1994; Grant, 1999; Freese and Schalk,
1996; Kotter, 1973; King, 2000; Lester and Kickul, 2001; Stiles et al., 1997; Martin et al.,
1998; Singh, 1998; Grant, 1999; Guest and Conway, 2002). Table II provides
categorisation of studies based on the foundational theories of the reviewed studies.
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Studies
Table II.
Foundational theories of
reviewed studies
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Rewards management
Reward management is an important inducement of the exchange process between
employers and employees (Gerhart and Milkovich, 1992). Rewards have been
recognised as an important element of the psychological contract defining the
relationship between employers and employees (Lucero and Allen, 1994). Reward and
remuneration packages that are in congruence with employees expectations,
encourages them to serve beyond their job description, gain professional expertise,
and cultivate core competencies across functional groupings (Hiltrop, 1995).
Appropriate reward management system motivates employees to apply skills and
abilities and encourage them to work harder and improve work processes.
Compensation can be direct and financial in nature such as wages and bonuses or
indirect benefits such as health and life insurance, employee assistance plans and so on.
Studies on the compensation have identified pay and pay for performance as
important employer obligations (Rousseau, 1990; Robinson, 1996).The review suggests
that compensations and benefits that employers provide for employees can have a major
impact on their conception of employment relationships (Rousseau and Ho, 2000). The
type of compensation may signals the type of employment relationship. Based on two
dimensions, durations (short-term or long-term) and type of compensation (specific vs
unspecified), Rousseau and Ho (2000) matched compensation system to employee
psychological contract. Based on these two dimensions, the authors have identified four
types of relationships: short-term relationships with specific measures of performance,
short-term relationships with unspecified measures of performance, long-term
relationships with specified measures of performance, and finally long-term
relationships with unspecified measures of performance.
Organisations can design the compensation system based on the type of
employment relationship that they want to maintain. For instance, firms that want to
establish a long-term relationship with specified performance measures should come
up compensation structure which invests in employees in terms of firms specific
skill-based training, wherein an organisation will invest in the employee in terms of
expensive skill-based training, flexible benefit systems and blend of short-term and
long term incentives. Alternatively, organisations with long-term and unspecific
performance measures, will base their compensation on seniority and also
institutionalise rewards like tenure-based bonus, retirement bonus etc. for long-term
employees. Alternatively, organisations with short-term employment strategy will
encourage short-term rewards for performance such as sales commission or
non-financial rewards such a free tour to the countryside, a branded pen set or free
lunch for family at a restaurant on achievement of sales target.
Employees conception of their employment relationship will also influence their
expectations of the type of compensation. For instance an employee working on
short-term job with specified performance indicators would be more likely to expect
compensation based on short-term performance, like sales commission. While an
employee looking for a long-term relationship with the organisation will expect the
firm to invest in skill-based training, assured career and financial growth, and may
react negatively if this expectation is not met. Involving employees in benefits
planning and decision making is suggested to be an important tool for preventing
perceived violations of PC (Lucero and Allen, 1994). Thus the review illustrates how
benefits and compensation can influence employee conception of psychological
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through policies and procedures (King, 2000). HR policies such as compensation and
benefits systems, career paths, appraisal and training processes all send structural
signals about the contract. Interactions with recruiters, managers, co-workers and
mentors, called as human contract makers, can also contribute to the development of a
psychological contract (Rousseau, 1995). Besides the human and structural contract
makers, literature also illuminates the role of organisational culture in influencing
employees conception of employment relationship.
PC is based on individuals perceptions and is idiosyncratic in nature. Psychological
contract are exchange agreements between employees and employers. They represent
beliefs that individuals hold about promises made, accepted relied on between themselves
and the organisation. Perceptions of what the organisation is like, in terms of its routines,
practices, procedures and rewards come from individuals. However, when individuals in
the organisation agree to share their perceptions, organisation culture emerges. Culture is
described as a shared pattern of assumptions, values, beliefs and behaviours among
employees (Schein, 1985; Turner, 1990). Organisational culture is a summary or shared
perception that people attach to work setting (Schneider and Reichers, 1983).
HR practices can play an important role in orchestrating the culture of an
organisation. HR practices represent a set of salient and universal practices that can
create the foundation for particular form organisational climate to develop (Ostroff
et al., 2000; Schneider, 1990). HR practices like realistic job previews, developmental
appraisal which captures employee expectations and identification of training needs in
consultation with the employees, results in formation of progressive organisational
culture which talks with people, not at them. Importantly, the climate or culture
perceptions of organisation also shape individual inferences about what the
organisation is like. Furthermore, organisational culture leads to the construction of
a normative psychological contract, which is shared by the members of the
organisation (Rousseau, 1995).
Suggestively, there are linkages between HR practices, individual and
organisational as well as normative culture of an organisation. Human resource
practices influence individual employees perceptions regarding what the organisation
is like. HR practices can be instrumental in creating the culture of an organisation.
Organisational culture in turn influences individual as well as group level perceptions.
Perceptions at group level are referred as normative contracts.
Proposing a conceptual model
Psychological contract is an individual construct, subjective in nature. Research has
tended to emphasise that PC focuses on individual characteristics that affect individual
reactions and have implications on organisational performance. However, individuals in
organisations do not exit in vacuum. They are nested within departments, occupational
groups and organisations. Extant literature on PC neglects a systematic integration of
the contextual and organisational factors that may significantly constrain or alter the
effects of individual differences that lead to collective responses (Kozlowski and Klein,
2000). As pointed out by Tetrick (2004), research on the construct (PC), to date, has not
explicitly examined the potential effects of these dependencies.
Similarly, research on HR practices has established how organisational practices
can have an impact on organisational performance. The macro perspective adopted for
examining the relationship between HR perspective and organisational outcomes, but
has neglected how individual behaviour and perceptions may affect and result in
interactions that may give raise to higher-level phenomena (Ostroff et al., 2000). After
all, macro factors such as human resource practices also emerge from individual-level
constructs. Similarly, as discussed, research on psychological contract has not
systematically examined the role of contextual factors that can significantly constrain
the effects of individual differences that lead to collective responses.
Absence of an integrative approach examining the relationship between the
individual construct PC and organisational construct, HR Practices, is not surprising,
given that past three decades of research on organisational phenomena is characterised
by a split along the two extremes in macro-micro continuum (Staw and Sutton, 1992;
Schneider et al., 1995). On the one hand, there is micro focus which aims to understand
individual level issues such as motivation, performance and attitudes, often studied
without regard to individual organisational context in which these processes occur. On
the other hand, macro perspective aims at understanding organisational level
phenomena such as structure, strategy, culture and effectiveness and the linkages
among these factors with little regard given to the human processes in organisation.
The macro perspective assumes that given a particular set of situational constraints
and demographics, there are substantial regularities in social behaviour and that
people will behave alike. Similarly, although extant literature on psychological
contract has examined the relationship of a macro-level variable like human resource
practices on the micro-level variable PC of employees, however there has been no effort
to examine the links between these constructs at a meso level.
Lately however, there has been growing consensus among scholars that neither
individual-level nor macro perspective alone can account for organisational behaviour.
Micro-level phenomena are embedded in macro contexts and macro level phenomena are
often emerge through the interaction and dynamics of lower-level elements. Literature on
human resource practices as well as emerging literature on psychological contract of
employees, expressly acknowledge the need to adopt an integrative approach to
understanding the social exchanges in employment relationship. House et al. (1995)
suggest need for a meso theory that captures both the macro as well as micro-level
variables. The basic premise of meso theory is that organisational behaviour is a result of
both person and situation and thus study of organisational or group-level processes
should be simultaneously conducted (Kozlowski and Klein, 2000).
In the light of the above discussion and in response to the literature call for adopting
a multilevel approach to better understand the organisational phenomena (Tetrick,
2004; Kozlowski and Klein, 2000), we propose a meso approach to understanding
linkages between HR practices, PC and employee attitudes and behaviours. Figure 1
places the individual level construct psychological contract and organisational
construct human resource practices within a conceptual framework that derives our
discussion of the linkages between HR practices, PC, employee attitudes and
behaviours as well as firm performance.
Starting with upper left of Figure 1:
.
Organisational strategy influences employment strategy and both in turn have
an impact on HR practices that an organisation chooses to implement.
.
HR practices are the means through which organisation signals its intentions
about the exchange relationship and results in formation of psychological
contract.
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Figure 1.
A model of relationship
between HR practices and
psychological contract and
their impact on employee
attitudes and behaviours
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Further reading
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A dynamic theory of leadership and team effectiveness: developmental and task
contingent leader roles, Research in Personnel and Human Resource Management, Vol. 14,
JAI Press, Greenwich, CT, pp. 253-305.
Lord, R.G. and Foti, R.J. (1986), Schema theories, information processing and organizational
behaviours, in Sims, H.P Jr and Gioia, D.A. (Eds), The Thinking Organization, Meanings
of Occupational Work, Lexington Books, Lexington, MA, pp. 20-48.
Meglino, B.M., DeNisi, A.S. and Ravlin, E.C. (1993), Effects of previous job exposure and
subsequent job status on the functioning of a realistic job preview, Personnel Psychology,
Vol. 46, pp. 803-22.
Moss Kanter, R. (1994), Change in global economy: an interview with Rosabeth Moss Kanter,
European Management Journal, Vol. 12 No. 1, pp. 1-9.
Pierce, J., Kostova, T. and Dirks, K.T. (2001), Towards a theory of psychological ownership in
organizations, Academy of Management Review, Vol. 26, pp. 298-310.
Rousseau, D.M. and Schalk, R. (2000), Psychological Contracts in Employment: Cross-National
Perspective, Sage, London.
Tekleab, A.G., Takeuchi, R. and Taylor, M.S. (2005), Extending the chain of relationships
among organizational justice, social exchange, and employee reactions: the role of contract
violations, Academy of Management Journal, Vol. 48 No. 1, p. 146.
Appendix
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The Psychological contract: Managing the joining-up process, by Kotter, J., California
Management Review, Vol. 15, pp. 91-99
The unwritten contract: job perceptions by Baker, H., Personnel Journal, Vol. 64, pp. 36-41
New hire perceptions of their own and their employers obligations: a study of
psychological, by Rousseau D.M., Journal of Organizational Behavior, Vol. 11, pp. 389-400
Newcomers information seeking: exploring types, modes, sources and outcomes, by
Morrison, E., Academy of Management Journal, Vol. 36 No. 3, 557-589
Changing obligations and the psychological contract: a longitudinal study by Robinson,
S., Kraatz, M. and Rousseau, D., Academy of Management Journal, Vol. 37, pp. 137-152
Human resource practices as communications and the psychological contract, by Guzzo,
R. and Noonan, K., Human Resource Management, Vol. 33 No. 3, pp. 44-72
Expatriate managers and the psychological contract, by Guzzo, R. and Noonan, K.,
Journal of Applied Psychology, Vol. 79 No. 4, pp. 617-626
Human resource managements role in clarifying the new psychological contract, by
Sims, R., Human Resource Management, Vol. 33 No. 3, pp. 373-383
Employee benefits: a growing source of psychological contract violations, by Lucero, M.
and Allen, R., Human Resource Management Journal, Vol. 33 No. 3, pp. 425-446
Expatriate managers and the psychological contract, by Guzzo, R., Noonan, K., and
Elron, E., Journal of Applied Psychology, Vol. 79 No. 4, pp. 617-626
Till death us part: changing work relationships in 1990s, by Kidder, D.L. and Parks, J.M.,
Journal of Organizational Behavior, pp. 111-136
The new employment contract, by Kissler, G.D., Human Resource Management, Vol. 33
No. 3, pp. 335-352
Linking strategy and human resource practices: how employee and customer contracts
are created, by Rousseau, D. and Wade-Benzoni, K. Human Resource Management
Journal, Vol. 33 No. 3, pp. 463-489
Human resource practices: Administrative contract makers, by Rousseau, D.M. and
Greller, M.M., Human Resource Management, Vol. 33 No. 3, pp. 372-382
The psychological contract as an explanatory framework in employment relationship,
by Shore, L.M. and Tetrick, L.E. (1994), Journal of Organizational Behavior, pp. 91-109
The changing psychological contract: The human resource challenge of the 1990s by
Hiltrop, J.E., European Management Journal, Vol. 13 No. 3, pp. 286-275
Transitions in the psychological contract: some evidence from the banking sector, by
Sparrow, P.R., Human Resource Management Journal, Vol. 6 No. 4, p. 75
Implications of differences in psychological contracts for human resource management
by Freese, C. and Schalk, R., European Journal of Work and Organizational Psychology,
Vol. 5 No. 4, pp. 501-509
Careers and the psychological contract: understanding the European context, by
Sparrow, P.R., European Journal of Work and Organizational Psychology, Vol. 5 No. 4, p.
479
Alternative approaches to the employee-organization relationship: does investment in
employees pay off?, by Tsui, A.S., Pearce, J.L., Porter, L.W. and Tripoli, A.M., Academy of
Management Journal, Vol. 40, pp. 1089-1119
Performance management and the psychological contract by P. Stiles, Gratton, Truss,
Hope-Hailey, McGovern, Human Resource Management Journal, Vol. 7 No. 1, p. 57
Psychological contracts and new deals, by Hendry, J., Human Resource Management
Journal, Vol. 7 No. 1, p. 38
Reappraising psychological contract, by Sparrow, P.R., International Studies of
Management and Organization, Vol. 28, pp. 30-63
(continued)
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29
Table AI.
A list of articles referred
for this review
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1998
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1999
1998
1999
1999
2000
2000
2001
2001
2002
2003
2003
2003
2003
2003
2005
2005
2006
Table AI.
Linking job security and career development in a new psychological contract, by Martin,
Harry Staines, Judy Pate, Human Resource Management Journal, Vol. 8 No. 3, p. 20
Redefining psychological contracts with the US workforce: a critical task for strategic
human resource management planners in the 1990s, by Singh, R., Human Resource
Management, Vol. 37, pp. 61-69
HRM, rhetoric and the psychological contract: a case of easier said than done by Grant,
D., International Journal of Human Resource Management, Vol. 10 No. 2, pp. 327-350
The changes in newcomers psychological contracts during organizational socialization: a
study of recruits entering the British Army, by Thomas, H. and Anderson, N., Journal of
Organizational Behavior, Vol. 19, pp. 745-767
The new employment contract by Gary D. Kissler, Human Resource Management,
Vol. 33 No. 3, p. 335
Antecedents and consequences of relational components of the new psychological
contract, by Cavanaugh, M. and Noe, R., Journal of Organizational Behaviour, Vol. 20,
pp. 323-340
White-collar reactions to job insecurity and the role of psychological contract:
implications for human resource management, by King, J.E. Human Resource
Management, Vol. 39 No. 1, pp. 79-91
The nature of the new employment relationship: a content analysis of the practitioner and
academic literatures by Mark V. Roehling, M.A. Cavanaugh, L.M. Moynihan, W.R.
Boswell, Human Resource Management, Vol. 39 No. 4, p. 305
Psychological contracts in the 21st century: what employees value most and how well
organizations are responding to these expectations, by Lester, S.W., and Kickul, J.,
Human Resource Planning, Vol. 24, pp. 10-21
Psychological contracts in the 21st century: an examination of what employees value
most and how organizations are responding to these expectations, by Lester and Kickul,
Human Resource Planning, Vol. 24 No. 1
Communicating psychological contract: an employer perspective, by Guest, D.E. and
Conway, N., Human Resource Management Journal, Vol. 12, pp. 22-38
Psychological contract development during organizational socialization: adaptation to
reality and the role of reciprocity, by Vos, A.D, Buyens, D. and Schalk, R. (2003), Journal
of Organizational Behavior, Vol. 24 No. 5, pp. 537-559
The impact of psychological contract violation on employee attitudes and behaviour, by
Judy Pate, Graeme Martin, Jim McGoldrick, Employee Relations, Vol. 25 No. 6, p. 557
Psychological contracting: processes of contract formation during interviews between
nannies and their employers, by Purvis, Lynne J. Miliward, Cropley, Mark, Journal of
Occupational & Organizational Psychology, Vol. 76 No. 2, p. 213
Editorial new developments in the employee-organization relationship,
Lynn M. Shore, Jacqueline A.-M. Coyle-Shapiro, Journal of Organizational Behavior, Vol. 24
No. 5, p. 443
The employment relationship in the UK public sector: a psychological contract
perspective, by Coyle-Shapiro, J. and Kessler, Journal of Public Administration Research
and Theory, Vol. 13 No. 2, pp. 213-230
The changing contours of the psychological contract: unpacking context and
circumstances of breach by Pate, J., Journal of European Industrial Training, Vol. 30,
pp. 32-47
Managing the career deal: the psychological contract as a framework for understanding
career management, organizational commitment and work behavior by Jane Sturges, Neil
Conway, David Guest, Andreas Liefooghe, Journal of Organizational Behavior, Vol. 26
No. 7, p. 821
The changing contours of the psychological contract: unpacking context and
circumstances of breach, by Pate, J., Journal of European Industrial Training, Vol. 30,
pp. 32-47
HRP and
psychological
contract
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