Table Of ContentPsychological
.Contracts
Orgafuzations
To Edward F. Rousseau,
cable splicer, coach and poet
Denise M. Rousseau
Psychological
.Contracts
OrgGiuzations
Understanding Written and
Unwritten Agreements
@SAGE Publications
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Library of Congress Cataloging-in-Publication Data
Rousseau, Denise M.
Psychological contracts in organizations: Understanding written
and unwritten agreements I Denise M. Rousseau.
p. em.
Includes bibliographical references and index.
ISBN 0-8039-7104-4 (alk. paper).-ISBN 0-8039-7105-2 (pbk.
alk. paper)
1. Organizational behavior. 2. Contracts-Psychological aspects.
3. Commitment (Psychology) 4. Industrial relations. I. Title.
HD58.7.R68 1995
I58.7-dc20 95-11730
This book is printed on acid-free paper.
95 96 97 98 99 10 9 8 7 6 5 4 3 2
Sage Production Editor: Gillian Dickens
Ventura Designer: Danielle Dillahunt
Contents
Acknowledgments ix
Introduction xi
1. Contracting: A Modern Dilemma 1
Why Contracts Aren't Well Understood 2
What We Know About Contracts
and What We Need to Know 5
Basic Types of Contracts 6
Illustrating Several Types of Contracts:
The Letter 14
The Features That Make a Promissory Contract
16
Promises 16
Limited Frames of Reference 18
Mutuality andAcceptance 20
Implications 21
2. Contract Making 23
Why Do People Keep Promises? 24
How Organizations Use Promise-Keeping Mechanisms:
An Example From General Electric 26
The Contract as a "Mental Model" 27
A Theory of Psychological Contracting
34
External Factors 36
Messages 36
Social Cues 39
Encoding 40
Individual Predispositions 43
Decoding 44
Creating a Normative Contract 46
Creating an Implied Contract 52
Conclusion 54
3. Tbe Contract Makers 5S
Who Made the Contract? 56
"The Deal That Wasn't" S6
Three Years Later: "The Deal That Came About" 58
Types of Contract Makers:
Principals and Agents 60
People: PrimaryContract Makers 63
Structural Signals:
Secondary Contract Makers 69
Personnel Handbooks and Manuals 72
Internal Career Ladders and Titles 73
Compensation Practices 75
Performance Reviews 76
Disconnection: When Human and Administrative
Contract Makers Disagree 82
Employees as Contract Makers 83
The "Real" Contract 85
How to Make or Not
Make a Contract: Illustration 86
Conclusions 88
4. Contemporary Contracts 90
Features of Contracts 91
A Brief History of Employment
Relations and Contract Fortns 93
A 2 x 2 Model of Contemporary Contracts 97
PublicAccounting'sTransactionalContract 99
Inland Oil's Braof "No Guarantees" 99
LakesideCompany's Relational Contract 101
General Electric's Balanced Contract 102
Mapping Contemporary Contracts
to Particular Types of Employment Relationships 103
Long-Term Insiders (Core Employees) 105
Short-Term Insiders (Careerists) 106
Long-Term Outsiders (Pooled Workers) 107
Short-Term Outsiders(Temporaries and
Independent Contractors) 107
SomeFloatingEmployment Arrangements 109
MissingWorkersRevisited:TheCaseofPart-Timers 109
Implications 110
5. Violating the Contract 111
What Is Contract Violation? 112
How Contract Violation Occurs: A Model 115
Contract-Outcome Discrepancy 118
Changing the Meaning of a Loss:
The Function of Remediation
and Credible Explanation 120
Procedural Justice 128
When Is Violation Most Likely? 133
What Features Create
Resistance to Violation? 133
When a Contract Is Violated 134
Typesof Responses 134
Violation Isn't the
End of the Contract 139
Summary 140
6. Changing the Contract 141
Forms of Contract Change 142
Internal Change: Drift 142
PracticalImplications of Drift 151
External Change 152
Accommodation: Adjustments Within
the Existing Contract 153
Conclusion 160
Transformation 160
Challenging the Contract: Creating Legitimacy
and Felt Need for Change 163
Preparation for Reframing:
Loss Reduction Strategies 167
Transition Structures 170
Contract Generation: Creating a New Schema 172
Contract Testing and Reliance:
Promoting New Contract Acceptance 175
Successful Transformation 177
Conclusion 177
7. Business Strategy and Contracts 180
Conceptual Framework 181
Types of Organizational
and Human Resource Strategies 183
Employment Contracts and Customer Relationships:
Contracts in Parallel? 193
Conclusion 197
8. Trends in the New Social Contract 202
Shifts in Meaning 203
Traditional Social Contracts and Change 204
Contracts in Transition:
The Threats to Contracting 211
Out of Transition: Trends to New Contracting 216
Changing the Rules: New Criteria for Fairness 218
Restoring Voluntariness: New Contract Making 221
Implications 223
References 225
Index 236
About the Author 242
Acknowledgments
Many friends and colleagues provided thought-provoking feedback on
various versions ofthis book: Jean Bartunek, Max Bazerman, Joe Baumann,
Art Brief, Martin Greller, Richard Guzzo, Jean Hirsch, Paul Hirsch, Wayne
Kriemelmeyer,DavidMessick,DonPrentiss,BenSchneider,Cathy Tinsley,and
Kim Wade-Benzoni. Katie Schonk, who edited the manuscript, deserves par
ticular recognition for her ability to tease out confounded concepts and errant
constructions. Carole McCoy saw it through to final product. Thank you all
very much. My family was especially supportive, despite living with this
book for several years. My thanks to my husband, Paul, and daughters,
Heather and Jessica.
