The effects of psychological contract breach and organizational cynicism: not all social exchange violations are created equal

Transcription

1 Journal of Organizational Behavior J. Organiz. Behav. 24, (2003) Published online in Wiley InterScience ( DOI: /job.207 The effects of psychological contract breach and organizational cynicism: not all social exchange violations are created equal JONATHAN L. JOHNSON* AND ANNE M. O LEARY-KELLY Department of Management, Sam M. Walton College of Business, University of Arkansas, Fayetteville, Arkansas, U.S.A. Summary This research explored the differential effects on employees of two types of social exchange violations: those that generate perceptions of psychological contract breach and of organizational cynicism. We predicted that psychological contract breach and cynicism would result in differential outcomes because of differences in the person specificity of their underlying social exchange relationships. Using a sample of bank employees, we found that cynicism partially mediated the effects of psychological contract breach on work-related attitudes (organizational commitment, job satisfaction), but that only psychological contract breach (not cynicism) predicted employees behavioral responses (performance, absenteeism). Further, affective cynicism fully mediated the relationship between psychological contract breach and emotional exhaustion, suggesting that cynical attitudes have negative consequences for the attitude holder. Copyright # 2003 John Wiley & Sons, Ltd. Introduction People often do not receive what they expect or desire in their employment relationships. Practices such as downsizing, increased use of contingent employment, corporate mergers, outsourcing, and the movement of operations to cheaper offshore locations truly have been transformative to employment relationships, with employees experiencing many and varied violations to traditional employment expectations (Robinson, Kraatz, & Rousseau, 1994). In studying and documenting these changes, organizational scholars often rely upon a social exchange perspective. Social exchange theory (Blau, 1964) suggests that individuals enter into relationships in which not only economic but also more diffuse social obligations are relevant. These obligations are traded, over time, in cycles of reciprocity, with individuals being most comfortable under conditions of balanced exchange (Gouldner, 1960; Wayne, Shore, & Liden, 1997). Models of social exchange have been used to explore various aspects of the employment relationship e.g., employees relationships with their supervisors (Wayne et al., 1997), trust in managers (Whitener, Brodt, Korsgaard, & Werner, 1998), decisions to * Correspondence to: Jonathan L. Johnson, Department of Management, Sam M. Walton College of Business, University of Arkansas, Fayetteville, Arkansas, 72701, U.S.A. jonjohn@walton.uark.edu Copyright # 2003 John Wiley & Sons, Ltd. Accepted 10 April 2003

2 628 J. L. JOHNSON AND A. M. O LEARY-KELLY initiate organizational citizenship behaviors (OCBs) (Konovsky & Pugh, 1994; Van Dyne & Ang, 1998), reactions to organizational justice (Aryee, Budhwar, & Xiong Chen, 2002; Masterson, Lewis, Goldman, & Taylor, 2000) as well as to study the employment contract generally, most prominently through research on the psychological contract (Rousseau, 1995; Rousseau & McLean Parks, 1993). Psychological contracts are one form of social exchange that develops between employers and employees. The focus of most psychological contract research has been on identifying the components of an employee s contract and the effects of fulfillment or non-fulfillment of contracts by employers (e.g., Robinson, 1996; Robinson & Brown, in press; Robinson et al., 1994; Rousseau, 1990, 2001). For example, Robinson et al. (1994) found that the psychological contracts of MBA alumni include such components as an expectation of rapid advancement, high pay, long-term job security, and training, and that when these expectations were unfulfilled subjects responded negatively (e.g., through lowered expectations regarding their own obligations to the employer). Recently, however, some have argued that this focus is too situation-specific, in that the components of the contract will depend greatly upon individuals and context, thus preventing comparisons across studies (Shore & Barksdale, 1998). An alternative approach to understanding employment contracts is to conceptualize employment relationships as involving different forms of social exchanges (beyond just psychological contracts), and to categorize the dimensions underlying these different forms and their effects on employee and organizational outcomes (Shore & Barksdale, 1998). For example, research by Shore and Barksdale (1998) demonstrated that two dimensions underlying social exchanges the degree of balance and the level of obligation in the employment relationship are important to predicting employee beliefs and attitudes. Specifically, employees who perceived mutual high obligations in their employment exchanges (compared to those who perceived mutual but low obligations, or those who perceived imbalanced obligations) were most likely to express strong organizational commitment and perceived organizational support, positive beliefs regarding their career future, and lower turnover intentions. Similarly, Rupp and Cropanzano (2002) examined a different characteristic of social exchanges the degree to which they have multiple foci and the effect on justice-related outcomes. From the standpoint of our paper, these previous studies are beneficial for two reasons: because they focus on the broader issue of employment-related social exchanges (versus a more narrow focus just on psychological contracts), and because they attempt to classify the characteristics of these social exchanges and their differential effects. If social exchanges have different underlying characteristics, then violations of employees social exchange expectations often may have differential consequences. The purpose of this paper is to examine two reactions to social exchange violations (perceptions of psychological contract breach and organizational cynicism) and their effects on employee attitudes and behavior. Essentially, we argue that the social exchange expectations that underlie psychological contract breach differ from those that underlie organizational cynicism in their degree of person specificity, and that this difference is useful to understanding why individuals who perceive a contract breach may react differently from those who are cynical about their organization. In the following sections, we discuss the two constructs central to our research (psychological contract breach and organizational cynicism), explain the person specificity dimension, and then present predictions regarding the effects of psychological contract breach and cynicism on criterion variables. Psychological Contract Breach and Organizational Cynicism The psychological contract is defined as an individual s expectations regarding the obligations that exist between an employee and an organization (Rousseau, 1995). Psychological contracts involve

3 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 629 only the employee s beliefs and expectations; it is not necessary that the other party in the exchange relationship share these expectations (Lucero & Allen, 1994; Rousseau, 1989; Shore & Tetrick, 1994). Further, psychological contracts involve perceived promises, not simply generalized expectations; that is, psychological contracts include obligations for which employees have reason to believe that a specific promise has been made (Morrison & Robinson, 1997). Promises are not always explicitly stated, rather they also may be inferred from the employer s actions (Rousseau, 2001). However, if an employee does not perceive that a promise has been made (for example, when an expectation is based on experiences with a previous employer; Morrison & Robinson, 1997), a psychological contract does not exist (McLean Parks & Schmedemann, 1994; Morrison & Robinson, 1997; Rousseau & Greller, 1994; Shore & Tetrick, 1994). Psychological contract breach involves an employee s perception that one or more obligations of the employer are unfulfilled (Morrison & Robinson, 1997). Perceptions of unmet obligations may occur as a result of reneging by the employer (e.g., the employer is unwilling or unable to deliver on a promised outcome), or because of incongruence in the expectations of the employer and employee (e.g., the employer has a different understanding of the promised outcome) (Morrison & Robinson, 1997). Psychological contract breach is expected to have significant consequences for employees work attitudes and behaviors because contracts are so fundamental to individuals employment-related beliefs and experiences (Morrison & Robinson, 1997). Organizational cynicism exists when employees believe that their employing organization lacks integrity (Dean, Brandes, & Dharwadkar, 1998). More specifically, this perceived lack of integrity may result from perceived violations of fundamental expectations regarding sincerity, justice, and honesty (Dean et al., 1998). Organizational cynicism is an attitude that is not necessarily specific to one object, but can relate to multiple objects, and that can generalize from one object to another (Andersson, 1996; Bateman, Sakano, & Fujita, 1992). Therefore, organizational cynicism is regarded as broader in scope than other attitudes such as job satisfaction, because it relates to a more diverse set of objects or foci (Andersson, 1996). Organizational cynicism has been conceptualized as anticipatory in nature (Andersson, 1996; Wanous, Reichers, & Austin, 1994), suggesting that it represents a learned belief (Vance, Brooks, & Tesluk, 1996, p. 1, as reported in Dean et al., 1998) that develops as a result of experience (Andersson & Bateman, 1997; Reichers, Wanous, & Austin, 1997). These two definitions suggest that an employment-related social exchange is inherent to both psychological contract breach and organizational cynicism. That is, both involve employee reactions to unmet expectations in their employment contexts (Andersson, 1996). Not surprisingly, then, it also has been suggested that these two forms of unmet expectations are related (Andersson, 1996; Robinson & Brown, in press). Specifically, psychological contract breach has been suggested as a fundamental determinant of employee cynicism (Andersson, 1996; Robinson & Brown, in press) in that perceived violations of the employment contract should be a primary antecedent to employees cynical beliefs and feelings regarding the integrity of the organization. To date, there is no direct test of this prediction (Robinson & Brown, in press), although one study demonstrated the negative effect that psychological contract violation by a previous employer can have on cynicism regarding a new employer (Pugh, Skarlicki, & Passell, in press). Based on this previous theorizing and preliminary empirical evidence, we predict: Hypothesis 1: There will be a positive relationship between an employee s perception that the employer has breached the psychological contract and his/her cynicism about the employer. Although we expect these two reactions to social exchange violations to be positively related, we also expect that they will have differential effects on employee attitudes and behaviors because they differ in their degree of person specificity. In the next sections, we discuss how person specificity differs for the social exchanges that underlie psychological contract breach and organizational cynicism, and

4 630 J. L. JOHNSON AND A. M. O LEARY-KELLY then present our predictions regarding the attitudinal and behavioral outcomes associated with these constructs. The Person Specificity Dimension in Social Exchange Given that psychological contract breach and organizational cynicism are both reactions to violations of employment-related social exchanges, it is important to consider how these constructs differ. Perhaps the most obvious distinction is in the breadth of the domain of issues relevant to each. As mentioned earlier, psychological contracts involve perceived promises (McLean Parks & Schmedemann, 1994; Morrison & Robinson, 1997; Rousseau & Greller, 1994; Shore & Tetrick, 1994), outcomes employees believe have been promised to them personally by the employer. Perceptions of contract breach occur when the employee s personal experience does not conform to these perceived promises (Morrison & Robinson, 1997). Psychological contract breach, then, is person-specific in two ways: (1) employees believe that promises have been made to them personally, and (2) in determining whether promises have been kept, employees consider how their experiences match up with perceived promises. On the other hand, research suggests that organizational cynicism develops from a wide range of unmet expectations, not simply unmet promises (Andersson, 1996; Bateman et al., 1992). Employees may have expectations of the employer that are based on general beliefs about how organizations should behave or based on what they have encountered in the past (Andersson, 1996; Bateman et al., 1992). For example, one recent study (Pugh et al., in press) demonstrates that experiences with one employer can influence an individual s cynicism about a new employer. In addition, cynicism can develop not only from the individual s own experiences, but also from knowledge about the experiences of others. For example, employees may become disillusioned and doubt the veracity of their employer because the organization is unethical in its dealings with another organization or in its treatment of coworkers. Although these actions exist outside the employee s personal psychological contract, they may still influence feelings of organizational cynicism because they influence perceptions of the organization s integrity. Cynicism, then, can result not only from violation of specific promises to the employee, but also from violation of generalized expectations or based on the experiences of others. This distinction is captured by the person specificity characteristic, which is the degree to which a social exchange involves perceived promises to the individual from the employer, versus generalized expectations that develop from varied and multiple sources. Although person specificity might be assessed from the perspective of the employee or the employer, it is the employees perceptions that will influence their subsequent attitudes and behaviors. This dimension adds to the earlier-mentioned characteristics (e.g., degree of balance and level of obligation, Shore & Barksdale, 1998; multifoci nature, Rupp & Cropanzano, 2002) that define different forms of social exchanges. More importantly, it provides a foundation for making predictions regarding the effects of social exchange violations that differ in their level of person specificity. Reactions to Social Exchange Violations Figure 1 illustrates our predictions regarding the relationships of psychological contract breach and organizational cynicism with criterion variables. As shown in the figure, we expect organizational cynicism to mediate the effects of psychological contract breach on some criterion variables, but

5 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 631 Figure 1. Proposed relationships between psychological contract breach, organizational cynicism, and criterion variables not others. Our explanations for these predictions are based on the person specificity dimension just described. Work-related attitudinal responses Based on previous theorizing (Andersson, 1996; Robinson & Brown, in press) and some early empirical evidence (Pugh et al., in press), Hypothesis 1 predicted that psychological contract breach would be positively associated with organizational cynicism. Preliminary research also suggests that organizational cynicism is associated with attitudes such as organizational commitment (Reichers et al., 1997; Wanous, Reichers, & Austin, 2000) and job satisfaction (Reichers et al., 1997). Therefore, putting these two statements together, it is plausible that cynicism may mediate the relationship between psychological contract breach and subsequent attitudes. That is, when employees feel that their psychological contracts have been breached by the employer, they will begin to believe that the organization lacks integrity (i.e., organizational cynicism), and they will develop more negative attitudes regarding the organization and the work they do within the organization. Although this is a logical prediction, it overlooks the person specificity issue mentioned earlier. Because psychological contract breach relates to a specific and personal set of expectations and experiences (i.e., perceived promises), we predict it will have significant and direct effects on numerous employee attitudes (beyond simply organizational cynicism). Psychological contract theory indicates that contract breaches are regarded as violations of personal trust that are fundamental to the employment experience (Robinson, 1996) and that can be associated with strong emotional reactions (Morrison & Robinson, 1997). Similarly, research on norm violation indicates that people (or in this case, organizations) who behave in unexpected ways are negatively evaluated (Tedeschi & Felson, 1994) and that strong affective reactions are particularly likely when norm violation involves some perceived attack on the personal identity (Tedeschi & Felson, 1994), a probable condition when the violated expectations are person-specific. It seems likely, then, that multiple organization-relevant

6 632 J. L. JOHNSON AND A. M. O LEARY-KELLY attitudes will be affected because of the profound type of personal violation that is involved in a psychological contract breach. There is some indirect empirical evidence to support this presumption in that research shows negative effects of psychological contract breach on organizational commitment (Bunderson, 2001; Coyle-Shapiro & Kessler, 1998, 2000; Kickul, 2001; Lester, Turnley, Bloodgood, & Bolino, 2002; Robinson, 1996; Robinson & Rousseau, 1994) and satisfaction (Bunderson, 2001; Porter et al., 1998; Robinson & Rousseau, 1994). No research to date, however, has explored how psychological contract breach and organizational cynicism interface to influence these other attitudes. As depicted in Figure 1, we predict: Hypothesis 2: Organizational cynicism will partially mediate the effect of psychological contract breach on employee attitudes ( job satisfaction, organizational commitment). Work-related behavioral responses As shown in Figure 1, we also expect the behavioral consequences of these two constructs to differ. As argued above, because psychological contract breach involves violation of a promise made to the individual, it is a person-specific violation. Emotion theory suggests both that people become angry when they perceive some demeaning offense against themselves and that anger is associated with an action tendency (Lazarus, 1991). Similarly, social interactionist theory (Tedeschi & Felson, 1994) suggests that if an offense is regarded as person-related, it can involve an identity threat which leads not only to strong emotional reactions but also to an energizing of behavior. Consistent with this, psychological contract theory suggests that violations of the psychological contract involve not only attitudinal reactions, but also a readiness for action (Morrison & Robinson, 1997, p. 231) due to the strong feelings (e.g., outrage, indignation, resentment; Morrison & Robinson, 1997) that result. Taken together, these arguments suggest that when a violation is perceived as personal (in that a perceived promise was broken) individuals are primed to action. Previous research supports the notion that psychological contract breach is associated with behavioral responses, in that relationships have been predicted and found between psychological contract breach and performance (Lester et al., 2002; Robinson, 1996), extra-role behavior (Coyle-Shapiro & Kessler, 1998, 2000; Robinson, 1996), and withdrawal behavior (Guzzo, Noonan, & Elron, 1994; Robinson, 1996; Turnley & Feldman, 1999). On the other hand, we would not expect organizational cynicism to be strongly associated with work-related behavior (such as performance, extra-role behavior, or withdrawal behavior). As we have argued to this point, the violated expectations that lead to cynicism need not be person-specific. Because the violated expectations are not always personal (in that employees can become cynical based on generalized expectations or based on how others are treated), the identity threat and emotional reaction that trigger action (Lazarus, 1991; Tedeschi & Felson, 1994) are less intense. Indeed, cynicism generally is depicted as an apathy-based attitude, one that involves resignation and weariness (Andersson, 1996; Kanter & Mirvis, 1989; Stivers, 1994) rather than an action readiness. One influential conceptualization does suggest that cynicism includes a behavioral component (along with cognitive and affective components; Dean et al., 1998). However, even here, the behavioral component is described as a tendency toward negative actions such as criticism of the organization, sarcastic humor, knowing looks, and rolling eyes (Dean et al., 1998), rather than as an enactment of significant negative work-related behavior (e.g., lower performance, withdrawal behavior, reduced citizenship behavior). Although there is very limited empirical evidence regarding the effects of cynicism, the current evidence suggests that it affects primarily attitudes (e.g., Reichers et al., 1997; Wanous et al., 2000) and intentions to behave (e.g., a negative intention to perform OCBs, a negative intention to comply with organizational requests; Andersson & Bateman, 1997).

7 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 633 Integration of these lines of argument leads us to predict that the effects of psychological contract breach on employees work-related behaviors will be strong and direct, but that (contrary to our predictions regarding attitudinal outcomes in Hypothesis 2 above) organizational cynicism will not significantly influence employee work-related behavior, either directly or as a mediator. Hypothesis 3: Psychological contract breach will be negatively related to employees in-role work performance and organizational citizenship behavior, and positively related to absenteeism. The relationships will not be mediated by organizational cynicism. Employee-related responses A final relationship depicted in Figure 1 involves the effects of psychological contract breach and organizational cynicism on the employee him/herself. In American society, the popular conception of a cynic is not positive for example, one definition identifies the cynic as a sneering fault-finder (reported in Dean et al., 1998, p. 342, from the Oxford English Dictionary, 1989). In a similar vein, theoretical explanations of cynicism describe cynics as people who are pessimistic and hopeless (Wanous et al., 1994), who express apathy and resignation (Kanter & Mirvis, 1989; Stivers, 1994), and who experience frustration, hopelessness, and disillusionment (Andersson, 1996). The general world weariness depicted in these conceptualizations suggests that cynicism may take a personal toll on those who hold such attitudes. In fact, the fatigue associated with cynicism seems likely to be associated with negative states such as emotional exhaustion, which represents a chronic state of emotional and physical depletion (Cropanzano, Rupp, & Byrne, 2003, p. 3). It also seems likely, given our earlier argument that cynicism involves reactions to a broad (versus narrow, personalized) set of expectations, that simply the act of monitoring and assessing this broad range of issues and objects (Andersson, 1996) creates the potential for personal strain and emotional exhaustion to be an outcome of this attitude. These arguments suggest that organizational cynicism will be associated with emotional exhaustion. The remaining question, however, is how psychological contract breach is related to this outcome variable. On the one hand, contract breach may have a direct effect on emotional exhaustion such that individuals who perceive broken promises not only display negative attitudes and behaviors toward the organization (as predicted in Hypotheses 2 and 3), but also suffer from emotional and physical burnout as a result. This prediction, however, does not fit well with the active orientation that appears to accompany a perceived contract breach. As argued earlier, contract breach is associated with action-ready emotions (Lazarus, 1991) such as anger and outrage (Morrison & Robinson, 1997). The general conception, then, is that individuals who experience a breach get angry at the organization, not personally exhausted by their circumstances. Alternatively, psychological contract breach may have an indirect effect on emotional exhaustion through its effect on organizational cynicism. This conceptualization (which is consistent with Hypothesis 1) suggests that one effect of psychological contract breach is an enhanced sense that the employer lacks integrity (i.e., organizational cynicism), and that it is this sense of cynicism that is associated with emotional exhaustion. This conceptualization, then, suggests that organizational cynicism acts as a mediator of the contract breach emotional exhaustion relationship. This prediction, along with Hypothesis 3 above, implies that the primary consequence of contract breach is negative action toward the organization, with the effects on the individual (i.e., emotional exhaustion) occurring only through the cynicism that is generated when promises are broken. Hypothesis 4: Organizational cynicism will fully mediate the effect of psychological contract breach on employees emotional exhaustion.

8 634 J. L. JOHNSON AND A. M. O LEARY-KELLY Organizational Context The study was conducted in a community bank that was founded in At the time of the initial data collection (mid-1999), the bank had one main location and four branches, each of which is represented in the study sample, and has since added three branches. The bank is owned by about 300 shareholders, who buy and sell shares at a local stock brokerage. In the years prior to the study, the bank had grown rapidly (16 per cent in each of the prior 2 years) and was slightly less profitable than peer institutions in those years (net income of 1.06 per cent and 0.76 per cent). The bank received many acquisition offers from larger regional and national banks, and in the year prior to the study the bank s managers entered into negotiations with a regional bank. The bank s board eventually refused the offer, but the period of evaluation was very stressful for the bank s managers and employees. Several employees mentioned that tensions between managers and lower-level employees had emerged in the evaluation period, and the bank s managers partly blamed substandard organizational performance in the subsequent year on distractions created by the acquisition offer. Unemployment in the local economy was very low, 2.6 per cent at the time of the study, and banks competed aggressively for qualified personnel. Employees from every level of the organization participated in the study, with a 98 per cent participation rate. About half of the officers, including the CEO and COO, were involved in the founding of the bank. The remaining officers had been hired from outside the firm, from rival banks or from governmental oversight agencies. Methods and Analysis Sample Data were collected in a community bank in a small city in the central United States. Surveys were distributed to all 105 bank employees, and 103 usable sets were received (a 98 per cent response rate). The bank consisted of five locations: the main bank (73 per cent of employees) and four branches. The researchers distributed and collected surveys at the main facility, and the bank s human resources manager distributed and collected surveys at the branch locations. Respondents were guaranteed confidentiality and, immediately upon completion, surveys were placed by the subjects in sealed manila envelopes. Completed instruments were seen only by the researchers. To ensure adequate response rates and a sample that was representative of employees at all levels of the organization, subjects were paid $20 for their participation in the study and were permitted to complete the survey during work hours. Respondents average age was 35.8, average tenure with the organization was 4.37 years, and 64 per cent were female. Data were collected from three sources: subjects, their supervisors, and organizational records. Subjects provided ratings of psychological contract breach, affective and cognitive cynicism, work-related attitudes ( job satisfaction, organizational commitment), emotional exhaustion, tenure, and the helping behaviors of other bank employees. Control variables (trait cynicism, negative affectivity, conscientiousness, organizational tenure) were chosen for two reasons. First, some control variables (trait cynicism, negative affectivity) were included because of their likely relevance to key independent variables. Specifically, previous research suggests relationships between trait cynicism and organizational

9 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 635 cynicism (Andersson & Bateman, 1997) and between negative affectivity and psychological contract breach (Turnley & Feldman, 1997). Further, studies of psychological contracts often include tenure as a control variable because of the likelihood that employees with longer tenure will have greater opportunity to experience contract breach (e.g., Robinson & Morrison, 2000). Second, the final control variable (conscientiousness) was included because of its consistent relationship in previous research to one of our dependent variables, job performance (Barrick & Mount, 1991). All control variables involved self-reports by subjects. Bank supervisors provided ratings of the in-role performance of each employee they directly supervised. Absenteeism information was collected from company databases and was provided by the human resource manager. Data were collected at two points in time. At Time 1, information on all subject-rated variables was collected. Ten months later, at Time 2, absenteeism data were collected. Measures Psychological contract breach was operationalized using the five-item scale reported in Robinson and Morrison (2000). Sample items include My employer has broken many of its promises to me even though I have upheld my side of the deal, and I have not received everything promised to me in exchange for my contributions. All items were rated on a seven-point scale ranging from Strongly disagree to Strongly agree. Affective organizational cynicism was measured using a nine-point, five-item semantic differential scale. This scale was a modified (semantic differential) version of an unpublished scale developed to assess the three components (cognitive, affective, behavioral) of cynicism described by Dean et al. (1998; Dharwadkar, personal communication, June 25, 1999). Respondents were asked to indicate how they felt when thinking about the motives of the organization with respect to the following anchors: Cynical Hopeful, Satisfied Aggravated, Tense Calm, Anxious Reassured, and Fed up Inspired. The anchors were derived from the Dharwadkar instrument, and are in keeping with the affective dimension of cynicism as described by Dean et al. (1998) and by Andersson (1996). Cognitive organizational cynicism was measured using the five-item Dharwadkar scale mentioned above (Dharwadkar, personal communication, June 25, 1999). Subjects responded on a seven-point scale ranging from Strongly disagree to Strongly agree to the following items: I believe that [the organization] always does what it says it will do, When [the organization] says it s going to do something, I know that it will really happen, [The organization s] policies, goals, and practices seem to have little in common, I see little similarity between what [the organization] says it will do and what it actually does, and [The organization] expects one thing of its employees, but rewards another. Job satisfaction was measured with eight items (personal growth, accomplishment, independence, challenge, supervision, challenge, work expected, and workload) from the Job Diagnostic Survey (Hackman & Oldham, 1975). Subjects were asked how satisfied they were with each of these aspects of their job, and answers were provided on a seven-point scale ranging from Extremely dissatisfied to Extremely satisfied. Organizational commitment was operationalized using items from the affective and normative commitment subscales from Meyer, Allen, and Smith (1993). Seven items were rated on a seven-point Likert scale ranging from Strongly disagree to Strongly agree, including This organization has a great deal of personal meaning to me, and This organization deserves my loyalty. Emotional exhaustion was measured with the six-item emotional exhaustion subscale of the Maslach Burnout Inventory (Maslach & Jackson, 1981). Sample items include I feel emotionally drained from my work, and I worry that this job is hardening me emotionally. Items were rated on a seven-point scale ranging from Strongly disagree to Strongly agree.

10 636 J. L. JOHNSON AND A. M. O LEARY-KELLY Absenteeism data were collected from the bank s database and provided by the bank s human resource director 10 months after the survey data were collected. Absenteeism was operationalized as the total number of days missed in the intervening period. In-role performance was measured using three items adapted from Van Dyne and LePine (1998). For each employee they supervised, managers indicated on a seven-point Likert scale ( Strongly disagree to Strongly agree ) the degree to which the employee (1) meets performance expectations, (2) fulfills the responsibilities in his/her job description, and (3) performs the tasks that are expected as part of the job. Organizational citizenship (helping behaviors) was measured by asking each employee to evaluate helping for each coworker. Specifically, subjects were provided with a roster of coworker names and asked to indicate who they helped and who helped them with tasks that go beyond formal job descriptions. Helping was coded dichotomously and operationalized as the number of others who indicated the individual helped them. Control variables Trait cynicism was measured using a five-item version of the Wrightsman s Cynicism Subscale (Wrightsman, 1974). Sample items include If most people could get into a movie without paying, and be sure they would not be seen, they would do it, and Most people are not honest for desirable reasons, they are afraid of being caught, and all were rated on a seven-point Likert scale ( Strongly disagree to Strongly agree ). Negative affectivity was measured using an eight-item version of the Watson, Clark, and Tellegen (1988) PANAS scale. Subjects were presented with adjectives (e.g., Irritable, Hostile, Jittery) and asked to indicate the degree to which they had felt this way during the past few months. Subjects responded on a five-point scale ranging from Not at all to Extremely. Tenure was operationalized as time, in years, since first employment. Conscientiousness was measured with a ten-item version of the scale developed by Goldberg (1992). Subjects were asked to describe themselves on a nine-point semantic differential scale which contained bipolar adjectives such as Impractical/Practical, Disorganized/Organized, Hardworking/Lazy. The nine-point scale was anchored with Very on each end and Neither at the midpoint. Analysis Analysis consisted of two stages. The first stage, conducted to ensure discriminant validity of the constructs, examined affective cynicism, cognitive cynicism, psychological contract breach, negative affectivity, and trait cynicism. A confirmatory factor model that included these constructs and their indicators was estimated using maximum likelihood estimation. Discriminant validity between two constructs was indicated if their squared interconstruct correlation, which represents the variance explained in each construct by the other, was less than the Fornell and Larcker (1981) variance extracted estimate for each construct. The second stage, testing of hypotheses, involved estimating three structural equations models. Each of the models included direct relationships between psychological contract breach and cognitive and affective cynicism, as well as direct relationships between the control variables (trait cynicism, negative affectivity, conscientiousness, and tenure) and the proposed dependent variables. The first model, which relates to Hypothesis 2, examined the direct and indirect relationships between psychological contract breach and work attitudes (Job Satisfaction and Commitment). In testing Hypothesis 3, the

11 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 637 second model specified direct relationships between psychological contract breach and work-related behaviors (in-role performance, helping OCB, and absenteeism), with no mediating role for cognitive or affective cynicism. The third model examined the relationships with Emotional Exhaustion predicted in Hypothesis 4, with affective and cognitive cynicism fully mediating the relationship between psychological contract breach and emotional exhaustion. Each of the models was estimated using maximum likelihood, and hypotheses were tested by examining overall model fit (chi-square, NFI, RMSEA) and the significance of individual path values. Results Means, standard deviations, and interconstruct correlations are presented in Table 1. Constructs were created using the mean of the associated indicators. The behavioral cynicism subscale was unreliable (Cronbach alpha ¼ 0.54), and was excluded from the analyses. All other constructs proposed in the hypotheses or used as control variables were judged to be reliable, with Cronbach alphas (also listed in Table 1) ranging from 0.69 to The first stage, which assessed discriminant validity, examined cognitive and affective cynicism about the organization, psychological contract breach, negative affectivity, and trait cynicism to ensure that these represented distinct constructs. Results from the confirmatory factor analysis are presented in Table 2 (chi-square ¼ 334 (220 d.f.), NFI ¼ 0.818, RMSEA ¼ 0.071). Discriminant validity was evaluated by comparing variance extracted estimates for each construct with squared off-diagonal intercorrelations i.e., variance accounted for by the other construct between the constructs in the model (Fornell & Larcker, 1981). Strong evidence for discriminant validity is provided when variance extracted exceeds the squared intercorrelations. Results corroborate that affective cynicism, cognitive cynicism, and psychological contract breach are unidimensional constructs that differ from each other and from trait-based cynicism and negative affectivity. Results from the first structural equations model are presented in Table 3. The model specified direct relationships between psychological contract breach and job satisfaction and commitment, as well as relationships between these constructs that were partially mediated by cognitive and affective cynicism. Overall model fit was very good (chi-square ¼ 14.1 (8 d.f.), p ¼ 0.08, NFI ¼ 0.994, RMSEA ¼ 0.087). The relationships between psychological contract breach and affective cynicism (0.60, p < 0.001) and cognitive cynicism (0.59, p < 0.001) were positive and significant, providing strong support for Hypothesis 1. Hypothesis 2 was supported with negative and significant direct relationships between psychological contract breach and job satisfaction ( 0.23, p < 0.01) and commitment ( 0.25, p < 0.01). Affective cynicism was significantly related to job satisfaction ( 0.17, p < 0.01) and commitment ( 0.218, p < 0.01), while cognitive cynicism was significantly related to job satisfaction ( 0.215, p < 0.01), providing further support for Hypothesis 2. Table 4 presents results for the second structural equations model, which also resulted in very good overall fit (chi-square ¼ 17.7 (14 d.f.), p ¼ 0.21, NFI ¼ 0.992, RMSEA ¼ 0.051). Unsurprisingly, Hypothesis 1 received additional support in this model, with significant relationships between psychological contract breach and the cynicism constructs. Significant direct relationships between psychological contract breach and in-role performance ( 0.262, p < 0.001) and absences (0.768, p < 0.01) provide support for Hypothesis 3, although the relationship predicted between psychological contract breach and helping was not significant. We also note that, consistent with Hypothesis 3, models in which the relationships between the cognitive and affective cynicism and work-related behaviors were freed failed to result in significant improvements in model fit (chi-square difference ¼ 3.57 (6 d.f.), p ¼ 0.73), supporting the prediction that the cynicism constructs would have no direct effects on behaviors.

12 638 J. L. JOHNSON AND A. M. O LEARY-KELLY Table 1. Item means, standard deviations, and intercorrelations Mean SD Tenure Conscientiousness Trait Cynicism Negative Affectivity ** * 5. Psych. Contr. Breach Cognitive Cynicism ** 7. Affective Cynicism ** 0.66** 8. Job Satisfaction * ** 0.57** 0.60** 9. Commitment * ** 0.50** 0.57** 0.69** 10. Emotional Exhaustion * 0.25* 0.38** 0.33** 0.42** 0.55** 0.42** 11. Absences * ** 0.25* * 0.20* 12. Helping OCB ** ** In-Role Performance ** * *p < 0.05; **p < 0.01.

13 Table 2. Tests of discriminant validity between theoretically related constructs Affective Cynicism 0.65 a 2. Cognitive Cynicism 0.54 b Negative Affectivity Psychological Contract Breach Trait Cynicism a Diagonal values represent ve (), or variance extracted, for each construct. b Off diagonals are squared intercorrelations between each factor, which represents the amount of variance explained by each factor in the corresponding factor. Table 3. Psychological contract breach, affective and cognitive cynicism, and attitudes structural equation models Dependent Independent Estimate SE Affective Cynicism Psychological Contract Breach 0.599** Cognitive Cynicism Psychological Contract Breach 0.588** Job Satisfaction Trait Cynicism Negative Affectivity Conscientiousness Tenure 0.064** Affective Cynicism 0.174* Cognitive Cynicism 0.215* Psychological Contract Breach 0.230* Commitment Trait Cynicism Negative Affectivity Conscientiousness Tenure 0.082** Affective Cynicism 0.218* Cognitive Cynicism Psychological Contract Breach 0.246* *p < 0.01; **p < Chi-square ¼ 14.1 (8 d.f.), p ¼ 0.08, NFI ¼ 0.994, RMSEA ¼ EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 639 Hypothesis 4, which proposes that affective and cognitive cynicism will fully mediate the relationship between psychological contract breach and emotional exhaustion, is partially supported by results from the third model estimated (Table 5). The overall model fit was again quite good (chisquare ¼ 17.0 (9 d.f.), p ¼ 0.05, NFI ¼ 0.991, RMSEA ¼ 0.093), and the relationships between psychological contract breach and affective and cognitive cynicism proposed in Hypothesis 1 were again strongly significant. While the hypothesized relationship between cognitive cynicism and emotional exhaustion was not significant, the relationship between affective cynicism and emotional exhaustion was positive and significant (0.29, p < 0.01). Furthermore, an alternative model in which the relationship between psychological contract breach and emotional exhaustion was freed did not result in a significant improvement in model fit (chi-square difference ¼ 2.86 (1 d.f.), p ¼ 0.09), supporting the hypothesized mediating role of cynicism. Discussion Psychological contract breach and organizational cynicism each are constructs comprised of unmet expectations by an employee of her or his employer. Although both are generated by social exchange

14 640 J. L. JOHNSON AND A. M. O LEARY-KELLY Table 4. Psychological contract breach, affective and cognitive cynicism, and work behaviors structural equation models Dependent Independent Estimate SE Affective Cynicism Psychological Contract Breach 0.599** Cognitive Cynicism Psychological Contract Breach 0.588** In-Role Performance Trait Cynicism Negative Affectivity Conscientiousness Tenure Psychological Contract Breach 0.262** Helping Trait Cynicism Negative Affectivity Conscientiousness Tenure 0.002** Psychological Contract Breach Absences Trait Cynicism Negative Affectivity Conscientiousness Tenure Psychological Contract Breach 0.768* p < 0.10; *p < 0.01; **p < Chi-square ¼ 17.7 (14 d.f.), p ¼ 0.21, NFI ¼ 0.992, RMSEA ¼ Table 5. Psychological contract breach, affective and cognitive cynicism, and emotional exhaustion structural equation models Dependent Independent Estimate SE Affective Cynicism Psychological Contract Breach 0.599** Cognitive Cynicism Psychological Contract Breach 0.588** Emotional Exhaustion Trait Cynicism Negative Affectivity 0.395* Conscientiousness Tenure Affective Cynicism 0.285* Cognitive Cynicism *p < 0.01; **p < Chi-square ¼ 17.0 (9 d.f.), p ¼ 0.05, NFI ¼ 0.991, RMSEA ¼ violations, they differ in the degree to which these social exchanges are person-specific. Our research examined the relationship between these constructs and the manner in which they combine to influence other attitudes and behaviors. First, we found that psychological contract breach and organizational cynicism are indeed distinct constructs. Confirmatory factor analyses verified their independence, both from each other and from relevant personality variables. Cynicism about the organization was not significantly correlated with either an employee s trait cynicism or level of negative affectivity. Similarly, feelings of contract breach were not significantly correlated with these personality traits. These findings related to discriminant validity are noteworthy for two reasons. First, previous research has not clearly established the independence of these constructs from relevant individual dispositions. Second, their independence from personality traits suggests that attitudes of contract breach and organizational cynicism are not

15 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 641 simply feelings that negative people bring into the organization, but that these attitudes are shaped by experiences in the work context, as a social exchange perspective would predict. We also found that, although psychological contract breach and organizational cynicism are distinct constructs, they are related. Specifically, employees who felt that promises by the organization had been broken held more cynical attitudes about the employer. This finding is consistent with predictions made (but not tested) by previous researchers that psychological contract breach should be a primary determinant of organizational cynicism (Andersson, 1996). If psychological contract breach is a determinant of cynicism, then it is interesting to examine the extent to which attitudinal and behavioral reactions to psychological contract breach which have been documented in previous research are mediated by cynicism. Related to this, perhaps the most striking finding is that cynicism played no mediating role in the psychological contract breach behavior relationships we examined. That is, employees cynical attitudes toward the employer did not influence their work performance, their organizational citizenship behaviors, or their absence levels. As proposed in the emerging organizational cynicism literature, it appears that cynicism involves more apathy-based reactions (Andersson, 1996; Dean et al., 1998). On the other hand, psychological contract breach had significant and direct effects on in-role performance and absenteeism. Perhaps because psychological contract breach involves violation of a person-specific social exchange in which promises have been perceived, employees act out their displeasure in their work-related behaviors. We had also predicted a direct effect of psychological contract breach on citizenship behaviors, but found no support for this prediction. Perhaps this differential pattern of results for citizenship behavior relates to the fact that such actions benefit not only the organization but also coworkers. That is, employees anger over psychological contract breach may not directly affect helping behavior if it is perceived that coworkers will be harmed by their withdrawal. The fact that our measure of helping behavior involved coworker ratings makes this a particularly feasible explanation. A different pattern of results was evident in regard to predicting work attitudes, where both cynicism and psychological contract breach had significant effects. Specifically, affective cynicism partially mediated the psychological contract breach attitudes relationship, both for organizational commitment and for job satisfaction. It appears, then, that when contracts are breached, employees affective reactions generalize across a range of objects. Such employees appear not only to believe that the organization lacks integrity (i.e., organizational cynicism), but also to be less committed to the organization and less satisfied with the work that they do within the organization. Interestingly, these effects were not as definitive in regard to cognitive cynicism. Specifically, we found evidence of a mediating role for cognitive cynicism in the psychological contract breach job satisfaction relationship, but not in the psychological contract breach commitment relationship, suggesting that the affective component of cynicism is a better carrier of the effects of psychological contract breach on subsequent attitudes. Finally, particularly intriguing results were found in relation to emotional exhaustion. Because of the emotional weariness that is associated with cynical attitudes, we predicted that cynicism would be accompanied by emotional exhaustion for the attitude holder. Our data were supportive of this prediction in that those individuals who expressed the strongest affective cynicism also reported the highest levels of emotional exhaustion. However, as predicted, we found no direct relationship between psychological contract breach and emotional exhaustion, only a mediated effect through affective cynicism. This suggests that employees who experience a breached contract will feel cynically about the employer, but that they do not simply become apathetic and emotionally burned-out. Rather, as demonstrated in our earlier results, they also act out their displeasure, perhaps because the anger associated with person-specific violations (such as psychological contract breach) is associated with action-readiness (Lazarus, 1991; Morrison & Robinson, 1997).

16 642 J. L. JOHNSON AND A. M. O LEARY-KELLY Interestingly, we did not find that cognitive cynicism acted as a mediator of the psychological contract breach emotional exhaustion relationship. It appears that simply holding cynical beliefs is not sufficient to create emotional exhaustion; rather employees must feel this cynicism in the form of disillusionment, frustration, bitterness, and other emotions associated with affective cynicism. Theoretical implications and future research From a theoretical standpoint, these results are instructive. Perhaps most fundamentally, they suggest that feelings of contract breach and of organizational cynicism can be explored as distinct (albeit related) concepts. Recent critiques of the psychological contract literature (Guest, 1998) suggest that feelings of contract violation or breach may be redundant with other forms of unmet expectations or attitudes, a contention that our data dispute. Although there is similarity in the fundamental nature of the two constructs (i.e., both involve unmet expectations; Andersson, 1996), our results demonstrate they are distinct concepts that act in very different ways on organizational and individual outcomes. This suggests, contrary to recent criticism, that there does appear to be a distinction between the violation of a perceived promise and the violation of other forms of expectation, and this distinction is evidenced by the differential outcomes that result. It also is noteworthy that our research was built around the consideration of psychological contract breach and organizational cynicism as reactions to different types of social exchange violations. The person specificity distinction inherent to these different types of social exchange violations was helpful in making predictions regarding the differential effects of psychological contract breach and cynicism. More specifically, we found that a focus on characteristics of the social exchange relationship provided us a foundation for assimilating two literatures (psychological contract and organizational cynicism) that have similar emphases but have not been well integrated. More specifically, our results indicate that some relationships established in earlier research (e.g., between psychological contract breach and affective reactions) may be more complex than previously recognized in that cynicism plays a mediating role. In addition, it suggests that the outcome variables examined in cynicism research should be expanded to include a focus not only on the organizational consequences of cynical attitudes, but also on the individual consequences. Unlike other forms of social exchange violation, cynicism may have more significant negative effects on the person him/herself because of the emotional weariness with which it is associated. It is also important, in future research, to explore the cyclical effects of psychological contract breach and cynicism. Based on theory regarding each of these constructs, we have explored psychological contract breach as a determinant of organizational cynicism. It also seems likely, however, that once cynicism develops, it may influence perceptions of psychological contract breach. That is, an individual s assessment of whether contract breach has occurred may be interpreted through the perceptual lens of cynicism, enhancing the likelihood of psychological contract breach perceptions (Robinson & Brown, in press). Our data did not allow us to test for these cyclical effects, but we would expect a downward spiral of negative reactions to develop once an initial psychological contract breach has occurred. It is also important to consider, in future research, a more finely tuned distinction between psychological contract breach and psychological contract violation. Morrison and Robinson (1997) suggested a distinction between these two constructs that was not examined in our research. Specifically, they argued that breach involves perception of a broken promise while violation involves the emotional reaction to this violation. Our data did not allow us to examine this distinction, but additional research on the ways in which each of these constructs relate to cynicism would be interesting. For example, it seems likely that perceptions of contract breach may be more strongly related to cognitive cynicism,

17 EFFECTS OF PSYCHOLOGICAL CONTRACT BREACH 643 while psychological contract violation (which involves affective reactions) may relate more strongly to affective cynicism. It would also be useful to assess the degree to which the cognitive and affective components of each of these attitudes can be separated in practice. While theory suggests that is possible for employees to perceive a contract breach and not experience negative emotions (e.g., if the organization was not responsible for the breach; Morrison & Robinson, 1997), it is not clear whether employees who believe that their organization lacks integrity (cognitive cynicism) always feel negatively toward the organization (affective cynicism) as a result. Our data, which suggest that affective cynicism operates differently on some dependent variables than does cognitive cynicism, suggests that this may occur. This raises interesting questions, such as whether there are differential antecedents to cognitive and affective cynicism. Also, it becomes interesting to consider the effects of time on these two forms of cynicism does the affective component of cynicism dissipate when employees are disillusioned over and over again (i.e., can they become so disillusioned that they become apathetic even in regard to generating negative feeling about the organization)? Or, alternatively, do frequent disillusioning events lead to enhanced affective cynicism? Just as psychological contract research has distinguished between psychological contract breach and violation (Morrison & Robinson, 1997), future research could examine the antecedents and effects of different components of cynicism (cognitive, affective, behavioral; Dean et al., 1998) and the conditions under which they are related/unrelated. Practical implications Our findings also have interesting practical implications. Specifically, they suggest that when employee expectations are perceived as dishonored, the degree of person specificity inherent to these expectations may greatly affect the consequences that result. When expectations are personal and when they are regarded as promises, as with psychological contracts, violation results in strong and significant negative consequences for the organization. Employers should expect dishonored employees to not only develop negative attitudes such as cynicism, lowered job satisfaction, and lowered organizational commitment, but also to enact their displeasure through decreased in-role performance and increased absenteeism. Psychological contract breach, then, is a violation of fundamental trust (Morrison & Robinson, 1997) which has significant negative consequences for employers. This underscores that managers must recognize and respect those employee expectations that are perceived as promises and, when it is necessary to change the deal, that these expectations be addressed. As implied by Morrison and Robinson (1997), it may be possible for an employer to breach the contract and still minimize negative consequences if employees perceptions are appropriately managed. For example, negative emotional reactions may be minimized if employees believe that the contract breach was of small (versus large) magnitude, if there was procedural and interactional justice as the deal was changed, and if they attribute the change to unavoidable (versus purposeful) reneging. Contract breach, therefore, creates challenges for managers but does not automatically create disaffected employees. From the standpoint of the organization, cynicism has less immediate negative effects than does psychological contract breach. Employees who are cynical feel more disillusioned with their employer and report less positive feeling toward the organization and their work, but they do not act out this displeasure in behaviors that influence organizational performance directly. Rather, cynicism appears to have the most negative effects on employees themselves, through emotional exhaustion in that employees with strong affective cynicism suffer emotional fatigue and burnout. On the one hand, this might suggest that organizations need to be less concerned with managing employees cynical attitudes (versus their psychological contract breach perceptions). On the other hand, though, it seems likely that emotional exhaustion will have its own negative effects over time. For example, Cropanzano et al.

18 644 J. L. JOHNSON AND A. M. O LEARY-KELLY (2003) recently reported evidence that emotional exhaustion can lead to lowered job performance and extra-role behaviors, and enhanced intentions to turnover. Perhaps, then, the effects of psychological contract breach compared to cynicism on organizational performance simply depend on time. The negative consequences of psychological contract breach may be more immediate and dramatic, but the cumulative effects of exhaustion over time may lead employees to a similar low level of individual performance. If true, this suggests that employers must be concerned with both psychological contract breach and cynicism, but that they may have more time to address issues related to the latter. Limitations Several limitations of our research should be noted. First, data were collected within one organization, limiting the generalizability of our results. Other data collection efforts in different organizational contexts is necessary to verify the generalizability of the findings reported here. Second, our sample size was relatively small, which raises the possibility that we had insufficient statistical power to uncover significant relationships between some variables. This limitation, of course, does not discount any significant relationships reported here, but may mean that some significant relationships existed but were not reported. Third, it should be noted that subjects were paid for their participation in this research, leading to two potential biases: (1) differential participation of subjects based on some confounding variable such as salary or job level; (2) a social desirability bias in subjects responses. In regard to the former, it should be noted that virtually all members of the organization participated in the study (there was a 98 per cent response rate). In regard to the latter, careful confidentiality procedures were used and explained to subjects a priori to encourage honesty in responses. For example, all completed surveys were sealed in separate envelopes and results were never seen by any organizational members. Conclusion In conclusion, our findings suggest that organizations should be most immediately concerned with psychological contract breach (because of the negative employee behaviors it generates), while employees themselves should be concerned with the personal consequences of organizational cynicism (which is associated with emotional exhaustion for the employee). The fact that these related constructs generate distinctive effects suggests that not all social exchange violations are created equal. That is, employees will react quite differently depending on their perceptions of the nature of the social exchange. More specifically, our research demonstrates that person specificity is an important underlying dimension that influences the nature of employee reactions to violated social exchange relationships. Author biographies Jonathan L. Johnson is an Associate Professor of Management in the Sam M. Walton College of Business at the University of Arkansas. He received his PhD from Indiana University. His research interests include corporate governance and social networks in and between organizations.

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