Psychological contract development theoretical paper

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A model of psychological contract creation upon organizational entry

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Maria Tomprou

Received 14 October 2010 Revised 3 December 2010, 28 March 2011 Accepted 29 March 2011

Heinz College and Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania, USA, and

Ioannis Nikolaou Department of Management Science and Technology, Athens University of Economics and Business, Athens, Greece Abstract Purpose – The purpose of this paper is to highlight the importance of a number of factors in newcomers’ psychological contract development.

Design/methodology/approach – The approach taken is a literature review with the development of a conceptual model.

Findings – The paper contributes to the psychological contract literature by adopting a sensemaking perspective and focusing on the role of newcomers’ pre-entry expectations and emotions on the psychological contract creation process. The authors also discuss the differential role of contract makers and facilitators and the modes they employ to influence newcomers’ psychological contract creation.

Originality/value – Psychological contract research has emphasized the consequences of psychological contract breach and violation. The paper’s aim is to direct attention at understanding the psychological contract in its very initial stages. The authors discuss implications for research and practice on managing psychological contract creation.

Keywords Psychological contract, Socialization, Sense making, Employee behaviour, Employment Paper type Conceptual paper

A concept that “neatly captures the spirit of our times” (Guest, 1998, p. 649) regarding the contemporary employment relationships is the psychological contract. The plethora of literature on this topic has to date predominantly focused on the processes of contract violation and its attitudinal and behavioral aftermath (Coyle-Shapiro and Kessler, 2000; Edwards et al., 2003; Lo and Aryee, 2003; Robinson, 1996; Robinson and Morrison, 2000; Turnley and Feldman, 1998, 1999a, b). This wealthy theoretical and empirical work has contributed substantially to our understanding of the properties of the psychological contract and its relevant outcomes.

However, we believe that this approach is rather pessimistic. The conventional approach conceptualises the process through which psychological contracts are formed, managed and breached (Rousseau, 1995, 2001). It is generally accepted among researchers that contract violation refers to “the rule and not to the exception” Career Development International Vol. 16 No. 4, 2011 pp. 342-363 q Emerald Group Publishing Limited 1362-0436 DOI 10.1108/13620431111158779

Part of this research was funded by the State Scholarships Foundation (IKY) to the first author.

The authors are also grateful to Denise Rousseau for her support and helpful comments during the development of this article.

as predicted by Robinson and Rousseau (Coyle-Shapiro and Kessler, 2000; Robinson and Morrison, 2000; Turnley and Feldman, 2000). Here, we examine psychological contract by looking in particular at the dynamics of psychological contract creation.

Psychological contract creation refers to the sensemaking process including an amalgam of promises exchanged by the newcomer and the organizational insiders, as experienced by the focal individual during her first days at work.

Psychological contract creation is very important from a careers perspective, as well.

Changes occurring in the employment relationships, as a result of the current economic climate might have led employees to embed the new psychological contract in their mentality (Baruch and Bozionelos, 2010). The traditional protean career shifts its focus of career management to the individual, while the organisation’s role is to provide employees with opportunities for growth and development (Briscoe and Finkelstein, 2009; Hess and Jepsen, 2009). As a result, the newly recruited employees have also probably adopted a different way of creating their psychological contract compared to previous generations.

Here, we consider a number of characteristics, such as pre-entry expectations, stemming from previous work experiences and pre-entry information about the organization, certain individual differences, and post-entry social influence that may affect psychological contract creation. We also incorporate in our model the role of emotions, since upon entry emotions can be considered a good indicator of comprehending how psychological contract creation is perceived and experienced by the newcomer. We distinguish psychological contract creation from psychological contract development since we mainly focus on psychological contract processes occurring during the encounter stage of socialization.

Psychological contract creation is a process taking place during newcomers’ first days at work and lasts for a few weeks. During this stage, the outsider becomes a newcomer and faces the new working reality; promises and information are intensively exchanged and expectations are being revised (Louis, 1980). On the other hand, psychological contract development accounts for a longer time period (almost up to a year) and may include perceptions of fulfilled and/or violated promise-based obligations (De Vos et al., 2003).

We have decided to concentrate on psychological contract creation during the first days of employment for a number of reasons: (1) A few studies have explored the early processes of psychological contract development (De Vos et al., 2003, 2005; Rousseau, 1990; Thomas and Anderson, 1998). In these studies, participants have provided retrospective reports of their perceptions of contracts at entry, with some reports involving lengthy periods (e.g. four waves: first month, third month, sixth month and 12th month (De Vos et al., 2003), two waves: first year, second year (Robinson et al., 1994); two waves: first day and after eight weeks (Thomas and Anderson, 1998)). Although retrospection over such lengthy periods does not necessarily lead to biased reports, there is ample evidence suggesting that retrospective reports are prone to various problems (Reis and Gable, 2000).

(2) The findings of these studies have shown that newcomer’s expectations and perceived promises tend to change over time contingent on the employer’s actual inducements and insiders’ perceptions of the psychological contract. Yet these studies do not fully tap the dynamics occurring during psychological contract creation. For instance, none of these studies explains the sources and modes of psychological contract-related information, although they appear to recognize their influential role.

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(3) Theory and research on organizational entry have primarily emphasized newcomer’s cognitions and behaviors (i.e. how they think and act related to their new job and organization) rather than newcomer’s emotions (i.e. how they feel related to the new job and organization). Although emotions are considered inherent in the sensemaking processes (Weick, 1995), they are systematically neglected under the scope of contract creation with a few exceptions mainly within the framework of psychological contract violation (Conway and Briner, 2002; Robinson and Morrison, 2000).

(4) Our conceptual model attempts to respond to recent calls (Bauer and Erdogan, 2011) for integration of the psychological contract and socialization literatures, since there is limited interplay between the two approaches, although they are both very significant for understanding newcomers’ adjustment in the organization.

Our aim is to provide a testable model of psychological contract creation upon entry, from a socio-cognitive perspective. Our proposed model is graphically shown in Figure 1.

Overview of the psychological contract creation Since Rousseau’s (1989, 1995) landmark work, psychological contracts have been construed as the perceived agreement of promise – based on obligations between the focal person and the employing organization. According to Rousseau (2011, p. 193) “psychological contract theory represents the employment relationship in terms of the subjective beliefs of employees and their employers”. By definition, a psychological contract implies a subjective nature (Rousseau and Tijoriwala, 1998) indicating that in every mind there is a different world (Sparrow, 1996). A key issue in psychological contracts is the belief that some kind of promise is made and a consideration is offered in exchange for it, binding the parties to some set of reciprocal obligations (Rousseau, 1989, 2011). However, empirical work has shown that when newcomers enter an organization, they already have expectations about the job itself, the organization and their working relationship, which may function as the basis on which psychological contracts are being formulated (Thomas and Anderson, 1998). Although not all expectations are contractual (Rousseau, 1990, 1995), some actually are and therefore cannot be neglected during psychological contract creation. Such expectations form the basis of early evaluations of the organization’s (in)ability to fulfill contractual obligations and might create a “reality shock”, which in turn can sow the seeds of future (dis)engagement. Indeed, findings have consistently reported that employees change their perceived obligations to the organization as a function of their evaluations of the inducements and obligations offered by the organization adjusting thus their psychological contract with the employing organization (Coyle-Shapiro and Kessler, 2002; De Vos et al., 2003; Robinson et al., 1994; Tsai and Yang, 2010). Expectations seem to be revised contingent on the messages conveyed by the contract makers; pre-entry expectations can be either met, unmet or indeed, even overmet. Met and overmet expectations are incorporated into a newcomer’s psychological contract.

In particular, expectations that are actualized through implicit or explicit promising within the new employing relationship become part of the new psychological contract.

On the other hand, the promises exchanged between the newcomer and the employer about the employment relationship establish the main fundamentals of the focal person’s

Pre-entry expectations Cognitive biases Previous work experiences Pre-entry information

Psychological contract creation Anticipatory expectations

345 Contract makers Power and authority Promising Formal modes of sensegiving - contracting

Post entry experiences Individual differences work ideologies Sensegivers

Facilitators No power and Authority Informing Informal modes of sensegiving - facilitating

Monitoring

Emotional reactions Intensity/type

Psychological contract creation Update Expectations Exchanged Promises Fluctuation of Emotions

psychological contract, as these comprise the main components of the unwritten agreement between the two parties. Promises are the inherent property of psychological contracting, as these messages encoded by individuals as promissory signify psychological contract creation (Rousseau, 2001, 2011). Rousseau (2001) argues that promises express intentions to provide the recipient with some benefit. This entails that promises increase the psychological attractiveness of the transmitter and increase the odds that agreements will be reached. Through promising not only obligations are created but also trust by providing information that people would otherwise possess about each others’ intention. As such, upon entry, promises are considered the main ingredient of psychological contract creation as these imply two primary functions: first, they initiate the negotiation between the two parties and, second, they engage both parties in achieving a perceived mutual agreement about their obligations.

Salience is another property that appears to influence the way employees interpret the messages sent by the organization (Herriot et al., 1997; Thomas and Anderson, 1998).

Figure 1.

A model of psychological contract creation

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Salience has been defined as the degree to which a stimulus becomes noticeable from its immediate context (Fiske and Taylor, 1984). Depending on how important some organizational inducements are to the employee, promissory messages about salient inducements will have a greater likelihood of being detected and becoming part of her psychological contract. Conway and Briner (2002) have found that the personal significance of particular inducements is a key predictor of emotional reactions regarding the occurrence of a broken or exceeded promise. Accordingly, newcomers entering the organization actively seek information about the organizational inducements they consider salient (De Vos et al., 2005; Thomas and Anderson, 1998).

Psychological contract creation as a sensemaking process Rousseau has presented an approach on how an individual’s contract is created with the other “party”, focusing mainly on constituent, intra-psychic processes, such as how the focal person encodes and decodes external messages based on personal dispositions and motives (Rousseau, 1995). Her theory of psychological contracting has been developed based on schema theory focusing specifically on how the employee makes sense of her psychological contract (Rousseau, 2001). Fiske and Taylor (1984) have defined schema as a cognitive structure that demonstrates organized knowledge about a given stimulus as well as the rules that direct information processing. Schema serves as a mental map to make sense of the environment and guide the individual to act accordingly (Harris, 1994; Louis, 1980). Schema-based sensemaking processes are generally understood to be naturally occurring for organizational newcomers from entry onwards (Harris, 1994). This paper will adopt a sensemaking approach consistent with Rousseau’s (2001) position on psychological contracts as cognitive schemata (De Vos et al., 2005; Morrison and Robinson, 1997; Rousseau, 1989).

Sensemaking theory furnishes insight into how the psychological contract, as a cognitive schema, is being created and evolves in an employee’s mind (Rousseau, 1995, 2001, 2011; Shore and Tetrick, 1994). Sensemaking refers to the actors’ attempts to build meaning in relation to self and their context. The assumption is that people are continuously engaged in a retrospective sensemaking process, particularly in new, novel or unanticipated situations (Weick and Quinn, 1999). Within the socialization context, sensemaking refers to the attempts of a newcomer to cope with their entry experiences (Louis, 1980), and in particular by attributing meaning to their employment relationship (De Vos et al., 2005). Previous literature on psychological contracts has employed sensemaking theory mainly to explain dynamics of breach and violation (Conway and Briner, 2005; Morrison and Robinson, 1997) or psychological contract development (De Vos et al., 2003), but none of these has focused on psychological contract creation.

Here, we propose that pre-entry expectations based on previous work experience and pre-entry information about the future employer might both affect what the newcomer perceives as promissory messages sent by the organization whilst ignoring others.

Pre-entry expectations Pre-entry expectations are created during the anticipatory stage of socialization (Louis, 1980). During this stage, recruits – while outsiders – anticipate their experiences in the organization they are about to enter. According to Weick (1995), the most distinguishable property of sensemaking is the focus on retrospect. The newcomer entering the organization, and especially the young graduate (Hurst and Good, 2009;

Hess and Jepsen, 2009), relies on a number of inputs to interpret and understand the new employment relationship (Louis, 1980; Weick, 1995), and to formulate expectations about the prospective psychological contract. Individual predispositions influence how newcomers interpret these expectations. Rousseau (1995) claims that an important factor influencing the development of these expectations is cognitive biases, which appear to be a generalizable information processing style. We believe that this style will be heavily influenced by newcomers’ previous work experiences. Newcomers’ previous experiences, either positive or negative, will affect how they encode and develop their expectations from their new employer. Moreover, this is not the only influence on recruits’ pre-entry expectations. These will also be affected by the pre-entry information, the employee has gathered about the future employer through organizational and recruitment image during the job seeking and recruitment process.

Cognitive biases. These pertain to the schemata that gradually develop from previous experiences and subsequently guide the way new information is organized (Louis, 1980; Weick, 1995). They provide a lens through which prospective employees create their expectations about the content of their psychological contract acquired prior to socialization (Rousseau, 2001). Within the anticipatory stage, previous work experiences act as pre-entry schemata accounting for the formation of newcomer expectations (Rousseau and Tijoriwala, 1998) and depict how the newcomer will act within the new employing organization (Louis, 1980; Weick, 1995). Upon entry, newcomers with previous work experience are considered as veterans vis-a`-vis the inexperienced neophytes (Carr et al., 2006). Veterans have created extant schemata that serve as a guide for attributing meaning to the new employment relationship (Louis, 1980). Neophytes on the other hand are more reliant on schemata evolved in relation to similar but different contexts (e.g. university or school context). During this stage, recruits develop prospective expectations about their life in the organization and on the job. According to Wanous (1977), it is during this phase that unrealistic expectations or expectations inconsistent with organizational reality can develop. As a pre-employment schema, previous work experience accounts for the extent to which some employees develop stable psychological contracts (Rousseau, 2001). Veterans can have well-developed psychological contracts that are more difficult to change and are often less responsive to contradictory information than their neophyte counterparts.

Most people work for several organizations throughout their careers and it is not uncommon for employees and organizations to change occupations, industries or organizations. Newcomers’ previous experience of terminating psychological contracts can influence the content of pre-entry expectations. Experiencing involuntary job change or any other unpleasant job event also contributes to employees’ expectations for future employment relationships (Morrison and Robinson, 1997). Research has shown that employees with a history of perceived breach of a relational (i.e. high trust) contract are more likely to defensively pursue a transactional contract (i.e. quid pro quo) as a pre-emptive strategy against other incidents of violation (Robinson et al., 1994). On the other hand, individuals who have experienced job loss and organizational change are more likely to expect job insecurity (Cavanaugh and Noe, 1999). Conversely, newcomers with positive previous experiences, such as keeping promises and expectations on behalf of the employer, would influence, respectively, the process of psychological contract creation. It is also more likely that they would expect that their new employer would keep their promises.

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Pre-entry information. Pre-entry information about the employing organization can influence a newcomer’s expectations about the new employment relationship. Dineen and Soltis (2011) in the most recent review of recruitment research emphasized the importance of firm characteristics in the context of recruitment. Here, we focus on the signalling messages sent by the employing organization through its brand and organizational image. Signalling is a very significant part of the recruitment process.

Candidates often generalize from job and organizational attribute information they have to job and organizational attributes about which they lack information (Breaugh et al., 2008). The credibility of the source might also be an important factor in this process. Tsai and Yang (2010) suggested that one of the main antecedents of organizational attractiveness is corporate credibility image. Credibility is generally considered a valid way of taking others “on board” and earn their trust. When an organization is positively perceived by outsiders, people may normally associate such a positive impression with a number of positive characteristics in the firm. Because of the functioning of social identification, a positive image will attract larger number of applicants to the corresponding organization.

Psychological contract researchers argue that the employer can send messages (whether unwitting or contrived) about future contractual obligations during the recruitment and selection process (Millward-Purvis and Cropley, 2003; Rousseau, 1995, 2001; Rousseau and Greller, 1994; Shore and Tetrick, 1994). Firm characteristics, such as the corporate image, create general organizational impressions through advertisements, campaigns and activities of corporate social responsibility (Rynes, 1991). In the absence of inside information, applicants may rely on corporate image to decide whether to pursue an employment relationship with the focal organization. Images actively used in recruitment processes may likewise be used by prospective employees (Gatewood et al., 1993). Rousseau and Greller (1994) argue that promises abound in descriptions of the work, pay system, career progression and working conditions. Although these promises may be considered by those who send the messages as personal opinions, the result is more often than not to create lasting expectations. Selection procedures, such as the employment interviews, realistic job previews and assessment centers can all furnish expectations (Rousseau and Greller, 1994; Wanous, 1977).

The above provide the rationale for the following propositions: P1.

Pre-entry expectations will influence newcomer’s perceptions of organizational promises.

P1a. Veteran newcomers will have more realistic expectations, and will perceive fewer promises than neophyte newcomers.

P1b. Corporate and recruitment image will influence pre-entry expectations, which will in turn affect newcomers’ perceptions of organizational promises.

Post-entry experiences When new hires enter the organization, they have already formulated a gamut of expectations about their future employment relationship (Robinson, 1996; Rousseau and Greller, 1994). However, it is also clear that these expectations are subject to revision through the course of interactive exchanges with insiders (Thomas and Anderson, 1998). As earlier stated, one common newcomer experience that can challenge pre-existing schemata is “reality shock”. Newcomers, in their early

days at their new position, are busy with many unfamiliar cues that need to be handled. Louis (1980) argues that individuals experience events that may be starkly divergent from their expectations and predictions. A perceived inconsistency of promises (i.e. perceived obligations) and anticipatory expectations may be experienced (Robinson, 1996), because pre-entry expectations are ill-founded in the reality of the organization (Wanous, 1977; Wanous et al., 1992). It is also possible that new recruits will perceive congruence and consistency between pre-entry expectations and perceived obligations (Robinson, 1996). Met expectations are likely to become part of newcomers’ psychological contracts. However, it should be noted that expectations can exist in the absence of perceived promises (Robinson, 1996) contributing to some uncertainty about where expectations end and promises begin in the employees’ minds (Coyle-Shapiro and Kessler, 2000; Guest, 1998).

Whether the newcomer recognizes what was promised and whether these expectations are actually met or unmet will also depend on the salience of perceived obligations and expectations. Salience is likely to affect how vigilant an employee will be in detecting whether perceived promises are upheld (Morrison and Robinson, 1997), and also the perceived relevance of particular employer contributions to judgments about whether obligations have been met. In addition, the influence of social environment guides the individual’s attention to focus on certain information close to her salient schemata and provide expectations concerning individual behavior (Harris, 1994). In the following section, we explain the influence of certain individual differences and the role of the social environment within the context of psychological contract creation.

Individual differences. Psychological contract and breach are individual-specific constructs that are influenced by individual characteristics and differences, generally represented by personality traits, work values and beliefs. A few studies have investigated the role of individual differences on psychological contract violation (Raja et al., 2004; De Vos et al., 2005; Rousseau, 2004; Nikolaou et al., 2007). Further, previous research has investigated the effect of work values on psychological contract development and type of information seeking (De Vos et al., 2005). We expand this work by suggesting the potential role of work ideologies that could affect psychological contract creation, since we believe that reciprocation ideology and self-reliance play have important roles in psychological contract creation.

Proactive personality. Personality is less subject to changes during career and organizational experiences relative to work values and ideologies (De Vos et al., 2005; Gundry and Rousseau, 1994). As stated earlier, socialization researchers tend to conceive newcomers as proactive in information seeking in relation to their new environment (Bauer and Erdogan, 2011; Major et al., 1995; Morrison, 1993a, b, Nikolaou et al., 2007).

Proactive newcomers appear to adjust more readily to new organizational settings (Morrison, 1993a, b). Proactive employees take action to influence their environment (Bateman and Crant, 1993) and experience career success (Seibert et al., 1999) along with increased levels of work engagement over time (Dikkers et al., 2010). Crant (2000) argues that, in general, proactive people recognize opportunities and act on them, demonstrate initiative, take action and persist until significant change occurs. In short, proactivity may influence the sensemaking process during psychological contract creation, and may in particular contribute to the development of realistic expectations as well as to their ability to understand and interpret promissory messages sent by the organization.

Proactive newcomers would be more vigilant about organizational messages in order to

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understand the new working environment than less proactive individuals. Proactivity is also associated with the willingness to take the initiative and to make promises as a way to seek and initiate feedback (Crant, 2000). Proactive individuals also have an increased tendency to control their work environment, thus demonstrating proactive behavior that enhances socialization (Bauer and Erdogan, 2011). Therefore, we expect that more proactive newcomers would report more employer promises than less proactive newcomers.

Work ideologies. Ideologies have been defined as “a relatively coherent set of beliefs that bind some people together and that explain their worlds in terms of cause-and-effect relations” (Beyer, 1981). Work ideologies often exist prior to an encounter with a particular employer (Rousseau, 2001). Ideologies within the organizational setting serve to reduce uncertainty and ambiguity acting as an interpretation of employment reality, minimizing the need to constantly explain an overload of complicated information (Beyer, 1981; Edwards et al., 2003). When the individual is about to enter the organization, her pre-entry expectations direct sensemaking processes regarding psychological contract creation. Based on the idea of the psychological contract as an exchange relationship (Coyle-Shapiro and Conway, 2005; Coyle-Shapiro and Neuman, 2004; Teklab and Taylor, 2003), the role of reciprocation ideology has been found to influence the formation process by means of biasing the way newcomers perceive information sent by the organization (Coyle-Shapiro and Neuman, 2004; Eisenberger et al., 1987). Eisenberger et al. (1987) have identified two independent dimensions of reciprocation ideology: one involving beliefs that returning help greater than previously received will result in generous repayments (i.e. creditor ideology), and one involving caution in returning help required to avoid being taken advantage of (i.e. reciprocation wariness). Creditor ideologists are more likely to pursue an over-reciprocation contract with the employer when they enter an organization, due to a preference to have the other party in their debt rather than experiencing the felt discomfort of indebtedness (Coyle-Shapiro and Neuman, 2004). As such, a creditor newcomer will tend to be vigilant about their own promises but not to the employer promises. Accordingly, newcomers with high reciprocation wariness may appear to ignore promissory messages sent by the organization and being rather stingy on their own promises maintaining a balance between their own and the organization’s obligations. Another potentially important work ideology is that of self-reliance.

Employee’s self-reliance is a belief that employees should depend on their employers as little as possible and should be responsible for their own employability (McKinley et al., 1998). Edwards et al. (2003) argue that employees who are not self-reliant can have high expectations of employers regarding training, benefits and job security (i.e. pursuing a more relation-oriented psychological contract), whereas their counterparts subscribing to a self-reliance ideology are likely to have lower expectations of employers regarding these attributes, predisposed to more transaction-oriented contracts. Therefore, self-reliant newcomers will tend to perceive fewer promises about employer promises.

This leads to the following propositions: P2.

Certain personality traits and work ideologies are likely to affect newcomer’s psychological contract creation.

Specifically: P2a. Proactive personality will be positively related to perceived employer promises.

P2b. Ideologies of reciprocation and self-reliance will be negatively related to perceived employer promises.

Sensegivers. Psychological contract creation does not take place irrespectively of the newcomers’ work environment. “Sensemaking is a social process that acts as a constant substrate shaping interpretations and interpreting” (Weick, 1995, p. 39). Learning the ropes involves exchanges with insiders (i.e. existing employees), who act as sensegivers; they supply viable and workable interpretation of the new reality and influence newcomers to adopt it as their own. Rousseau (2004) describes the psychological contract as a product of a complex web of exchanges between the organization and the employee. These exchanges occur within the organization on an interpersonal level between the focal person and various organizational representatives (Rousseau, 1995). It is too easy to personify the organization as a unified party to the exchange relationship insofar as the feelings an employee may have for an agent of the organization may sometimes be generalized to the whole organization (Coyle-Shapiro and Kessler, 2002; Dabos and Rousseau, 2004a). However, we have to note that individuals hold psychological contracts, not organizations: the organization, as the other party in the relationship, offers a framework for the creation of the psychological contract.

Organizations cannot “perceive”, but their representatives can perceive a psychological contract and react accordingly (Rousseau, 1989). In psychological contract terminology, organizational representatives with whom the employee interacts and perceives his/her contract have been labeled as contract makers (Rousseau, 1995).

Contract makers. The contract maker is defined as any person who conveys some form of future commitment to another person, implying that this contract maker has – at least to some degree – the power and the authority to fulfill his/her obligation. Different potential contract makers have been identified, such as managers, recruiters, top management and mentors, along with structural signals, such as human resources practices (Rousseau, 1995, 2004a; Rousseau and Greller, 1994). Empirical work has focused mainly on the role of managers and supervisors as contract makers, with whom, along with coworkers, the employee has the most frequent contact (Coyle-Shapiro and Kessler, 2000, 2002; Tekleab and Taylor, 2003). Here, we differentiate the role of contract makers from the informal social influence or alternatively the “third party” of the psychological contract, such as co-workers. This is in order to comprehend more fully their function in the sensemaking process on psychological contract creation.

Previous research on the effect of networks has shown that friends and ties within the organization have important consequences for perceived psychological contract fulfillment (Ho and Levesque, 2005; Ho et al., 2004). These researchers argue that the perceived discrepancy between employees’ and employers’ evaluation of fulfillment is partially accounted for by the fact that an individual’s network play a pivotal role in shaping an employee’s fulfillment evaluation. However, there is still no clarity on whether an employee’s network encompasses contract makers or other information sources. Within early socialization, newcomers have not yet established their network within the organization, therefore organizational insiders are considered as information sources rather than as an established network. Rousseau (1995) identifies two external sources based on the nature of the messages provided to the employee; contract makers, who send organizational messages and co-workers who provide social cues. Applying this distinction to a socialization context, we distinguish the two potential sources of sensegivers into contract makers and facilitators. Here, we expand co-workers to all

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potential sources labeled as “facilitators” because although they do not have the power and authority to make any promises, they do nonetheless influence the sensemaking process of psychological contract creation, providing information that influences its content.

To comprehend better this demarcation, we will focus on the differential functions sensegivers serve during the process of newcomers’ psychological contract creation.

First, the contract maker conveys promises about future intent or warranties (Rousseau, 1995). These promises might correspond to employer’s obligations in exchange for employee’s contributions; therefore they are made by those who can act on behalf of the organization to fulfill these promises. To convey promises, the organizational representative should satisfy at least two requirements: (1) to have the power to fulfill them at least to some degree; and (2) to have been given the authority to make promises on behalf of the organization.

Otherwise, the promises conveyed to the newcomer may lead to a disoriented and unrealistic psychological contract vulnerable to violations. Contract makers, on the other hand, are not always an accessible source of information; they mainly convey messages as organizational representatives through formal procedures, such as recruitment and selection or socialization and induction processes (Miller and Jablin, 1991; Rousseau, 1995). Within these organizational practices, formal conversations are the framework of sensegiving and sensemaking processes that create the content of the psychological contract (Rousseau, 2001). This might occur, for example, through realistic job previews (Premack and Wanous, 1985) or active communication.

Facilitators. By contrast, facilitators convey messages about the employment relationship as information providers to help (facilitate) the newcomer to make sense of his/her psychological contract. Ho and Levesque (2005) and Ho et al. (2004) conceived the third party as friendships and networks, whereas Thomas and Anderson (1998) defined the third party as insiders but not clearly distinguished from contract makers.

During organizational socialization, especially in the early beginning of the employment relationship, the third party has a facilitative role to the extent that they clarify promissory messages sent by organizational representatives. Therefore, they are labeled as facilitators and act as a secondary informal information source.

When promissory messages are conveyed by organizational representatives, the newcomer is likely to seek validation or clarification from facilitators. Facilitators can provide helpful information for the newcomer to make sense of the promissory messages sent by the organization. For instance, if an organizational representative promises fringe benefits, the newcomer can make use of facilitator source to obtain information of the process of obtaining these benefits. Facilitators can be co-workers, administrative staff, and colleagues from other departments (Miller and Jablin, 1991) but do not necessary have some type of relationship, such as friendship or network, as in Ho and colleagues’ definition. During psychological contract creation, relationships are not yet established and newcomers focus on the facilitative role of the third party to obtain information. They may turn to experienced peers, or informal mentors (Eby, 2011), who act as helpful sources and guides to salient background information for assigning meaning to events and surprises (Louis, 1980). In their study into army recruits’ changes in psychological contracts, Thomas and Anderson (1998) argue that newcomers’ changes in their pre-entry expectations are generally toward the existing

norms of experienced soldiers. All these arguments indicate the influential role of facilitators in the psychological contract creation process.

Unlike contract makers, facilitators cannot make any official promises about employer’s obligations as they are not assigned with the authority or the power to do so. Therefore, they may not be considered as reliable source of information as contract makers. Nonetheless, they do provide information about employer’s obligations. This will definitely be the case if we are talking about an informal mentoring relationship (Eby, 2011). This information may attribute both positive and negative meaning compared to promises that have a primarily positive nature, as they refer to intention to fulfill a perceived obligation. Researchers have consistently found that supervisors evaluate contract fulfillment towards their subordinates higher compared to employees’ evaluation of organizational contract fulfillment (Coyle-Shapiro and Kessler, 2000; Porter et al., 1998; Tekleab and Taylor, 2003). Porter et al. (1998) have also found that employees report greater amounts of employer’s inducements than do their organizational representatives. These discrepancies can be explained by the information provided by the facilitators who help the newcomer to learn the ropes by providing both positive and negative information.

The second function that differentiates the role of contract makers from that of facilitators is the differential sensegiving modes they adopt. Contract makers, as we explained earlier, are more likely to employ formal tactics to convey messages about an employer’s obligations, whereas facilitators use more informal tactics to provide their information. The potential inefficiency of formal procedures to offer the newcomer a holistic picture of the new employment relationship may lead to the development of alternative modes of information seeking (Miller and Jablin, 1991). The use of facilitators as informal socialization agents may provide a means by which the newcomer can confirm or clarify contract makers’ promises. Facilitators are available to newcomers through more informal modes, such as chatting, storytelling and advising. Previous research has shown that advice and friendship relationships shape the content of psychological contract (Dabos and Rousseau, 2004b; Ho et al., 2005). Therefore, we develop the following propositions: P3.

During the encounter stage, different sources of sensegivers will influence differently the process of psychological contract creation.

P3a. Newcomers will perceive more employer promises by contract makers than by facilitators.

P3b. Newcomers will perceive more facilitative information about employer inducements from facilitators than by contract makers.

Monitoring. As a sensemaking process, monitoring is also another potential tactic the newcomer employs in order to scrutinize uncertain or ambiguous information and events (Miller and Jablin, 1991; Rousseau, 1995). Monitoring refers to observation of the interactions taking place within their new working environment and the respective behaviors of others. Scanning the environment may be considered as a less explicit way of interacting with insiders as the newcomer opts not for direct contact, either primarily because the insiders are not always accessible or as an alternative mode to gain knowledge and learn. According to social learning theory, the advantage of monitoring as a sensemaking process lies in its inconspicuous nature and on the individual’s ability

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to imitate other’s behaviors (Bandura, 1977). Researchers suggest that newcomers are more likely to monitor others, than ask questions (Miller and Jablin, 1991; Morrison, 1993b). During the first days at work there is overwhelming information that a newcomer’s mind capacity cannot fully interpret. She will monitor and extract only this information that entails discrepancy from the existing schema of her psychological contract (Rousseau, 1995). It is also likely to employ monitoring when the information is salient regarding her employer’s obligations and when the information source is not readily accessible. However, the information obtained through monitoring may not be as reliable as that derived from other modes, as it is highly implicit in nature and therefore, promises inferred by monitoring may need further confirmation (Morrison, 1993b).

Morrison (1993b) argues that when the information is particularly salient and valuable or very difficult to obtain through monitoring, employees will be more willing to ask directly. Overall, monitoring is considered as a rather implicit tactic with relatively unreliable inputs to making sense of the environment but frequently used, when the focal information is considered highly important and is otherwise not easily accessible.

This leads to the following proposition: P3c. When there is lack of communication, newcomers will view promises and facilitative information via monitoring organizational representatives and facilitators.

Emotional reactions. Another inherent property of sensemaking processes is the type and the intensity of the newcomers’ emotions. We will first have a look at the intensity of emotions. Weick (1995) argues that emotions are experienced when an organized sequence is interrupted unexpectedly. Emotions are at stake when the newcomer experiences contrast and change between the pre-entry expectations and the emerging psychological contract. The frequency of emotions is likely to be intense as the newcomer tries to attribute meaning to his/her new psychological contract based on pre-entry expectations as well as on the congruence between promissory messages by contract makers and information provided by facilitators. The revision of pre-entry expectations is likely to provoke intense emotions as the newcomer is bombarded with new and unknown interruptions of his/her pre-entry script. Further, the (in)consistency of promises and facilitative information may also challenge the newcomer emotionally: P4.

The greater the extent to which exchanged promises refer to salient pre-entry expectations, the more intense the emotion the newcomer is likely to experience, either positive or negative.

P4a. The intensity of emotional reactions is contingent upon the consistency of pre-entry expectations and perceived promises. The more inconsistent the terms of the psychological contract are with pre-entry expectations, the more intense the emotional reactions will be.

P4b. The intensity of emotional reaction is contingent upon the consistency of facilitative information and perceived promises. The more inconsistent the terms of psychological contract are with facilitative information, the more intense the emotional reactions will be.

The type of emotions experienced may also vary. In psychological contract research, emotions have been conceptualized by the term violation (Morrison and Robinson, 1997;

Rousseau, 1989, 1995). Violation conveys strong emotional experiences that involve feelings of betrayal and deeper psychological distress, as well as anger and resentment (Morrison and Robinson, 1997; Rousseau, 1989). These strong emotions are provoked under the assumption that the organization has failed to meet one or more obligations corresponding to a focal person’s contributions namely perceived breach (Morrison and Robinson, 1997). The above implies that the psychological contract is underpinned by the concept of trust (Robinson, 1996). When the organization fails to fulfill its obligations, trust is eroded (Lo and Aryee, 2003; Robinson, 1996) resulting into negative emotions.

Promises may also increase the possibility of positive emotions (Conway and Briner, 2005). Promise implies an intention for future action, i.e. obligation (Rousseau, 1995).

The nature of a promise indicates a positive reaction insofar as the party involved is obligated to fulfill her promise (Sull and Spinosa, 2007), and the fundamentals of an alleged agreement are perceived to be set. Contract makers, therefore, are more likely to provoke positive emotions. Accordingly, facilitators provide information that may create positive but also negative experiences of the employment relationship. Sias and Jablin (1995) argue that after an emotional event, coworkers are more likely to discuss negatively valenced incidents amongst themselves than positively valenced events.

These findings indicate that the information provided by facilitators may provoke a mixture of positive and negative emotions especially related to perceived employer’s promises. Therefore, we believe that the consistency between perceived employer’s promises and facilitative information will influence newcomer’s emotional reactions.

Thus, depending on the source and nature of the information provided, emotions are likely to fluctuate. This leads to the following propositions: P5a. During psychological contract creation, promises by contract makers will provoke more positive emotions, due to its formal contracting process and newcomer’s perception for negotiating, than information provided by facilitators.

P5b. The more consistent the information provided by facilitators is with perceived employer promises, the more positive emotions it will provoke.

Concluding remarks We believe that the aforementioned dynamics provide a means of understanding how the content of a newcomer’s psychological contract is formulated. Pre-entry information and cognitive biases function as a cognitive lens through which the newcomer interprets the new employment relationship. Yet this cognitive lens is likely to be dysfunctional within the new context, as pre-entry expectations will need to be revised and updated contingent upon entry experiences and social interchanges with insiders (Robinson, 1996; Rousseau, 1989, 1995). Facilitators, as helpful sensegivers, also influence the content of newcomer’s psychological contract as they convey messages that attribute both positive and negative meaning to the new psychological contract (Ho and Levesque, 2005). The type of a new hire’s psychological contract is also being formed; promises emphasizing relational terms (e.g. long-term security and concern for individual’s wellbeing) or transactional terms (e.g. encouragement of external marketability and pay contingent on performance), shape the scope through which the newcomer interprets the nature of her employment relationship

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(Rousseau, 1990; Robinson et al., 1994). The final point regarding the psychological contract fundamentals involves the fluctuation of emotions the newcomer will experience. Acknowledging explicitly the role of emotions in the workplace has been on the rise recently (Elfenbein, 2007; Barsade and Gibson, 2007). In a similar vein to Morrison and Robinson (1997) and Robinson and Morrison’s (2000) argument about the need to distinguish between cognitive and affective components of the concept of violation, the influence of the emotions may need to be considered as inherent to psychological contracting. The degree of consistency between perceived employer promises with pre-entry expectations as well as with facilitative information can have a differential effect on how the psychological contract is being experienced upon entry.

Despite the important work on psychological contract, little is known about how the psychological contract is actually created and experienced during employees’ first days at work. We have attempted to clarify the sensemaking processes occurring during psychological contract formation taking into consideration emotional and social factors, as well as conventional cognitive elements. In doing so, we have illustrated certain pre-entry antecedents, the role of individual differences, as well as the differential influence of sensegiving from contract makers and facilitators. Likewise, we have emphasized the pivotal role of emotions as an inherent part of the psychological contracting process. Next, we address the future research potential of our propositions, and implications to promote both research and practice on psychological contracts.

Research and practice implications The model outlined in this paper not only presents a framework on psychological contract creation during the early days at work, but also provides an agenda for future empirical research and guidelines for how such research could be conducted. For each part of our model, we have neatly identified variables that we deem likely to affect the processes of psychological contract creation. Researchers should also focus on the neglected issue of emotions as an inherent part of psychological contract creation.

Sentiments and emotional reactions may fill the gap regarding differential perceptions of the psychological contract, as well as its subsequent behavioral and attitudinal reactions. Likewise, the role of facilitators (with no formal authority to make promises) not just contract makers (with the authority to make promises) also needs to be further investigated within the process of psychological contracting. Further, the individual should not be considered as “tabula rasa” when entering the organization, since previous experiences and knowledge has articulated certain expectations that would guide individual’s perceptions about the new working environment.

The most important challenge, however, will be in developing an appropriate methodology for capturing the dynamics of psychological contract creation. One-shot cross-sectional surveys cannot fully tap the dynamics of contract creation.

Longitudinal surveys and diary methods are potentially much more conducive to capturing postulated processes. Diary methods are especially likely to capture subtle emotional reactions and moods, more so than traditional surveys (Bolger et al., 2003), as well as narrative methods of interviewing which capture the chronological and temporal nature of experience and sensemaking.

The exploration of these questions will shed light not only in the area of employment relationship, but also in other areas, such as recruitment, selection

and career management. We consider that career management will especially benefit from understanding newcomers’ psychological contract creation. Despite the heightened effect of employability on employees’ work life (Scholarios et al., 2008) and the shift towards individual or group responsibility for career management, as Baruch and Bozionelos (2010) suggest, employees value and will still value more in the future employers offering better career deals than the market, leading to increased levels of organizational commitment (Ng and Feldman, 2008).

Our model has also practical implications for both employees and organizations regarding how to manage psychological contracts from the beginning of the employment relationship. The psychological contract has been often criticized as a construct developed by researchers rather than practitioners (Arnold, 1996; Cullinane and Dundon, 2006). However, when violated it becomes more dominant in the organization than ever. This is primarily because organizations mainly focus on the pathology of a phenomenon than on the aetiology. Organizations thus invest money to increase desired outcomes, such as enhancing organizational commitment and morale, instead of investing on how to create the fundamentals that will lead to these outcomes.

Therefore, understanding how the psychological contract is created may assist practitioners to comprehend employment relationships better and manage them accordingly. First, organizations should invest on dealing effectively with newcomers’ pre-entry expectations. Although nowadays most large corporations spend a great deal of money on improving their corporate and recruitment image, job applicants can gather information from many different sources, which are not easily managed by the company. In a “connected” world, candidates can easily form expectations about a company and if these are provided by credible sources, it might be difficult for a company to change them, if it is required to do so. Moreover, pre-entry expectations are also formed during the recruitment and selection process (Millward-Purvis and Cropley, 2003). Organizations should understand the important role of recruitment and selection in forming and developing newcomers’ psychological contract.

Newcomers play an active role in making sense of their new psychological contract.

Socialization researchers have repetitively reported the proactive role of the neophytes in the information-seeking process (Major et al., 1995; Morrison, 1993a, b; Ostroff and Kozlowski, 1993). They can creatively use the multiple sources of psychological contracting to filter their new expected role and working relationship. Although some of the sources may be considered more accessible, such as co-workers and administrative personnel, these may not always be as reliable and powerful as they may appear.

Understanding the differential role of contract makers and facilitators will enhance newcomer’s ability to recognize the reliability of the exchanged information. For the organization, it may be more productive to use facilitators more actively in the socialization practices instead of neglecting their influential role. In that way, implicit, incongruent and distorted messages sent by the facilitators can be reduced. Team leaders or newcomers’ supervisors should be aware of this exchange of information and intervene, when and if it is possible. This can be achieved, for example, through close contact with the neophytes or with the development of “unofficial” mentoring programs.

In practice, drawing a distinct line between the contract makers and facilitators may not be easy, but organizations should make an attempt to recognize the influential role of facilitators during psychological contract creation.

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In general, we suggest that sensegivers play a pivotal role in the establishment of a psychological contract. When the psychological contract is still open to negotiation and malleable, sensegivers can exercise their communication skills effectively to influence psychological contract creation. Accordingly, it is important for the organization to become aware of its implicit messages to attract recruits and promote its corporate and recruitment image to the society. These messages may be considered as valid indicators of their prospective working relationship, especially for inexperienced newcomers. Organizational agents, especially recruiters, HR specialists and first-line supervisors may need to work together to deliver messages in a more realistic way.

Within the context of positive organizational behavior, certain HRM interventions are applied within organizations to increase positive emotions at work and thus increasing employees’ commitment and work performance. In short, these interventions mainly refer to “positive programs”, such as empowerment, fun at work and emotional intelligence (Fineman, 2006). Without by any means condemning these structured types of emotion management programs, we want to prioritize emotions through active psychological contract management on an everyday basis especially from the very beginning of a newcomer’s organizational life.

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363 Corresponding author Ioannis Nikolaou can be contacted at: inikol@aueb.gr

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