University of Amsterdam

Faculty of Economics and Business

Exploring the Relationship Between the Psychological Contract Breach, Globalization

and Recruitment

Ria Nash

10621512

Bachelor Thesis

Business Administration BSc

Word count: 12,827

Supervisor: Nesrien Abu Ghazaleh

28th June 2016

Statement of Originality

This document is written by student Ria Nash who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

Abstract

This thesis studies literature on the psychological contract and the effects of breach and fulfillment. Much of this literature introduces the complications that arise as a result of globalization, especially the occurrence of increasingly diverse cultures. There is also a vast amount of literature that examines the importance of recruitment, however, there are few examples of how it effects the psychological contract. Consequently, this thesis looks at the importance of recruitment and how this interacts with the psychological contract within culturally diverse firms, in order to propose how the recruitment process can lessen the negative consequences of a psychological contract breach. This paper found that in order for the recruitment process to be useful in culturally diverse firms, and thus decrease the chances of a psychological contract breach, the organization is advised to be knowledgeable of the market, use a strict recruitment process, and use opportunities to transfer the desired organizational culture to employees whenever possible.

Contents

1. Introduction ............................................................................................................................ 1

2. Psychological Contract .......................................................................................................... 4

2.1 Psychological Contract Breach ........................................................................................ 5

2.2 Fulfillment of the Psychological Contract and Organizational Citizenship Behaviors ... 7

3. Globalization .......................................................................................................................... 8

4. Cultural Dimensions ............................................................................................................ 10

4.1 Power Distance ............................................................................................................... 11

4.2 Uncertainty Avoidance ................................................................................................... 14

4.3 Individualism .................................................................................................................. 16

4.4 Masculinity ..................................................................................................................... 17

5. Recruitment .......................................................................................................................... 19

5.1 Organizational and Employee Fit ................................................................................... 20

5.2 Specificity of Information .............................................................................................. 21

5.3 Job Advertisement Content ............................................................................................ 22

5.4 Successful Recruitment in MNEs .................................................................................. 24

6. Conclusion ........................................................................................................................... 26

7. Limitations and Suggestions for Further Research .............................................................. 29

8. Bibliography ........................................................................................................................ 32

1

1. Introduction Contracts create a naturally appealing and culturally accepted way to describe

relationships in a working environment. They are however, subject to dispute (Rousseau,

1995). The reform of corporations and the decline in organized labor has created a challenge

for traditional employment contracts. Contracts are made up of promises about the future,

however these promises are increasingly difficult to make and even more so to keep

(Rousseau, 1995). Additionally, meeting the agreements of a formal contract is important

within firms, however in order to provide satisfaction, management must meet additional

obligations related to beliefs and expectations of employees. These additional obligations are

what formulates the psychological contract, defined by Herriot, Manning and Kidd (1997) as

“the perceptions of mutual obligations to each other held by two parties in the employment

relationship, the organization and the employee” (page151). Rousseau (1995) further defines

the psychological contract as individual beliefs, shaped by the organization, regarding terms

of an exchange agreement between individuals and their organization.

Most psychological contract research has focused on the effects of fulfillment or

breach. For example, Rego and Cunha (2008) demonstrate the positive outcomes of

fulfillment and the increase in organizational citizenship behaviors, while Robinson and

Rousseau (1994) found the negative effects that a psychological contract breach has on

employee behavior including decreased effort, a lack of commitment, and vandalism. This

research has made it evident that the psychological contract plays a very important role in the

relationships within the working environment. This is therefore useful for the organization as

it will increase effectiveness of the firm. However, in the case of a firm failing to meet these

additional expectations, a psychological contract breach is said to occur. A psychological

contract breach has a detrimental effect on the firm, more specifically it lowers citizenship

behavior, reduces loyalty and decreases satisfaction (Robinson, 1996).

Many definitions of the psychological contract emphasize perception and subjectivity;

this highlights the difficulty that arises due to individuals constructing the psychological

contract in different ways, thus it can result in two parties having different or unclear ideas of

their obligations (Herriot et al. 1997). Consequently, breaches are often inevitable. The

likelihood of a breach is also intensified due to the nature of today’s work environment. As

organizations move toward the trends of globalization, restructuring, and downsizing,

employment relationships are becoming progressively more dependent on the psychological

2

contract which is playing an increasingly important role (Robinson, 1996). The increase in

globalization is introducing a greater variety of nationalities and cultures to what used to be

completely domestic firms. These cultures bring greater dynamics to firms and opposing

beliefs as to what is the norm. As a result of this individuals have different expectations from

their firm, consequently the understanding of the psychological contract has become more

complex. This is best described through Hofstede’s cross-cultural dimensions.

Hofstede (1990) describes the differences between nations by introducing four cross-

cultural dimensions. These include; power distance, uncertainty avoidance, collectivism and

masculinity – all of which impact the psychological contract. One example from Zagenczyk,

Cruz, Cheung, Scott, Kiewitz & Galloway (2015) discovered that the level of power distance

that is the norm in culture will play a role in how employees respond to a psychological

contract breach, identifying that the negative consequences that occur as a response to a

breach will differ depending on the power distance. They suggest that, when triggered by the

situation of a breach, an individual’s culture will play a role in their reactions – for example,

employees with a low power distance orientation will have more severe and detrimental

reactions to a psychological contract breach than those with a high power distance orientation

(Zagenczyk et al., 2015). A more in depth example of each of the four dimensions along with

examples will be explained in succeeding chapters.

Additionally, during a study on newly recruited students, Rousseau (1990) found that

the psychological contract begins to develop during the recruitment process. They further

found formation of the psychological contract is dependent on what type of relationship the

employee wanted with their employer and therefore differed depending on what the employee

sought from their job. Employees seeking a short-term relationship desired monetary benefits

in exchange for hard work, whereas those desiring a long-term relationship held emphasis on

job security for their loyalty (Robinson and Rousseau, 1994). Further studies by Robinson

and Rousseau (1994) identified that 54% of new employees reported some form of contract

breach in their first 2 years of employment. It is probable that this breach is a result of

different interpretations of the deal and changes among contract makers. One may assume

that understanding how managers, co-workers, human resource practices, and organizational

culture shape individual psychological contracts can create guidance towards more consistent

communication and management of the psychological contract. Recruitment is the primary

tool for attracting applicants and refers to any activities used in order to identify and attract

suitable employees. It is also a way of ensuring the appropriate individuals are hired (Acarlar

3

& Bilgic, 2013). Thus it is apparent that the process can and should be used by organizations,

not only to fill vacant positions, but also to ensure there is fit between the employee and the

organization.

Much research, including that realized by Rodwell (2013) and Rousseau (1995), has

investigated the detrimental effects of a psychological contract breach including reduced

effectiveness, weaker employment relationships and lower performance and attendance.

Moreover, they researched how this may be more apparent in culturally diverse firms. Other

research has also focused on the importance of job advertisements to ensure they attract the

most suitable employees and provide these employees with sufficient information (Mohamed,

Singh, Irani and Darwish, 2013). However, there is little research on the interaction of these

dimensions and how prior contact with the employees can aid the firm in reducing the

likelihood of a psychological contract breach. Therefore, the purpose of this paper is to fill

this literature gap and explore the research question: how can recruitment mitigate the

possibility of a psychological contract breach in today’s global work environment? In order

to answer this it is necessary to first answer a number of sub questions. Firstly, what is the

psychological contract? What are the effects of violating the contract? What are the

incentives of fulfilling the psychological contract? What influence does globalization have on

the interpretation of the psychological contract? Why is recruitment important in today’s

organizations and how does it relate to the psychological contract?

The paper will be structured as follows; firstly, it will examine and define concrete

understandings of the psychological contract and the effects that breach and fulfillment have

on an employee’s behavior. Then it will introduce the influence that today’s globalization has

had by using Hofstede’s four cross-cultural dimensions to analyze how cultures differ, thus

suggesting ways in which different cultures may understand the psychological contract and

how they may react to a breach. It will then look into the importance of the first points of

contact that a firm has with employees, through the means of the recruitment process. Finally

a conclusion will be presented where this information will be used to see how the initial

points of contact can be utilized for both parties to gain more of an understanding of the

unwritten expectations and consequently mitigate the chances of a psychological contract

breach occurring, or minimizing the negative effects that a perceived breach may have.

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2. Psychological Contract

The idea of the psychological contract was first introduced by Argyris in 1960 in

order to characterize the mutual expectations between an employee and employer and to

understand the nature of work relationships (Hui et al. 2004). It has since been dramatically

developed by many authors. For example Rodwell and Gulyas (2013) state that the

psychological contract is essentially “an exchange relationship that encompasses an

employee’s perceptions of reciprocal promises and obligations between themselves and their

employer” (page 2775). Such obligations include performance related pay, opportunities for

promotions, training and the level of responsibility that one is given (Rousseau, 1990). This

gives a basic answer to the first sub question ‘what is the psychological contract’, however

the concept is a lot more complex than the simple definition. Robinson and Rousseau (1994)

explain that an individual’s psychological contract is formed through explicit promises,

previous exchanges and observations. However, they also describe the psychological contract

as being inherently subjective, and existing in ‘the eyes of the beholder’. A contract is

comprised of the beliefs in mutual obligations, however the two parties do not need to agree

on these obligations for the contract to exist. As a result, the psychological contract is a

personal construction of each individual, thus it is different for every individual (Robinson

and Rousseau, 1994). What is more, when defining this concept it is important to note that

the psychological contract should not be confused with simple expectations (Robinson and

Rousseau, 1994). Whilst expectations refer to what one expects from their employer, the

psychological contract goes further and also denotes mutual obligations that depict the

relationship between an employee and employer. It involves beliefs – based on perceived

promises - of what the other party is obliged to provide (Robinson and Rousseau, 1994). This

research indicates that the psychological contract is different depending on the individual,

therefore it is clear that understanding one another’s idea of the psychological contract may

be difficult and means that fulfillment or breach of the psychological contract does not

involve the same things for each employee. The following text introduces how the

psychological contract can influence and employees workplace behavior.

An employee’s performance and actions whilst at work are believed to be a result of

their constructs of the psychological contract (Hui et al., 2004). Rousseau (1995) found that

fulfillment of the psychological contract lead to in-role and extra-role performance, trust,

satisfaction, and intention to remain within the organization, whereas Parzefall and Coyle-

Shapiro (2001) found that failure to meet obligations and thus causing a breach of the

5

contract leads to a decrease in organizational commitment, increased turnover, reduced

organizational citizenship behavior and increased deviant behaviors. Evidently the

psychological contract brings together the employee and employer, creating a mutually

beneficial relationship if both parties cooperate and do their part. Robinson and Rousseau

(1994) state that this bond is weakened if a violation occurs - the party perceiving violation

will lose faith in the advantages of staying in the relationship, thus there is a greater chance of

them ending the relationship by leaving. Therefore it can be argued that it is beneficial for

organizations to be aware of the existence of the psychological contract and aim to

understand how it can effect an employee’s behavior depending on how it is approached. The

detrimental effects that occur as a result of a psychological contract breach are explored in

more detail in the following chapter.

2.1 Psychological Contract Breach

The psychological contract is subjective and made up of individual’s perceptions of

obligations, thus they do not always involve a common understanding between two parties

(Rodwell, 2013). Blancero, Johnson and Laxham (1996) reiterate the issue of subjectivity by

stating that each individual has a unique psychological contract making it difficult for every

component to be satisfied. As a result of this it is easy for one party to fail to meet their

obligations, therefore it is inevitable that some inadvertent violation will arise - this violation

is termed the psychological contract breach (Robinson, 1996). She continues to highlight “the

psychological contract breach is inherently perceptual, and thus one party’s understanding of

the contract may not be shared by the other” (page 575). Furthermore, she states that “it is an

employee’s belief that a breach has occurred that affects behavior and attitudes, regardless of

whether that belief is valid or whether and actual breach took place”. Moreover, there are two

sides that are open to interpretation and these are influenced by situational factors which

construe how these contracts are understood and kept (Rousseau, 1995).

A psychological breach occurs when obligations - such as performance related pay,

promotions, training and responsibility - have not been met (Rodwell, 2013). This failure of

fulfilment negatively effects an employee’s attitudes towards their work in a number of ways,

including reduced organizational commitment and a decreased desire to partake in activities

that go beyond their formal duties (Parfezall and Coyle-Shapiro, 2001). Additionally, the

violation of contracts creates anger, reduces effectiveness, and changes the way people

behave in successive interactions (Rousseau, 1995). Likewise, contract violation impedes

6

trust; it weakens the employment relationship, causing lower employee input – performance

and attendance – and lower employer investments – retention and promotion (Rousseau,

1995). As a result, it is unsurprising that a breach of the psychological contract is said to have

a negative relationship with organizational commitment but in fact a positive relationship

with job commitment, implying that employees will act in favor of themselves instead of the

organization (Rodwell, 2013). These consequences of a psychological contract breach are

said to be a lot more severe than lucid unmet expectations or a lower degree of fulfillment of

the psychological contract (Rodwell and Gulyas, 2013), further stating why it is important for

a firm to avoid its occurrence.

Individuals’ reactions to a violation of the psychological contract vary, ranging from

suffering in silence to ending the relationship (Rousseau, 1995). An individual’s choice of

how to react is a function of situational factors and the predisposition of parties. Prior

research by Hirschman (1970) largely focuses on four courses of action: exit, voice, loyalty

and neglect (as cited by Rousseau, 1995). Moreover, the perception that a violation has

occurred and the impact of this violation may differ depending on an individual’s career

motives. Those who have a greater need for a relationship within the organization will feel

more negatively influenced if a violation takes place (Robinson and Rousseau, 1994). These

findings are further evidence that that the psychological contract is unique for every

individual.

It has been made apparent that the consequences that follow the perception of a

psychological contract breach are detrimental to firms. This subsequently gives a valid

answer to the second sub question ‘what are the effects of violating the contract’ by

recognizing that a violation leads to a decrease in trust which in turn weakens the relationship

leading to lower employee input, a decrease in organizational commitment and can result in

an employee’s exit from the company. As a result, it is within an organizations best interests

to work in order to prevent them from occurring or mitigate the negative effects that they

have. Although the negative consequences of contract breach have received the greatest

empirical attention, it must be stressed that the concept does not solely have negative

connotations. The next section will explain the possible positive outcomes that arise as a

result of fulfilling the psychological contract.

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2.2 Fulfillment of the Psychological Contract and Organizational Citizenship Behaviors

Managers should be aware of the positive outcomes that arise as a result of the two

parties meeting their mutual obligations leading to fulfillment of the psychological contract.

Reciprocity is developed once relationships are formed in the workplace, and promotes an

environment of employees helping one another and the organization beyond their expected

duties (Xerri and Brunetto , 2013), these are more commonly known as organizational

citizenship behaviors (OCB). Xerri and Brunetto (2013) describe OCB as “the discretionary

advantageous, tangible and intangible activities and behaviors that are a result of effective

workplace relationships” (page 3164). They also refer to it as a factor that has the potential to

enable the implementation of organizational strategy and gain a competitive advantage,

through positive relationships. Organ (1998) also adds that OCB is done at the employee’s

will and explains that it is not associated with formal organizational rules or rewards (as cited

by Xerri and Brunetto , 2013). Moreover, Rego and Cunha (2008) describe OCB as

“organizationally beneficial behaviors and gestures that are neither explicitly enforced on the

basis of formal role obligations nor elicited by the formal reward system”. They continue by

adding “OCB consists of informal contributions that employees can choose to make or not,

without regard to considerations of sanctions or formal incentives” (page 541). Such

organizational behaviors are said to be helping behavior, sportsmanship, organizational

loyalty, compliance, individual initiative, civic virtue and self-development, and are said to

be crucial for the survival and good functioning of organizational systems (Katz, 1964 as

cited by Rego and Cunha, 2008).

Some believe that all effective organizations must have members with cooperative

and spontaneous behaviors (Rego and Cunha, 2008). This was supported in research by

Karambayya (1990) who found that OCB existed more in work units where the employees

work performance was also higher (as cited by Rego and Cunha, 2008). This supports the

idea that OCBs are facilitators or organizational effectiveness.

OCB could also have a positive influence on performance through enabling the

attraction and retention of the best and most talented individuals, as a result turnover may

decrease which in turn will reduce hiring and training costs (Rego and Cunha, 2008). What is

more, Cohen and Avrahami (2006) believe that the process of recruitment and selection is a

possible opportunity to recruit individuals who convey characteristics that may suggest such

citizenship behaviors.

8

One particular positive for organizations whose members exhibit organizational

citizenship behaviors is that the managers of these firms feel more reassured that they can

empower their employees, thus managers will be more available to dedicate their efforts to

more strategic actions and ways of dealing with opportunities and delegate other tasks to their

employees. As a result, it is suggested that manager should focus their attention towards

actions that promote OCB (Rego and Cunha, 2008). Therefore, it has been made clear that

understanding and fulfilling an employee’s psychological contract is beneficial for managers.

This previous literature on organizational citizenship behaviors highlight the positive

outcomes that arise from the fulfillment of a psychological contract. It is clear that an

employee who feels as though their company cares for their needs will be more willing to put

extra time and effort into their organization. This provides an answer to the third sub question

‘what are the incentives of fulfilling the psychological contract’ by describing the positive

outcomes. In particular mentioning organizational citizenship behaviors and describing them

as actions of the employees that are not explicitly enforced, are actions that the employee

chooses to make, and are not necessarily rewarded. Consequently these behaviors are also

said to lead to a more effective work environment. It is also suggested that organizations are

able to select employees during the recruitment process in order to obtain employees who are

most likely to partake in OCBs, this is a positive opportunity that a firm can implement even

before the potential employee joins the organization. Therefore, it is clear that fulfillment of

the psychological contract that results in employees participating in organizational citizenship

behaviors will improve the effectivity and efficiency of an organization and is consequently

important to maintain. However, the increase in globalization has changed the dynamics of

the traditional workforce and meant that fulfillment of the psychological contract has become

more complex.

3. Globalization

Globalization is ever more apparent in today’s workplace and creates an increase in the

number of cultures, languages, perspectives, and introduces more expatriates to the

workforce. Friedman (2007) highlights the problem that cultural and institutional differences

make it difficult and sometimes impossible for the best human resource management

practices to be transferred across countries. However, as globalization expands, it is

becoming increasingly important for firms to have effective international human resource

9

management, one aspect of this may be gaining a better insight into the vast perceptions of

the psychological contract that vary between individuals and even more so between nations.

Some examples of how human resource management practices differ across countries

involve the amount of severance payments offered to employees who have been terminated.

In the United States, terminated employees are given one week for every year worked,

whereas employees in Spain are given nine weeks for every year worked. Moreover, starting

vacation in the U.S is two weeks, unlike many European countries who are given five weeks.

Plus, the allowance for family and medical leave is 12 weeks in the U.S yet one year in

France (Falcone, 2004 as cited by Friedman, 2007). These examples highlight the different

benefits countries are able to receive. Such benefits could be the basis as to why people have

different expectations from the firm depending on where they are from, and thus different

constructions of the psychological contract.

Additionally, Robinson (1996) argues that globalization has also led to organizational

climate change which has caused a change in the traditional contracts. These contracts,

involving long term job security in return for hard work, are becoming less valid resulting in

all organizational members rethinking their mutual obligations (Robinson, 1996).

Furthermore, as organizations move toward the trends of globalization- which may further

lead to restructuring and downsizing- it may be assumed that employment relationships will

become progressively more dependent on psychological contracts, thus leading to them

playing an increasingly important role.

What is more, the psychological contract is becoming more complex as a result of

globalization which in turn is introducing more elaborate individual needs (Robinson, 1996).

It may be assumed that this is due to individuals gaining greater access to a richer set of

information and are accordingly better informed and connected. Therefore, employees

attitudes are likely to have changed including attitudes towards traditional corporations,

markets and governance. Robinson (1996) argues that this will lead to the psychological

contract being more significant and elaborate as a result of these changes. However, she also

states that these changes have heightened the chances of psychological contract breach.

This is supported by Rousseau (1995) who identifies situations when a violation of the

psychological contract is most likely to occur; she suggests they are often probable when

there is a history of conflict and low trust in the relationship, yet she stresses that one of the

greatest causes is when social distance exists between the two parties such that one does not

10

understand the perspective of the other. This is extremely relevant and unfortunately more

likely in today’s organizations where many organizations are experiencing organizational

changes such as rapid modernization and downsizing of state owned enterprises (Robinson,

1996). As a result of this, many individuals are working in foreign-owned firms (Hui, Lee

and Rousseau, 2004). Consequently, this is leading to a greater variety of cultures in a

workplace that need to be able to work together in order for the firm to strive.

This provides an answer to the fourth sub question by stating that globalization

introduces more cultures to an organization, however in order to study how globalization can

impact individuals and their psychological contract, it is important to understand how culture

can play a role in determining how an individual will construct their psychological contract.

This can impact how firms organize themselves, and why it may be difficult for an individual

from one nation to work under another nation with different cultural dimensions.

4. Cultural Dimensions

“Culture consists of patterned ways of thinking, feeling and reacting, acquired and

transmitted mainly by symbols, constituting the distinctive achievements of human groups,

including their embodiments in artifacts; the essential core of culture consists of traditional

ideas and especially their attached values” (Hofstede, 1984, page 21). This definition stresses

that the core of culture arises from traditional and historically derived artifacts which

suggests that it is deeply rooted. This may further propose that culture is hard to change and

could give an explanation to the findings of Pearce (2001) who emphasizes that societal

differences create different understanding of the psychological contract, thus raising issues

regarding generalizability (as cited by Hui et al., 2004). Also, Hui et al. (2004) identify that

workers will respond differently to the psychological contract depending on how traditional

their values are. They further explain the differences between the psychological contracts in

traditional countries, such as China, in comparison to other less traditional nations and

explain that it is a result of distinct beliefs, values, and societal structures of the Chinese that

other nations may not hold. For example, in North America business people create contracts

with the use of rules and legal protection, whereas the traditional Chinese business sector

relies on human factors in business situations, especially when managing employees. The

characteristics of communism that prevails in China creates the absence of legal contracts,

suggesting employee-employer relationships are influenced by psychological, social and

interpersonal mechanisms (Hui et al., 2004). Moreover, the psychological contract will be of

11

different importance to different nations. It is suggested that if a nation’s social orientation

promotes harmony in relationships – such as Asian societies – individuals are expected to

value relational forms of employment (Yang, 1995 as cited by Hui et al., 2004). These

examples reiterate previous findings by stressing that societal differences will lead to varied

understanding of the psychological contract, but also explains why some nations may see it as

more important than others.

Hofstede (1980) researched how cultures differ across nations. By outlining four

cross-cultural dimensions, Hofstede was able to describe the cultures of different countries.

These four cross-cultural dimensions are uncertainty avoidance, masculinity-femininity,

individualism-collectivism, and power distance. Uncertainty avoidance is the degree of

ambiguity people are comfortable with. Masculinity-femininity refers to the degree that

individuals exhibit masculine values - such as independence and dominance, or feminine

values - like interdependence, empathy and openness. Individualism-collectivism focuses on

the extent that individuals focus on individual needs and wants compared to the needs of the

groups. Finally, power distance is the amount that individuals accept a difference in people’s

authority depending on their level in the organization (Friedman, 2007).

These cross-cultural dimensions can influence the characteristics and behavior of a

firm. For example Lau and Ngo (1996) explain that Americans have a rational culture

suggesting they are low in uncertainty avoidance, high in individualism, and high in

masculinity. As a result, it may be assumed that this nations firms will be innovative, be

attracted to growth possibilities, and will strive for personal achievement. Also, these cross-

cultural dimensions can be used by human resource managers in order to increase their

effectivity in different cultures and gain a better idea of what each employee expects. Nations

fit differently within Hofstede’s cross-cultural dimensions, and therefore are an example of

how such nations may require different things from the same organization and will therefore

have different constructions of the psychological contract. These cross-cultural dimensions

and their impact on the construction of the psychological contract will be explained in the

subsequent text.

4.1 Power Distance

Inequality of members’ abilities and power is inevitable in organizations and an

unequal distribution of power between members is said to be the essence of an organization

12

(Hofstede, 1984). Power distance was originally described by Hofstede (1984) as “a measure

of the interpersonal power or influence between a boss and subordinate, as perceived by the

less powerful of the two” (page 71). The power distance index (PDI) focuses on whether

inequality is desired within a nation. A hierarchy will exist in all firms regardless of whether

they have a high or low PDI; however the presence of the hierarchy will be for different

purposes. For high PDI nations (where there is large and obvious inequality) a hierarchy will

be a key feature of the organizational structure, whereas low PDI nations will implement

hierarchies purely for convenience (Hofstede, 1984).

Zagenczyk et al. (2015) found that one of the obvious differences of employees with

high power distance orientation, in comparison to those with low power distance orientation,

is their respect for those with greater authority. This is shown through the formal manner in

which they address superior personnel, but also they are less likely to question what is

instructed by these superiors. However, employees with a lower power distance recognize the

absence of long-lasting power. In this particular situation, subordinates who are recognized as

being high performers will be given regular leadership tasks and are more likely to be offered

promotions to positions with more authority. What is more, Zagenczyk et al. (2015) state that

these subordinates regularly address their superiors by using their first name and are

accustomed to superiors asking for their opinions in matter that will have an impact on their

role in the organization.

Moreover, culture influences the importance and implementation of hierarchy as

organizations and nations vary in terms of their norms and status of equality (Florida and

Kenney, 1991 as cited by Rousseau, 1995). It is therefore understandable that due to

opposing levels of power distance between employees depending on the PDI, countries often

differ in their structure of organizations, as a result their solutions to similar tasks may be

controlled in different ways (Hofstede, 1984). For example, nations with a low PDI will have

less of a distance between an employee and employer, this can result in the subordinate being

given greater responsibility over tasks or problems that arise. This has the potential to be

difficult for an employee who is from a nation with a high PDI as they may not feel as though

they are qualified enough to take such responsibility. It is possible that even within continents

there can be a difference in power distance. Eastern European countries, such as Poland,

Czech Republic and especially Slovakia, are said to have a high power distance in

comparison to Western European countries (Kolman, Noorderhaven, Hofstede and Dienes,

2003).

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The existence of hierarchies is also an indication of the opportunities of being

promoted within the organization, and gives more of a definite classification of roles. This is

particularly relevant for American workers who require more job classification to provide

them with the feeling as though they have an internal career ladder (Florida and Kenney,

1991 as cited by Rousseau, 1995). Moreover, it is traditional for the Chinese to abide by a

strict social structure; the hierarchies make it clear that the people at the top possess power

over those below (Hui, et al. 2004). Consequently, employees within different nations look

upon the existence of hierarchies as a way of classifying their roles within the firm.

In some cultures, if a powerful employer commits to their obligations presented in the

psychological contract they are likely to exceed the anticipations of employees. This in turn

will create a positive response leading to the employee being prepared to reciprocate the good

gesture (Hui et al., 2004). However, if a breach occurs this will have a negative impact on the

employees, although the negative responses vary depending on the power distance.

Zagenczyk et al. (2015) quoted “although psychological contract breach has destructive

consequences for all employees, the deference to authority and preference for harmony

characteristic of higher power distance employees seems to be related to less active responses

to breach” page 862. Thus, they found that employees’ reactions to a psychological contract

breach varied depending on their power distance orientation. Of the four reactions previously

mentioned, exit and voice were a more common reaction for employees with a lower power

distance orientation. Therefore, these employees who have a high power distance between

themselves and their employer are more likely to tolerate treatment from an authoritative

figure that they deem to be unfair or breaching their psychological contract.

It has been made clear that in the event of a psychological contract breach occurring,

individuals who are most likely to react by voicing their concern or removing themselves

from the situation are those employees with a low power distance orientation and it has been

made apparent that employee’s with a larger power distance may be more accepting of breach

than those with a lower power distance. However it is still important to realize that a breach

of the psychological contract will lead to reduced loyalty and increased neglect regardless of

the power distance orientation (Zagenczyk et al., 2015).

As a result of their findings, Zagenczyk et al. (2015) stress the importance of being

attentive towards an employee's power distance orientations, and state that is it important to

be aware that these are likely to have an impact on how an individual will react to a

14

psychological contract breach. Organizations should keep in mind that employees with a

lower power distance orientation are increasingly likely to have an active response to breach

including actions such as exiting the organization. This is likely to be useful knowledge for

managers who are more familiar with working alongside employees with higher power

distance orientation but are being introduced to employees with low power distance

orientation.

It has been made apparent that power distance is important to recognize, and can be

beneficial to the organization, for example if an employer commits to their obligations the

employee is likely to reciprocate the good gesture. It has also been made clear that a breach

has a negative effect for all employees regardless of their power distance orientation, thus it is

important for the organization to be aware of the individual’s psychological contract in all

cases. However, the consequences are more severe in low power distance organizations thus

it is important for firms to notice the power distance orientation and respond accordingly in

order to avoid the potential breach of the psychological contract.

4.2 Uncertainty Avoidance

Uncertainty avoidance is the degree to which uncertain or unknown situations makes

a country feel threatened (Hofstede, 2006). Uncertainty is deemed to be inevitable in modern

organizations and is said to have strong connection with the environment. Hofstede (1984)

says the environment includes “everything not under direct control of the organization” he

further explains that it is “a source of uncertainty for which the organization tries to

compensate” (page 112). However, internal uncertainty is also relevant and can stem from the

unpredictability of the behavior of members and stakeholders, as a result organizations

attempt to reduce this by implementing rules and regulations which Hofstede (1984) explains

“rules stem from past adjustments and seek to stabilize the present and future” (page 115).

These internal uncertainties are more in the control of the firm and therefore they are able to

work in order to mitigate the difficulties that arise from them.

Whether a nation has a high or low uncertainty avoidance index (UAI) will have a

consequence on the organization. Firms within nations with a low UAI are said to have less

structure of activities, fewer written rules, a more interpersonal oriented and flexible

manager, and ambitious employees. Firms in high UAI countries on the other hand, will have

more structured activities, an increase of written rules, uniform organizations (which

regularly implement standardization), managers who are more task oriented and consistent,

15

and less ambitious employees (Hofstede, 1984). According to Hofstede’s dimensions, Greece

and Portugal are examples of countries with high uncertainty avoidance. In this situation it is

suggested that such nations require detailed plans and timetables in order to reduce anxiety

associated with uncertainty (Friedman, 2007). It may be possible that the level of uncertainty

avoidance in a host country could lead to employees having to obey more rules than they are

used to, for example if an individual from a nation with a low uncertainty avoidance index

works in a firm with a high UAI, they may feel restricted by the vast amount of regulations

they must follow.

Cultural heritage of societies is likely to be a determinant as to how members cope

with uncertainty. These coping mechanisms are made apparent through basic institutions and

are reflected through members of a society through the values they collectively share

(Hofstede, 1984). The roots of these shared values are non-rational therefore they can create a

collective behavior in one society, yet this behavior could be seemingly abnormal and

incomprehensible in another (Hofstede, 1984). This identifies the issue that many firms will

face when employees are unable to understand why others act in such different ways and may

find it difficult to adapt to behaviors that feel so unfathomable to their norms.

The level of uncertainty avoidance that is the norm within a country may also affect

the differences in power. Hofstede (1984) suggest that power within an organization is not

solely a result of the PDI within that nation, yet if the norm is a low tolerance for uncertainty,

those individuals who have control of uncertainty will automatically have more power,

whereas if uncertainty is tolerated the power is more equally shared between individuals.

Finally, Hofstede (1984) explains that uncertainty about the future is a basic fact of

human and organizational life. Members of organizations try to cope with these uncertainties

through technology, rules, rituals and laws. However, whilst globalization continues to

become more popular and firms become more culturally diverse this will introduce a greater

array of these coping mechanisms. This will introduce more rules, rituals and laws that are

unfamiliar with individuals and will be another uncommon norm they must adjust to.

Consequently, this second dimension also introduces differences between nations that

are likely to influence their constructions of the psychological contract and the individual’s

reaction to a breach, it is clear that the more an organization aims to avoid uncertainty the

more structured the organization is. This in turn creates a greater set of rules that must be

followed. However, this varies for every nation and can mean that mean that cultures may

16

find it difficult to comprehend others. This creates a greater chance of the occurrence of a

psychological contract breach as individual’s may not understand what and why some aspects

are so important to one another.

4.3 Individualism

The relationship between an individual and the organization of which they belong is

strongly affected by the degree of individualism or collectivism that is most predominant

within the society (Hofstede, 1984). Individualism, as described by Hofstede (2006) is “the

degree to which people in a country learn to act as individuals rather than as members of

cohesive groups: from collectivist to individualist” (page 156).

The level of individualism or collectivism will also play a role in an individual’s

reasons for conforming to requirements set by the organization. In collectivist nations,

members will have a moral involvement with the firm, whereas in individualist nations the

involvement will be more calculative (Hofstede 1984). Moral involvement is described by

Mowday, Porter and Steers (1982) as representing “a positive and intense orientation toward

the organization that is based on the internalization of the organization’s goals, values, and

norms and on identification with authority. Hence an employee may become involved in

organizational activities because they feel the organization is pursuing useful societal goals”

(page 21).

Parsons and Shills (1951) suggest that the level of individualism or collectivism that a

culture denotes is a way of distinguishing whether individuals will be oriented towards the

group and care for social systems and individuals who are self-interested and strive to reach

their own goals (as cited by Moorman and Blakely, 1995). An individualist is said to consider

their personal interests as more important, would look out for themselves, and would rank the

attainment of their personal goals as primary importance. Contrastingly, a collectivist gives

priority to the interests of the group; they greatly appreciate being a member of a group, and

would look out for the well-being of the group at their personal expense (Moorman and

Blakely, 1995). Cultures such as the United States, are primarily individualistic and include

citizens whose priority is their own interests. On the opposite end of the spectrum there are

countries such as China, whose culture is more collectivist and thus citizens aim to support

the goals of the group and care for the prosperity of the group (Moorman and Blakely, 1995).

Additionally, Australia, Great Britain and America are countries that are characterized as

being individualistic. These countries would work well under HR initiatives that lay focus on

individual achievement and accountability. On the other hand, collectivist nations such as

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Pakistan, Peru and Taiwan would prefer team-based programs including quality programs

and team building (Friedman, 2007).

These differences in whether an individual is oriented towards themselves or the

group can influence how they construct their psychological contract. Hui et al. (2004) found

that relational contracts are more highly related to behavior in work groups, they also found

that such contracts were more apparent in Hong Kong than in the United States, this is

because collectivism is more apparent in Hong Kong and individuals strive for personal

relationships at work, thus creating a psychological contract will identify the obligations and

the terms of the relationship that the individual requires.

Thereupon, the evidence from previous literature has shown that the importance of the

psychological contract will differ depending on whether an individual is looking for

relationships within their work and therefore are deemed collectivists, suggesting that

collectivist cultures will place more value on the psychological contract. Thus it is necessary

for an organization to understand whether their employees are collectivist or individualist in

order to know the level of importance their psychological contract holds as this is likely to

impact the severity of a perceived breach.

4.4 Masculinity

The final dimension introduced by Hofstede is masculinity, “the degree to which

values like assertiveness, performance, success and competition, which in most cultures are

traditionally considered the domain of men, prevail over values like the quality of life,

maintaining warm personal relationships, service, care for the weak, and solidarity, which in

most cultures are considered to be more the domain of women: from tender to tough”

(Hofstede, 2006, page 156). Masculinity also identifies the degree to which an individual

magnifies the need for achievement and success. Such individuals are often aggressive,

competitive and strive for material objects and value achievement. Whereas individuals who

are high in femininity desire social relationships, quality of life and are compassionate

towards others (Hofman and Newman, 2014). Therefore, a particular individual’s

characteristics could be best suited to a particular nation’s level of masculinity.

Like the other cultural dimensions identified by Hofstede, the origins of cultural

norms within a society stem from historical factors. Musil (1993) describes the differences in

masculinity between European countries from a historical and family perspective suggesting

that in patriarchal countries the role of fathers and extended families prevail, whereas the

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father figure is less apparent in others (as cited by Kolman et al. 2003). This is said to be an

explanation as to why some countries differ in their level of masculinity, suggesting that

countries that historically have a stronger male and father figure will have characteristics of a

masculine nation. It also, much like the other dimensions, suggests that these norms are

deeply rooted and identify with an individual’s personal life as well as their work.

Additionally, jobs are also often described as being either masculine or feminine,

however this stereotype may differ between nations (Hofstede, 1984). A specific job role may

require an individual whose exhibits characteristics that are particularly competitive, assertive

and aggressive, or more tender, caring and empathetic. Therefore it is necessary for an

organization to state the characteristics that are desired for the role that is available. An

individual who is caring and compassionate towards others but is placed in a role where they

need to be more task oriented could be less likely to succeed. It may be assumed that more

feminine individuals will rely more on the psychological contract as, much like collectivist

individuals, the psychological contract is a way of defining their relationships they search for

at work. They may also desire relationships within their work which will not exist, thus they

will be experiencing a potential breach of their psychological contract.

From these four cultural dimensions it is clear to see that a firms norms are a result of

their culture, this subsequently influences what individuals are used to when working in their

home nation. It is also often stressed that these norms that create their cultures are deeply

rooted and heavily influenced by their historic pasts. What is more, the norms of one nation

compared to another can vary dramatically in how they fit within Hofstede’s cultural

dimensions. As a result of this, if an employee enters a firm with extremely different norms

they will experience a setting that is not only unfamiliar but they may fail to understand

norms that they are unaccustomed to and are subsequently alien to them. As a result of this

the firm may fail to meet the needs of the psychological contract, not because they don’t care

but because some aspects of one nation aren’t as important for the other.

In spite of this, Hofstede (1984) explains that scientist believe many societies will

become increasingly similar as all countries are becoming gradually exposed to the same

technologies which are believed to play a large role in cultural change. This suggests that as a

result of the technological advances that are arising, nations will slowly adapt to the same

norms. However, it is more realistic to conclude that technological modernization is creating

change which guides societies to similar developments. It is important to understand that this

does not annihilate differences among societies and may even amplify them; this is due to

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preexisting value systems managing technological modernization in a variety of ways

(Hofstede, 1984). This suggest that although cultural norms create large differences between

nations and globalization is amplifying these norms as they are being put in the same firm, it

is also introducing other factors, such as technological change, that may even lead to societies

evolving towards similar ways.

It has been made clear by Robinson and Rousseau (1994) that the psychological

contract is made from observations, exchanges and explicit promises therefore it will be

interesting to explore how a firm can use the initial interaction with employees in order to

have more control over the construction of the psychological contract and potentially lessen

the negative effects. One of the initial points of contact an employee has with the firm is the

recruitment process, therefore the next section will explore the recruitment process and how

this may be utilized to decrease the negative effects of the psychological contract breach.

5. Recruitment Recruitment is the primary tool for attracting applicants and refers to an

organization’s activities carried out with the aim of identifying and attracting potential

employees. As a result, the recruitment process impacts both quality and quantity of

applicants (Acarlar & Bilgic, 2013). Job advertisements are a way of notifying potential

applicants of job openings. The information presented in this form is important as it allows

the job seeker to gain a prior understanding of what the job may entail. As a result, the

messages in job advertisements can reduce any initial uncertainty. Mohamed, Singh, Irani

and Darwish (2013) argue that the way in which employees are recruited, trained and retained

are key success factors for any organization. Moreover, they believe this relationship is the

foundation of sustaining a competitive advantage compared to its rivals. Additionally, Koch

and McGrath (1996) identified that careful recruitment and selection have a positive

relationship with labor force productivity.

There are endless benefits accompanying effective and efficient recruitment and

selection processes, and (as previously mentioned) Mohamed et al. (2013) argue these are

critical success factors for organizations when choosing the right person for the job. If these

practices are not used appropriately they can lead to demoralized and de-motivated

employees and other undesirable outcomes of which many are costly to an organization

(Mohamed et al., 2013). Matthews and Redman (2001) introduce the “hidden” effects of

employing an individual who is not appropriate for the role. Poor hiring decisions cause

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havoc and this extends to sales figures, customer satisfaction and causes disharmony among

reliable staff. Furthermore, employee turnover is not only costly to the organization, they are

also disruptive as they disturb work routines (Matthews and Redman, 2001).

Therefore it has been made clear that the recruitment process is important in order to

ensure that the right person is chosen for the job. What is more, it is necessary that both the

candidate and the organization match in terms of what they seek from one another.

5.1 Organizational and Employee Fit

Pfeffer (1998) discovered the importance of selective hiring, suggesting that a better

fit between organizational needs and employee skills and abilities can occur from careful

recruitment and selection (as cited by Mohamed et al., 2013). What is more, Dawis, Lofquist

and Weiss (1968) introduced their theory of work adjustments which can be used to explain

why individuals may prefer a particular job. They propose that individuals strive to seek and

maintain correspondence with their work environment. Mason and Belt (1986) describe

correspondence in the work environment as “the individual fulfilling the requirements of the

work environment and the work environment fulfilling the requirements of the individual”

(page 426). They later emphasize the importance in correspondence suggesting that it leads to

satisfactory work performance and satisfaction with the work. When applying the work

adjustment model to the job search process one can assume that an individual will look to

match their abilities to that required for the role. However, it is also suggested that the job

seeker will look for a match between their personal needs and the nature of the work itself,

thus it is the match between the individual’s needs and the job description (Mason and Belt,

1986). These findings suggest that a potential employee will search for a job that will best

suit their needs and abilities, for example an individual who comes from a collectivist nation

and thus prefers working in teams, is likely to be attracted to a firm that expresses the need

for team work, and may be discouraged if they are required to work alone.

Moreover, it has been made evident that it is possible for organizations to limit

employee turnover and undesirable outcomes at the start of an employee’s career by ensuring

good fit between the organization and the individual. This can be implemented at the

recruitment stage by utilizing more stringent practices – one example of this is focusing on

the content of the job advertisement (Mohamed et al., 2013). Job advertisements are a way of

notifying potential applicants of job openings. The information presented in this form is

important as it allows the job seeker to gain a prior understanding of what the job entails. As

21

a result, the messages in job advertisements can reduce any initial uncertainty (Acarlar and

Bilgic, 2013). Moreover, it is also important to ensure that the information in the job

advertisement relevant to the job and organization. This ensures that the vacancy is more

favorable and is an opportunity for the organization to give more information before the

employee constructs their psychological contract.

It has been made apparent that individuals aim to work in an environment that suits

their needs, they will therefore search for and be attracted to an organization that suggests

they will achieve this. If an employee believes that the organization will have a culture that

fits theirs but in reality they are somewhat different, there may be a greater chance of a

psychological contract breach because of unmet expectations.

5.2 Specificity of Information

There are typically two types of information available in recruitment advertising;

information on the ability and requirements (job specification) and information regarding the

work itself (job description). These sources of information can be made available to potential

applicants in varying amounts of specificity and are believed to increase the probability of

response as the level of specificity increases. It is also known that as specificity rises the

more unqualified individuals will screen themselves out as they perceive a lack of match

(Mason and Belt, 1986). Therefore, the more specific a job advertisement is, the more suited

applicants will apply, leaving the less suited applicants to remove themselves from the

process. Tom (1971) focuses especially on the second dynamic and implies that individuals

analyze how their self-concept aligns with the organizational image, and then choose the

organization accordingly (as cited by Mason and Belt, 1986). Therefore, in order to increase

the chances of finding a match between job description and individual needs it may be

necessary to increase the specificity of descriptions of both the job and the employee’s needs

(Mason and Belt, 1986). This supports Dawis et al. (1968) concept of theory of work

adjustment, suggesting that a greater level of specificity of information will better enable a

potential employee to assess whether the company is able to offer what they desire from an

organization.

In addition to this Robinson and Rousseau (1994) have introduced the dangers of

overselling the features of a job by insinuating that it will lead to biased understanding of

what is actually involved in the ‘great’ job that was promised. Therefore this suggests that it

is best to be totally honest when giving the two types of information that were previously

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explained to be the main content of recruitment advertising – the job specification and job

description. If these aspects of the advertisement are not accurate or over exaggerated in

order to appear more attractive, employees are likely to be disappointed when the job is not

what they expect. As a consequence this will lead to unmet promises and an increase in the

perception of psychological contract violations.

Rousseau (1990) found that after recruitment an individual’s beliefs in terms of each

parties obligations are impacted by the new employee’s career motives and intentions to stay

within the organization. She gives the following example of “a person desiring long-term

employment with a firm is likely to be party to a different set of commitments to the

employer and to perceive himself or herself party to more relational obligations than someone

viewing employment as a stepping stone to another job. Whether the hiring process takes the

form of a transaction or establishes an enduring relationship can influence the obligations

new hires perceive” page 398. In addition, as previously mentioned, expectation differ from

obligations, thus an employee who finds their work boring, after expecting it to be exciting,

will feel disappointed, however they will not necessarily feel as though a promise has been

broken. Yet when the individual perceives that an obligation has not been met, this will

trigger a more emotional reaction (Rousseau, 1990).

Consequently, it has been made apparent that the specificity of information in a job

advertisement will increase the chance of hiring the most appropriate candidate. Specific

information allows candidates to remove themselves from the recruitment process if they

believe they are not qualified enough for the role. It may also be the case that candidates who

feel as though the organization does not fit their norms, or will not provide what they need

will also not end the recruitment process. This in turn is likely to reduce turnover, thus

avoiding these detrimental costs. As a result it is important to make the information truthful

and specific as individuals will begin to construct their psychological contract.

5.3 Job Advertisement Content

A job advertisement can be displayed in a variety of medium, the effectiveness of this

medium is dependent on the content (Matthews and Redman, 2001). They continue to stress

that “advertisements that miss out on essential content may suffer seriously impaired

effectiveness” (Page 545). This further stresses that is it the content of the advertisement that

is the most important aspect. Likewise, Askehave (2010) assesses the impact of

communication on the recruitment process. She lists factors such as communicating positive

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information about the work context, the firm’s social reputation, affirmative action programs,

and having prompt communications with job applicants. Jennings, Werbel and Power (2003)

suggest that the importance lies in being able to offer various types of benefits such as

insurance and flexible work arrangements. Whilst, Mathews and Redman (2001) express that

advertisements that include long lists of candidate requirements, yet create an unclear image

of what the organization offers, provide a poor start to the psychological contract between the

employee and the organization. Consequently, as well as being specific about the job itself,

candidates are interested in what more they can gain from the organization. It is therefore for

this to be truthful as these are additional aspects that if promised and not fulfilled could lead

to a breach of the psychological contract.

Advertisements that include company benefits, salary information and advertised

more than one position received a larger number of applicants than advertisements lacking

this content (Acarlar & Bilgic, 2013). This suggests that it is important for job seekers to have

a large pool of information before even considering the job. Moreover, it suggests that

increased information and understanding throughout the employment process is an important

aspect to most individuals. In addition to this, Behling, Labowitz and Gainer (1986) propose

job choice was based on three dynamics; objectives factors (salary), company image and

initial impressions of the organization (as cited by Mason and Belt, 1986). Additionally, vivid

messages (through pictures), concrete language, messages that convey unexpected

information, messages that provide personally relevant information, and messages that are

understandable and viewed as credible by the applicant are all listed by Breaugh and Starkie

(2000) as attributes likely to appeal to potential applicants (as cited by Askehave, 2010). In

addition, Rousseau (1990) suggests that an employee’s predispositions are likely to be

reflected in their perceptions of acceptable contributions and entitlements. Therefore when

joining an organization a new employee may have an idea of the benefits they will receive

and the work they are required to put in based on what they have previously experienced.

However, this may differ between firms, thus it is necessary for the new organization to

clearly specify expectations such as effort required and possible benefits.

Matthews and Redman (2001) support this by expressing that adverts lacking

fundamental information for potential applicants are limiting the recruitment process. In

conjunction with this Acarlar & Bilgic (2013) argue that in the long run, individuals who

receive more information about their job before they start are more satisfied than those

individuals who receive less accurate and less complete information (p.51). In addition,

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evidence shows that job advertisements containing more information are perceived as more

appealing, and this increases further as the relevance of the information increases (Yuce and

Highhouse, 1998 as cited by Acarlar & Bilgic, 2013). Furthermore, it is also important to

ensure that the information in the job advertisement relevant to the job and organization. This

ensures that it will attract best suited applicants and is an opportunity for the organization to

give more information before the employee constructs their psychological contract.

Askehave (2010) as she highlights how organizational discourses, such as job

advertisements and interviews reflect practices and values within an organization, thus they

are a useful tool when attempting to create, sustain and change organizational reality.

Moreover, an early study by Belt and Paolillo (1982) found that specificity of qualifications

had little effect on response to job advertisement, whereas perception of a good corporate

image had a strong positive effect (as cited by Mason and Belt, 1986). Therefore this shows

that many applicants are attracted to the image of the company which also supports the idea

previously mentioned by Dawis et al. (1968) that an individual will be attracted to an

organization that matches them personally and conveys the beliefs and ideas that they share.

From this is has been made apparent that regardless of the medium used to advertise,

the intentions of job seekers is influenced by the information in the job advertisement, and

also impacts their perception of the organization in terms of compensation, organizational

culture, training and development opportunities (Acarlar and Bilgic, 2013). It is advised that

the job advertisement should play a key role in creating a corporate image of an organization,

as opposed to simply expressing “help wanted” (Matthews and Redman, 2001). By using this

opportunity a company is able to give a truthful image of the company and the job entail, this

will allow the most suitable employees to apply for the job. It will also aid the employee into

constructing a psychological contract that is realistic and has less chance of being unfulfilled

as the recruitment offered truthful and realistic information.

5.4 Successful Recruitment in MNEs

Recruitment and selection are used by multinational enterprises (MNE) as major

strategic international human resource management practices in order to coordinate and

control global operations. They are also necessary to ensure the correct people are in charge

of these operations (Mohamed, Singh, Irani and Darwish, 2013). However, Hsu and Leat

(2000) found the differences in recruitment and selection across countries. They found that

external recruitment agencies and executive search consultants are popular amongst British

25

firms, whereas this is rare in Taiwanese companies. A different study revealed that Japanese

and Swiss firms fill positions within their firms by candidates from the home country, unlike

the Netherlands, the UK and France who appeared to employ a greater spread of nationalities

(Wong and Bimbaum-More 1994, as cited by Mohamed et al., 2013). They also found

distinct differences in HR practices such as staffing, training and career path design, between

Western and Eastern companies. Such variations in recruitment preferences are likely to be a

result of differences in culture suggesting they may be more effective in some nations than

others.

International management teams are able to use their knowledge of local market

conditions and internal organizational competence in order to overcome potential challenges

that multinational enterprises may face during the recruitment and selection process

(Mohamed et al., 2013). They gave an example of multinational companies whose host

country rank highly on the collectivist scale often prefer to recruit internally as this is said to

endorse loyalty within the firm. In the particular situation of internal recruitment, the

company often prepares the candidate in advance in order to avoid competition between

internal candidates, maintain harmony and avoid unwanted disruptions. What is more,

organizations that look internally to recruit and actively prepare these employees for their

new and higher position can improve the rates of employee turnover (Mohamed et al., 2013).

Thereupon, although it has been made clear that different nations have opposing methods of

recruitment, multinational enterprises are knowledgeable about the market in which they are

operating and thus able to act accordingly.

A further reason as to why multinational enterprises are able to cope with a vast array

of recruitment preferences and still able to manage successful recruitment, is that MNEs are

predicted to be more strict in their recruitment and training and tend to be more rigorous

when promoting individuals (Mohamed et al., 2013). MNEs also place a greater importance

on training. Moreover, they create a stronger work culture by utilizing induction by

socialization and implementing buddy systems for mentoring (Mohamed et al., 2013).

Therefore, under the circumstances MNEs make many efforts to ensure that their recruitment

is not jeopardized by the diversity of different nations.

A likely explanation for the differences in human resource practices across nations is

a result of many factors. Their differences in national culture, external organizational factors

(for example regulation by government institutions), internal organizational factors (such as

26

the size of the organization and the type of ownership), and the national view of HR within a

country (Mohamed et al., 2013). These human resource practices of course involve the

relevant topic of recruitment. As a result, it is evident that there is no ‘one best way’ for all

nations to recruit individuals. The ample number of factors that create variations will always

be apparent and therefore cannot be ignored, however it is clear that firms working in foreign

countries or with individuals from many nations are aware of these differences and are able to

use their knowledge to overcome and potential problems such as a psychological contract

breach.

6. Conclusion The psychological contract has been shown to be very relevant in today’s society and

must not be ignored by organizations. It brings together the employee and employer creating

a mutually beneficial relationship, however this is only the case if both parties contribute.

Breaching the psychological contract has negative responses that vary from a decrease in

effort to abandoning the organization. On the other hand it is also clear that fulfillment of the

psychological contract leads to positive outcomes, this occurs through meeting obligations

and is shown to lead to positive outcomes such as extra-curricular activities that are favorable

towards the organization. This provides an answer to the second and third sub question by

highlighting the effects of breaching or fulfilling the psychological contract. This should also

encourage organizations to pay attention to the concept as it can lead to behaviors that are

highly detrimental or incredibly beneficial to the organization.

The basic principle of the psychological contract is simple – people want fair

treatment at work. It is described by many authors as a relationship between an employee and

employer regarding their exchanges and perceived obligations. This gives a sufficient answer

to the first sub question, however it is important to recognize that the concept is not fixed;

there are many forces that can lead to the concept seeming rather chaotic. The complexities

and dynamics that arise when it is put into a real life context make it more complex.

Subjectivity is one of these factors that has often been proven to add complexity to the

psychological contract, it is different depending on the individual and this subjectivity can

lead to different interpretations of the mutual obligations that form the psychological

contract. Consequently, this subjectivity emphasizes the likelihood of a breach occurring.

Another reason for an increase in the likelihood of a breach, and one that has been a

particular cause recently, is the increase in globalization. By providing an answer to the

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fourth sub question it has been made clear that globalization has introduced dynamics that

make it more difficult to use the same human resource management practices across

organizations. Globalization has led to a change in traditional organizational contracts, people

are becoming less attracted to long term job contracts that offer security in return for

commitment and hard work, but are instead looking for additional benefits from their

organization. Globalization has also led to individuals having richer demands - individuals

have more access to information which has elaborated their traditional needs. As a result the

psychological contract is playing a more important role than ever.

However, globalization has also led to an increase in the chances of a psychological

contract breach. This is due to social distance between two parties. Individuals have different

understandings of the psychological contract as a result of culture. It has also been found that

individuals will behave differently to the psychological contract depending on their culture

and the psychological contract will have different levels of importance in countries as a result

of their culture. A previously presented example was that China has more emphasis on the

psychological contract as they look for relationships within work, whereas contracts in

America are used more for legal matters. These differences in cultures within nations can best

be explained by Hofstede’s cross-cultural dimensions.

The first dimension is power distance. It was found that there will always be

inequality between members and a hierarchy is apparent in most organizations, but the power

distance index focuses on whether inequality is desired in a nation. Higher power distance

means that individuals have greater respect for authority. It also leads to different structuring

of organizations, which consequently means they manage problems in different ways, which

in a low power distance place is likely to see the subordinates being given a lot more

responsibility. It can be assumed that this will make people from nations with high power

distance feel as though they are not qualified enough if they are delegated in a nation with

low power distance. The hierarchies that rise from power distance also give an indication of

job roles. Therefore the more definite classification of roles is said to be preferred by

individuals who are looking for an internal career path. Evidence show that consequences of

a psychological contract breach will always be negative, however these will vary depending

on the norm of inequality. It has been found that low power distance nations will have a more

severe reaction to a breach than those in high power distance nations.

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The dimension of uncertainty avoidance refers to how much uncertainty or unknown

situations make a nation feel threatened, thus it highlights to what extent they go in order to

avoid these situations. Firms are more able to manage uncertainties within their organizations

by implementing rules and regulations, hence the more an organization feels threatened by

the unknown, the more rules they impose, more control they demand and the more structured

the firm will be. Consequently, this will have an impact on the structure and functioning of

the organization.

Individualism focuses on the level of which it is the norm for an induvial to work on

their own or within a group. It therefore effects their contribution to the organization and

shows whether they will act in a way that favors themselves or the organization. The level of

individualism plays a role in how employees construct their psychological contract, and it

was found to be especially important for collectivists as they look for personal relationships

which are defined and supported by the psychological contract.

The final dimension masculinity explores whether individuals feel the need for

achievement and success as opposed to desiring social relationships, quality of life and

compassion. It may be assumed that more feminine individuals will rely more on the

psychological contract as, much like collectivist individuals, the psychological contract is a

way of defining the relationships they search for.

It is clear from the four cultural dimensions that organizations may differ substantially

as a result of their culture; this is a result of culture playing a large role in individual’s

construction and importance of the psychological contract. Therefore, it is imperative that an

organization is attentive towards it. Of course there will be differences between nations but

this does not necessarily have to be a limitation, providing organizations do not ignore the

psychological contract, instead they should attempt to specify the obligations of the two

parties. This is especially possible during the recruitment phase where the organization can

give a true and meaningful insight of the organization. Job advertisements are not just a way

of advertising a job opening, they also give information of what the job may entail, hence

reducing any initial uncertainty. They are also a way of creating a company image and it is

also said that during the recruitment phase both the employee and the organization use this

time to assess fit between the two parties. Employees search for a match between their

personal needs and the nature of the work itself. The requirements of each party need to be

fulfilled in order for there to be fit. Employees strive to maintain a fit between themselves

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and the organization, thus it is clear that employees will be attracted to what suits them. This

is relevant for the cultural dimensions that Hofstede introduced. An employee may use these

dimensions to assess whether the firm also shares the same norms. Thus, it is important for an

organization to be truthful about these aspects and make this information clear.

It is also apparent that specificity in the information is necessary as this leads to

application of better suited individuals, and less appropriate applicants will screen themselves

out. If these aspects of the advertisement are not accurate or over exaggerated in order to

appear more attractive, employees are likely to be disappointed when the job is not what they

expect. As a consequence this will lead to unmet promises and an increase in the perception

of psychological contract violations. Moreover, more information is said to be favorable and

attractive to applicants who may support the idea that they begin constructing the

psychological contract before they join the firm and this information will aid them in making

a realistic construction. The use of job advertisements and other aspects of the recruitment

process that reflect values within the organization are a useful tool when creating and

sustaining a realistic image of the organization.

It has been found that the construction of the psychological contract does begin at the

recruitment phase, especially when an individual views a job advertisement and experiences

their first point of contact with the organization. Therefore it is clear that this will have an

influence on the potential employee’s psychological contract. This presents an answer for the

final sub question by identifying why recruitment is important for organizations and how it

impacts the psychological contract.

Moreover, evidence also shows that it is possible for multinational enterprises are able

to overcome the difficulties of recruitment, regardless of the fact they have many cultures.

Therefore organizations should be advised to follow the key features that MNEs use in their

recruitment process namely; fit the method of recruitment to the culture, be knowledgeable of

the market and internal competences, be strict, and make use of opportunities to transfer the

desired organizational culture to employees in order to mitigate the possibility of a

psychological contract breach and the negative consequences that arise a result of breach.

7. Limitations and Suggestions for Further Research Although the literature review does provide a sufficient answer to the research

question, like most research it does have some limitations. Firstly, utilizing a recruitment

30

process that attracts people who fit the organization may limit the diversity within the firm.

For example, if during the interview stage a collectivist company removes candidates who

portray characteristics of being individualistic this could lead to the employment of very

similar people. Although this is more likely to ensure the newly employed recruits will work

well in their firm, it could also mean that they limit the diversity of their firm. Diversity can

be difficult to deal with, however it does introduce different ideas and concepts to the

organization.

Secondly, the review does not specify a particular type of industry but instead looks at

organizations as a whole. Thus in future research it may be necessary to study one particular

market, as the impacts on the psychological contract, difficulties of cultural differences, and

methods of recruitment may vary depending on the organization. For example it may be

intersecting to compare companies who have regular contact with the public and those that do

not.

Also, it may be necessary to use another dimension other than that of Hofstede. His

study was conducted over thirty years ago, and although it is still often referenced and is still

supported by more recent studies, there are many other factors that create diversity within a

firm, including religion, gender and age, which will also play a role in their construction of

the psychological contract. One important topic that is very apparent in today’s society is

sexuality. An individual’s sexual preference may also affect their construction of the

psychological contract. Treatment and perception of homosexuals in organizations is gaining

more attention, therefore it may be advised that future research includes this dimension.

Furthermore, it would be important to study particular countries and analyze further

impacts. For example, how economically developed a country is will affect the additional

benefits that one would expect from an organization. Healthcare is often included in British

organizations as a company benefit, however other less economically developed countries

may not be able to provide such benefits, yet employees who are looking to work there are

likely to have expected the differences.

What is more, the funding that is available within a country or organization will

impact what they can spend on recruitment. Although it has been made clear that certain

aspects are important in the recruitment phase, some organizations and nations may simply

not have the funds to ensure these are implemented.

31

Finally, another suggestion for future research on this topic could include empirical

data of these ideas. This particular study is a combination of other researchers literature,

whereas it may be interesting to gather empirical data and test whether the predictions are in

fact true.

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