Understanding Commitment of External Employed people
within an Organization.
(Commitment to the companies’ mission, goals and targets is different for externally and internally employed people.)
Master Thesis
K. Maes BSc.
Thesis Coordinator: dr. S. Dominguez Martinez
30 June 2014
Universiteit van Amsterdam
Faculteit FEB
2
Abstract
This paper provides comparisons between internal and external employees in the psychological contract measuring the expectations and fulfilment of obligations by the employees and the employer. It aims to contribute to the understanding of psychological contracting between employees and employers. The research in this paper contributes to the literature about contracting by analyzing psychological contracting with external and internal employees. Theoretical differences between internal and external employees in motivations are explained in the literature. With the use of the Tilburgse Psychological Contract Questionnaire, internal and external employees' expectations and fulfillment of the psychological contract are measured. Answers to the questionnaire are tested for significant differences between internal and external employees. In line with other scientific research, a factor analysis is performed on the answers and with a regression analysis moderation by being internal or external employee is tested. The outcomes of the research in this paper show that external employees differ from internal employees in valuing their expectations and the fulfillment of obligations from the psychological contract. Internal and external employees differ significantly between the answered individual questions, but not between all questions. Each question is related to a specific theme of the psychological contract. When questions are taken together, and are regarded as a theme, there are also significant differences between themes, but not between all themes. With a regression analysis the specific themes of the psychological contract are evaluated on their relation with commitment. A possible moderation effect by the contract type on this relation is not significant. The value of this thesis lies therefore in an explanation, insight and understanding of the psychological contract and the difference between internal and external personnel.
3 “Well-functioning labor markets in economies need a flexible workforce. Companies should be able to adapt to rise and fall in demand. Nevertheless, a flexible workforce should not be reduced to a cheap alternative for work that can better be done by an internal workforce. We will take initiatives to better bring into balance flexible and internal workforces.” (Free translation)
Flexibele arbeid is belangrijk voor een goed functionerende arbeidsmarkt en economie. Het is nodig om bedrijven in staat te stellen pieken en dalen op te vangen. Flexibele arbeid mag echter niet verworden tot een goedkoop alternatief voor werk dat beter door vaste werknemers gedaan kan worden. We nemen initiatieven om flexibele en vaste arbeid beter met elkaar in balans te brengen.1
4 Table of Content
1 Introduction ... 5
1.1 External Contracting ... 5
1.2 Psychological contract: the unwritten part of the contract ... 6
2 Theoretical Framework ... 9
2.1 Organizational motives of external contracting ... 9
2.2 Theory about external employees. ... 11
2.3 Motives of external employees ... 12
2.4 Commitment of employees ... 15
2.5 Hypothesis ... 16
3 Empirical Research ... 20
3.1 Questionnaire development ... 20
3.2 Research Setup ... 21
3.3 Data Population and questionnaire ... 22
3.4 Method ... 23
4 Results ... 25
4.1 Measures for Expectations and Fulfilment ... 25
4.1.1 Content of the work ... 25
4.1.2 Career development ... 28 4.1.3 Social atmosphere ... 30 4.1.4 Organizational policy ... 32 4.1.5 Work-privacy balance ... 34 4.1.6 Rewards ... 35 4.1.7 In-role behavior ... 37 4.1.8 Extra-role behavior ... 38
4.2 Measure for Commitment ... 40
5 Regression analysis ... 43
5.1 The model ... 43
5.2 Analysis of the themes slopes with moderation ... 48
6 Conclusion ... 53
7 Discussion ... 56
8 Limitations ... 59
References ... 61
Appendix I: Tilburgse Psychological Contract Questionaire ... 70
Appendix II: Individual question analysis ... 73
Appendix III: Factor Analysis ... 74
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1 Introduction
1.1 External Contracting
Research shows that committed employees decrease costs by working faster and harder (Angle & Perry, 1981; Becker et al., 1996). The success of firms in previous decades can partly be related to the commitment of their employees (Meyer et al., 1989). Therefore, HRM policies should provide better strategic contributions to the development of the human capital (Kluytmans & Van der Meeren, 1992). Research confirms that the leading opinion is, that fixed and internal contracts provide higher commitment to companies’ mission goals and targets in return for higher job security (Martin et al., 1998). Following this line of reasoning, short term contracts, external contracts or any other form of non-conventional contracts are not contributive to commitment (Bolwijn, 1998; Delsen, 1996; Herriot & Pemberton, 1997; Kleinknecht, 1998). More flexible employment relations thus lead to a decrease of loyalty to an employer (Ester & Vinken, 2000).
In the past decades, the percentage of external contracts within organizations has risen rapidly (Huiskamp & Schalk, 2002). This is in line with research showing that currently in many countries larger proportions of the labor market work on an external basis than before (Cohany, 1998). Previously Legge (1989) already states that the development of more flexible labor markets is contradictory to the theoretical assumptions and the idea that commitment is fully related to job security. Only limited research about the contract type and employees’ attitude and commitment is available (Gallagher & McLean Parks, 2001; Kessler et al., 1999; Purcell, 1996). Theories based on psychological contracting suggest that commitment is related to the type of contract (Atkinson, 1984; Beer et al., 1984; Pfeffer, 1994; Rousseau & Tijoriwala, 1998). This theory is elaborated in this thesis and the research tries to provide more insight in their suggestions.
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1.2 Psychological contract: the unwritten part of the contract
Both internal and external employment is accompanied by a signed contract. These contracts describe at least some legal binding obligations between the employee and the employer. Not everything will or can be written down in the signed contract. This makes signed contracts incomplete. The interactive competences and internal personal frameworks of humans are complex, this complexity cannot not be reduced to all the aspects written contracts represent (Shore & Tetrick, 1994). The employee's and the employer's expectations and interactive processes make the “psychological contract” (Rousseau, 1989). Psychological contracts have their origin in unwritten promises between employers and employees. Rousseau (1995) describes possible parts of the psychological contract as ‘the employees’ belief in the fact that the employer will provide fair competitive wages, meaningful work, growth, opportunities and training. Therefore in exchange the employee will provide time, energy and technical skills. This is the basis for further development of the psychological contract.
The psychological contract was developed further by stating that every individual has his very own opinion about the elements of a psychological contract with an employer (Schalk & Freese, 2008). Every individual develops his own psychological contract on subjective expectations. The employee feels and understands what the employer should deliver. This deliverance has an impact on his obligations and the effort he will deliver (Freese et al., 2008). Freese et al. (2008) argue that the psychological contract is a useful instrument to analyze the employees’ commitment. They have developed a questionnaire for measuring the expectations and the fulfilment of the psychological contract from the viewpoint of the employee. In the questionnaire developed to measure the regarded expectations and fulfilment of the psychological contract, several questions together represent a theme. Six themes are present in the questionnaire, representing what an employer should provide within the psychological contract. These themes are content of work, career development, social atmosphere, organizational policy, work-privacy balance and rewards. Two other themes, the seventh and eight theme, are in-role behavior and extra-role behavior. These two themes represent what an employee should provide to the
7 employer according to the psychological contract. The ninth and tenth themes are related to commitment and are the themes employees’ affective commitment and the employees’ quit intention (Freese et al., 2008). The differences in content of the psychological contract between internal and external employees and organizations will be further investigated based on this “Tilburgse Psychological Contract Questionnaire” used for measuring the psychological contract.
Van Dyne and Ang (1998) consider that different contract types influences psychological contracting and showed that it is important to take sociological effects of temporary contracting into account. An internal employee or external employee regards the expectation and fulfillment of the psychological contract from his own belief. Therefore, the mean external contracted employee might regard the expectation and fulfilment differently from the mean internal contracted employee.
The research objective is to determine if the effect from the level of fulfilment on commitment is different between external and internal employees, according to the psychological contract.
To research this topic, the following research question is formulated:
Research Question: What themes of the psychological contract are related to
commitment of employees and what is the role of the type of contract in this relation?
First partial research question: What are differences between external and internal
employees regarding obligations and fulfilment?
Second partial research question: Fulfilment of which themes have a relation with
commitment?
Third partial research question: To what extent do internal or external contracts have
8 In this research, “external employees” or “external personnel” include all employees who are not directly contracted to the company. For the terms “internal employees” or “internal personnel” this research refers to workers with a fixed contract and short and long term temporary jobs similar to what Gallie et al. used (1998). It is stated clearly, when further reading this paper, that differentiation between internal and external is simply based on the basis of who the employee is providing his work for according to the written contract. This way analysis of the retrieved data is possible and most valuable in contributing to research in this field.
The structure of this research is as follows; firstly, the theoretic framework is outlined. In the theoretical framework arguments for internal or external contracting are described. Company and employees' reasons to hire or work as external employees are provided followed by theories of the psychological contract. Out of the relevant theories, the hypothesis will be formulated. Secondly, the method for testing this hypothesis will be outlined. The set of collected data will also be described in this chapter. Consequently, the statistical analysis will be performed and the results will be described. In the chapter thereafter the results will be interpreted followed by the conclusions and the answer to the research question. Finally, limitations of the present research and recommendations for complementary research will be given.
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2 Theoretical Framework
2.1 Organizational motives of external contracting
In the following section recent changes in internal and external contracting from the companies’ point of view are described. Possible reasons for companies to increase or decrease the number of external contracted employees are provided.
In recent years the economic crisis has created increasing pressure to cut costs. Companies who want to manage and reduce their costs can do so by decreasing the number of personnel. Most companies are confident that hiring external employees is relatively more expensive than costs of internal employees (De Vries, 2011). Limitations to this argumentation of decreasing costs by decreasing the amount of external employees are discussed in previous literature. (Golden & Applebaum, 1992). Nevertheless, according to Ernst & Young investigations, companies have been decreasing the number of external employees since the financial crisis of 2008 to reduce costs.
In his article, De Vries (2011) discusses several arguments opposing a decrease in the ratio of external employees from an organizational perspective. He provides arguments which should be taken into account in decision making about decreasing the ratio of internal and external employees. For example, costs for personnel selection are lower when hiring external employees. The costs of hiring an internal employee, when it shows that the employees’ capabilities are actually not satisfying, will lead to continuous higher costs than when contracting an external employee who can be replaced (De Vries, 2011). Nevertheless, due to austerity cuts, organizations are trying to reduce the costs of personnel. Organizations are decreasing the numbers of external employees and focusing more on hiring internal employees if new personnel is required (De Vries, 2011). This leads to a reduction of the ratio external compared to internal employees. The ratio was increasing up to the moment the 2008 financial crisis started. Until then the ratio of external compared to internal employees was continuously and significantly increasing (Houseman et al., 2003; Purcell et al., 2005). After the financial crisis the increase stopped (Spermann, 2011). Huiskamp and Schalk (2002) find that the use of external employees is fluctuating but
10 was increasing over time. The argument for an increasing ratio of external personnel was the capability of companies to adjust to economic changes (Hunter et al., 1993; Reilly, 1998). It is a requirement for flexibility that enables organizations to use labor to cope with fluctuating economy and demand (Blyton et al. 1992). Several studies have been trying to explain and predict the reasons for the changes in this ratio from the organizations' point of view. Arguments for a low ratio of external employees are often provided and generally accepted, such as higher financial costs of external employees (De Jong et al., 2007). Why employers hire these presumably less committed (Bolwijn, 1998; Delsen, 1996; Ester & Vinken, 2000; Herriot & Pemberton, 1997; Kleinknecht, 1998) and therefore less productive employees (Angle & Perry, 1981; Becker et al., 1996; Meyer et al., 1989) will be described. In literature motives for organizations to increase the number of external employees can be found. The following four motives relate to reasons for external hiring from the point of view of the firm.
Flexible shield. The company uses temporary workers to keep a flexible shield in
the workforce and to reduce fixed administrative costs (Feldman & Turnley, 2004). Atkinson (1984) suggests the amount of external employees can fluctuate, increase and decline due to the economic situation and changes in the market. When business goes down, external employees are regarded as a flexible shield for movements in the economy (De Haan, Vos & De Jong, 1994). Finally, specific “Just in Time” policies might require high flexibility within the labor force (Forde & Slater, 2005).
Outsourcing operations. Agencies provide work in projects or operations for
another organization. The external contracting leads to an external labor market (Houseman et al., 2003).
Screening model purposes. External contracting can be used for screening when
external employees are selected by an agency. The company can later offer the external hired personnel an internal contract (Houseman et al., 2003).
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Specific knowledge. External employees often have gained specific information or
expertise in previous work experience. A company might need to be provided temporarily with this expertise or information (Hertog, 2000).
The above shows that organizations have their considerations for hiring external employees. These motives are provided to understand that employers sometimes prefer external employees and do not want to contract employees on an internal basis. These motives of an employer to prefer an internal or an external employee leads to a demand for a different contract type. The employer demanding an external employee then causes a different contract type. The psychological contract is an unwritten part of contracting between employer and employee. The difference in the psychological contract between internal and external contract types is investigated.
Most research about contracting is based on the organizations' point of view and lacks a linkage to the employees' demand to work as an external (De Jong et al., 2009). The following section focusses on employees motives to work on an external basis.
2.2 Theory about external employees.
To fully understand the employees' reason to choose an external contract relevant literature is discussed. This discussion will result in an overview of eight considerations describing the employees’ motives for external employment. Starting point is Maslow (1954), who uses a pyramid to show the needs of an individual. Food and shelter are basic needs. Work provides a fundamental means to achieve these needs. If enough money is earned to satisfy basic needs, work on its own fulfills a way to create self-esteem. Work can even fulfill the need for self-realization and the use of personal talents improves part of the self-actualization, which is the basis for intrinsic motivation. In the Maslov pyramid these last needs are ranged as the “higher needs” (Maslow, 1954). Bonner and Sprinkle (2002) construct a possible framework to categorize previous research. In their framework personal differences are regarded
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as personal characteristics and preferences which influence performances of an employee. In their article, explanations are provided for these personal variables. It explains how employees’ characteristics influence performance. Lazear (2002) shows that much of the existing literature finds an important cause of employment in the financial incentives among employees. Lazear (2002) explains that financial incentives have an influence on performance. Other research projects provide evidence that the external demand for qualified personnel influences a person’s decision to work for an agency or as an entrepreneur. Analysis is performed about
the motivation of being an entrepreneur and providing services for an organization
(Purcell et al., 2005). This would explain why an employee would want to work as an
external.
Another direction in literature is the theory of the free agent perspective and the portfolio careers (Kunda et al., 2002). This direction in literature also finds proof for the motivation of highly qualified personnel to work for an agency or as an independent, due to the retaliation of working conditions and because of an increase in the rigidity internal employees are confronted with (Kirkpatrick & Hoque, 2006).
This can explain why many external employees are working through agency
contracting. Arguably this workforce prefers the best of both, being contracted but only specifically through an agency. It explains why employees have a motivation to perform their work on a temporal basis in an external organization but remain contracted by the agency (Ellingson et al. 1998; De Jong et al., 2009). The previous articles show the external contracted workforce is found in different forms. Gallie et al. (1998) distinguish between fixed contracts, short term temporary jobs (lasting less than a year), and contract jobs (lasting between one and three years). Contract jobs include agency workers, temporary advisers, externally contracted, self-employed entrepreneurs and other forms of external personnel.
2.3 Motives of external employees
In recent literature it has been argued that the employee is the one who primarily controls offering his services under an internal contract or to work as an external (De
13 Jong et al., 2009). External employees themselves in general have less interesting job descriptions (Goudswaard & De Nanteuil, 2000), earn less (Kleinknecht et al., 1997), and have a less secure environment (Goudswaard & De Nanteuil, 2000). The external employees should therefore have other motives for choosing working as an external. Kunda at al., (2002) have investigated the awareness of internal and external employees within the IT branch on the differences in contracting. Their research shows that employees are aware that they could offer their input to the organization by internal or by external contracting. They are also aware of the differences in salary between internal and external contracting (Kunda et al., 2002). By analyzing these different reasons, different motivations were provided to choose a
certain contract. Green (2008) suggests that the possibility for a person to grant his
own wish and to have his intrinsic and extrinsic reasons and motives to opt for an external contract should be considered. A possible categorization of motives for opting for an external or internal contract is provided by Porter and Lawyer (1968). They discuss intrinsic and extrinsic motivations. Intrinsic motivation is motivation out of personal interests. Extrinsic motivation is based on the revenue this motivation provides (Porter & Lawyer, 1968). For example, the extrinsic motivation of an employee is the need to have a secure but possibly lower remunerated internal contract (Houseman et al., 2003). Strong extrinsic motivation might affect the intrinsic motivation positively or negatively (Fehr & Falk, 2002). Combining the literature, motives for external employment are described. Three types of extrinsic motivations for having an external contract are presented; the autonomous motive, the stepping-stone motive, and the controlled motive. In the researched literature, five types of intrinsic motivations for having an external contract are presented: the voluntary employment motive, the boundary-less career motive, the portfolio career motive, the flexibility motive and the knowledge worker motive.
Autonomous motive. When a person is in need of employment but a person’s
present situation to combine available time with study, leisure or family requires a non-standard contract, this often results in agency work and external contracting. (Hardy & Walker, 2003; Morris & Vekker, 2001).
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Stepping stone. Agencies are often regarded as a stepping stone from
unemployment into the labor market. Being active in the labor market is argued to provide higher chances on getting a more desired job or obtaining a permanent job (Jahn & Rosholm, 2010). This implies the usage of an agency to find a job as a stepping stone to a fixed contract. Although the stepping stone is discussed there is no indication for agency workers to more easily find a regular contract within a year, when being employed through an agency. In contrast it is shown that, when having a temporary job, searching for a fixed contract increases the chances of losing a job (Kvasnicka, 2009; Houseman et al., 2003).
Controlled motive. The controlled motive is explaining a part of the motivation in the
demand for an external contract. The person is looking for a permanent internal contract, but cannot find it because of a shortage in the supply of suitable jobs, and therefore takes a temporary job (Ellingson et al., 1998). The controlled motive differs from the previous stepping stone motive by the intention to use the job to get the next one easier, from that the employee only takes the job because of having no option for a permanent contract at that moment.
Voluntary temporary employment. Flexibility, freedom and variation are clear
influences on the intrinsic motivations to choose external employment. In this situation external employment can be considered as a possible satisfier (Polivka & Nardone, 1989). The person who is highly interested in being satisfied with a focus on flexibility, freedom and variation values temporary or external employment higher than fixed contract employment. These employees are not taking external contracts because of a lack of other contracts but because of unique work arrangements (Ellingson et al., 1998).
Boundary-less careers. Arthur and Rousseau (1996) have found in their research
that some persons are motivated to engage in external and temporary contracts because they estimate it gives them greater opportunities to forge better careers if they can more easily switch between companies.
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Portfolio Careers. Knell (2000) has performed follow-up research on the
boundary-less career. He has developed a theory in which the boundary-boundary-less career has been theorized into a so-called portfolio career. The perceived need to have a portfolio of different career expertise increases the motivation of a person to avoid a fixed term contract within a company (Knell, 2000). Highly skilled experts more regularly choose to sell their expertise through intermediaries (Knell, 2000). Van Maanen and Schein (1977) consider that the portfolio career is a process of working out a synthesis between individual interests and the opportunities which exist in the external contract, so that both individual goals are reached.
Flexibility. Golden and Appelbaum (1992) describes the phenomenon that workers
who prefer flexibility seek temporary contracts because they are able to negotiate the form of the preferred contract very well. Also, the personal need for flexibility is a proven indicator for people to be externally employed (Golden & Appelbaum, 1992).
Knowledge workers. In the knowledge economy, income will rise if specific
knowledge is demanded. External workers with this knowledge can then demand high prices (Forde & Slater, 2005).
The aspect described in this section provides motives for employees to prefer to work on an external contract. Seen in the light of these motives, it is clear that the psychological contract is different in outline for externally contracted employees, since their motives for being in this type of contract differs significantly from those of internally contracted employees.
Therefore in the next section differences in the psychological contract of internal and external employees will be discussed.
2.4 Commitment of employees
Much research has explained the increase of external employment with external effects but too little research focused on external employees’ commitment (Torka,
16 2003). Important is that most of the previous research on the commitment of external personnel, up to now, was mainly measured through and from an employer’s point of view. Most data analysis was done through companies’ data and/or public authority data. Hardly any research included the external employee himself (Torka, 2003). Suggested is to further research contract type and employees’ attitudes and commitment (Gallagher & McLean Parks, 2001; Kessler et al., 1999; Purcell, 1996). De Jong et al. (2009) also mention that focus on the personnel point of view for external contracting should be developed.
Research has been conducted from the perspective that commitment is related to job satisfaction and that satisfied employees, internal or external, will be more committed (Ploeg & Scholte, 2003). The relationship between external employees and lower commitment was already questioned by Legge (1989). Commitment of employees can be estimated and researched through measuring employees' psychological contracts (Atkinson, 1984; Beer et al., 1984; Pfeffer, 1994; Rousseau & Tijoriwala, 1998). According to De Jong et al. (2009) the fulfillment of the psychological contract effects the commitment. The theory of the psychological contract shows that from an employee’s perspective the level of commitment becomes measurable by a psychological contract (De Cuyper et al., 2009). With a difference in fulfillment a difference in commitment is expected (De Jong et al., 2009). In order to make statements about commitment of external or internal personnel, a commonly used method is to compare the commitment of external personnel to the commitment of internal personnel (De Cuyper et al., 2009).
Investigation of the expectations and fulfilment of internal and external employees, and the fulfilment by the employer can establish better understanding of commitment. In the following section hypothesis about the differences between internal and external employees with regards to the psychological contract are developed.
2.5 Hypothesis
The valuation of the employees’ expectation and fulfilment, and the valuation of the employers’ fulfillment, is measured with the psychological contract. Previous research
17 described employers’ motives for an external or internal contract. Also different motives have been brought forward for employees to work as an external employee. Commitment can be measured with the psychological contract. To contribute to the research on external employees and internal employees motives it will be investigated how internal and external employees regard expectations and fulfilment of the psychological contract.
There are different motives for employers to hire on the basis of an external contract and there are different motives for employees to work as an external employee. The psychological contract is an unwritten part of the contracted agreement. When the contract type is different, and the psychological contract is part of this agreement, expected is that expectations and fulfillments mean is different. The internal employees and the external employees are expected to value the expectations and the fulfillment by the psychological contract differently. The psychological contract distinguishes between eight different themes. Between the indicated themes a difference in the mean is expected for internal and external employees. This leads to the first two hypotheses.
H1: External employees differ from internal employees on the mean valuation of the expectations of the themes, (a) content of the work, (b) career development, (c) social atmosphere, (d) organizational policy, (e) work-private balance, (f) rewards, (g) in-role
behavior, and (h) extra-role behaviorof the psychological contract.
H2: External employees differ from internal employees on the mean valuation of the fulfilment of the themes, (a) content of the work, (b) career development, (c) social atmosphere, (d) organizational policy, (e) work-private balance, (f) rewards, (g) in-role behavior, and (h)
extra-role behaviorof the psychological contract.
Commitment is expected to be related to the regarded fulfillment of the psychological contract. The valuations of the themes regarding fulfilment are then expected to have a relation with the level of commitment. The level of fulfilment is expected to influence commitment. In the psychological contract eight themes are presented. A conceptual model is constructed in which the expected relation between fulfilment and commitment is presented.
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Model1. Conceptual Model of the Relation of the Themes Fulfilment and Commitment with Moderation
The level of fulfilment is expected to have a relation with commitment. In the psychological contract each of the eight themes fulfilment is valuated. Each theme is expected to have a relation with commitment. This leads to the following hypotheses.
H3: The regarded fulfilment of (a) content of the work, (b) career development, (c) social atmosphere, (d) organizational policy, (e) work-private balance, (f) rewards, (g) in-role behavior, and (h) extra-role behavior has an effect on commitment.
The relation of the themes fulfilment on commitment will be investigated with previous hypotheses. By being an internal or external employee, a different valuation of
19 fulfilment is expected. Type of contract is therefore expected to have a moderating effect on commitment. This leads to the following hypotheses.
H4: The effect on commitment from fulfilment of (a) content of the work, (b) career
development, (c) social atmosphere, (d) organizational policy, (e) work-private balance, (f) rewards, (g) in role behavior, and (h) extra role behavior is moderated by the type of contract.
In the following chapter the development of the questionnaire is provided. The process of collecting data and what research methods will be used to test the hypotheses is explained.
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3 Empirical Research
3.1 Questionnaire development
In 2007 a questionnaire was set up by Schalk and Freese (2008) to investigate the psychological contract. The Tilburgse Psychologisch Contract Vragenlijst (TPCV) has been primary developed to measure expectations of the psychological contract. To this questionnaire, some questions of employees’ flexibility and security have been added. These questions about “flexsecurity” are looking for a balance between security and flexibility, which is nowadays a common part of the HRM policy of an organization (Schalk & Freese, 2008). Also the scale was improved from a two point scale into a 5 point Likert scale. All questions are measures for the expectations that employees can have on what the organization should offer. These measured values are the estimation of the level to which an organization or employee should keep up with the expectations. These answers to the questions were first researched, by using explorative factor analysis and regression analysis for statistic validity of a relationship between different components (Freese at al., 2008). That questionnaire has been fully tested and further researched (Raeder et al., 2009).
The first six themes of the psychological contract are related to employers’ obligations. The seventh and eight theme of the psychological contract are related to employees’ obligations. The ninth and tenth themes of the psychological contract are themes which measure the commitment of the employee. As described in the literature, questions are not related to employer opinions about psychological contracting. The questionnaire questions about the expectation, valuated from the employees view. The questionnaire was used and further developed by Raeder, Wittekind, Inauen and Grote (2009) when they developed a “Swiss” version of this questionnaire to gain understanding of the expectations of employees and employers related to each other and to investigate to which level these expectations are met. They followed the setup of the questionnaire of Schalk and Freese (2008). For the same content of the question about expectations, employees are asked about fulfilling these aspects of the psychological contract. The questionnaire has been proven solid and useable for interviews about psychological contracting among
21 employees (Freese, Schalk & Croon, 2011). This questionnaire has been used and is still being used in academic research. For this thesis the authors of the TPCV questionnaire have been contacted. The authors have confirmed that the questionnaire is a valid method for constructing the research as described in this thesis. The questionnaire in this thesis is fully based on the TPCV. With this questionnaire a total of 57 individual questions, distributed over 10 different themes, can be measured. Again there are six themes concerned with obligations of the employer towards the employee: content of the work, career development, social atmosphere, organizational policy, work-privacy balance and rewards. Two obligations of the employee towards the employer can be measured: in-role behavior and extra-role behavior. The final two themes are related to employees’ commitment: affective commitment and quit intention.
For the analysis of the expectations and fulfillment, a double 5 point Likert scale is used. One scale regarding the expectations and one scale regarding the fulfilment to the same question. Commitment with the company is measured by a single 5 point Likert scale with the themes affective commitment and quit intention.
3.2 Research Setup
For the research in this paper, the questionnaire has been inserted in a SQL database. The database has been constructed and tested by a focus group to find out whether the questionnaire was clear or needed improvement. The outcomes of the focus group led to a slight change in the questionnaire regarding the difference between the employer for internal employment or external employment. Because the original questions in the TPCV were solely focusing on internal employees, some questions seemed not fully clear during the interview. Therefore, in questions in which only “employer” was stated, this was replaced with “employer/contractor” and in the introduction the terms employer/contractor were clearly defined. This way the questions were clear and the alterations were minimal. The questionnaire in its final version can be found in appendix I.
22 All questions on screen are visibly grouped to one of the ten themes of the psychological contract, content of the work, career development, social atmosphere, organizational policy, rewards, in-role behavior, extra-role behavior, affective commitment and quit intention. The expectation of each obligation according to the employee is then measured by the first column. The second column provides the regarded fulfilment according to the employee. This way it is clear to what extent an employee valued an expectation and also directly to what extent his employer, for the first six themes, or the employee himself, for the seventh and eight theme, is keeping up with the according fulfillment.
3.3 Data Population and questionnaire
The questionnaire was offered online in such a way that when entering the questionnaire and answering questions, the data were automatically stored in the SQL database. The questionnaire was distributed by email to over 500 people. In the text of the accompanying emails, the purpose of the research was briefly explained, followed by a direct link to the questionnaire and a request to participate. The text explained that for improved understanding of psychological contracting the subject was requested to fill in the questionnaire. The questionnaire consisted of two data entry screens and a thank you note. The first screen collects descriptive information about the subject and the subjects' contract form. The second page consists of only the questions. The questionnaire has specially constructed features to guide the employee through the process. These features are a changing color when answers are filled, drop-down boxes when applicable, completion by mouse only, auto saved answers when accidentally logged off and a one page view for the full questionnaire.
All data are retrieved from the workforce of a large banking institution in the Netherlands. Within the large banking institution, people within the ICT group were questioned. Investigated is the Group ICT department responsible for the application development and maintenance of IT products. Sections of this department are located on several different sites globally. The department is accountable for the full
23 set of applications being used in the bank. There are two types of usage, products for internal use within the bank and products and services the bank uses for its interaction with clients. The number of employees in this department is 1900. The internal contracted workforce is 1200 and the external contracted workforce is 700. The department has been reorganized in previous years and started in its existing structure at the first of January 2012. All email addresses are retrieved from the bank's internal administration. The emails were sent to all sections of this department which are situated in Zeist and Utrecht. Sections located on other Dutch sites like Eindhoven, Best and Boxtel or international sections, like the ones in India, were not contacted. All used data within this investigation have been retrieved through the questionnaire. None of the data analysis outcomes can be traced back to individuals. The questionnaire has been available for 9 months and only as many as 45 people completed the questionnaire, of which 28 were internal and 17 external employees. These are not very large populations, but compared with other studies in this field it is not a small population either.
3.4 Method
In this research data based on employees’ regarded expectations and fulfillment measured by the “Tilburgse Psychological Contract Questionnaire” are analyzed. The research in this paper specifically focuses on the differences between internal and external employees in regard to the expectations and fulfilment in relation with commitment. The TPCV provides indicators of the expectations and fulfilment of the employee and to the fulfilments of the employer regarded by the employee (Schalk & Freese, 2011). The TPCV consists of fifty seven questions. Answers to the questions are provided by internal and external employees. For each question the difference in the mean between internal and external employees is calculated. This step aims to verify if the individual questions of the TPCV can identify differences between internal and external employees. The difference between internal and external employees is positive if the mean to the individual question is higher for internal then for external
24 employees. An independent samples T-test is used to validate the significance of the mean difference of internal and external employees’ answers.
Factor analysis is used to check if the individual questions within a theme do statistically correspond to one measure for that theme. The themes have previously been identified and used by Freese et al. (2008). In their empirical results the retrieved components yielded high Cronbach’s alpha’s (>0,7).
As all data sets can provide different outcomes an identical factor analysis is performed. It is tested if the provided themes of Freese et al. (2008) can again be validated with this dataset. This present study also includes a principal component analysis on the items to validate the constructed themes. The answers related to one indicated theme are loaded into a principal component analysis and rotated. Tested is for the confirmation that the questions in the theme represent only one component, which in the principal components analysis often occurs. The validity of retrieved components is further analyzed with rotation if multiple Eigen values larger than one occur. The possible secondary components with an Eigen value larger than one are not further analyzed. However, it could be an indication that a theme, as constructed by Freese (2008), might be constructed out of several aspects. The criteria used to identify if a question is contributing is if it presents a factor loading higher than 0.5. This analysis merely tests if the dataset has statistical validity on the previously indicated themes To establish the reliability of all the themes the Cronbach’s Alpha are calculated, with a minimum of 0.7 as the criteria value. The Cronbach’s Alpha will be the main and only indicator for the validation of the indicated theme. For the value of the Cronbach’s alpha Freese, et al. (2008) refer to the criteria set by Nunnally (1967) requiring a value of Cronbach’s alpha higher than 0.7. The difference between the mean answer of external and internal employees to the validated themes are shown with a positive value presenting a higher mean for internal employees. The significance level of the mean difference is presented from testing with an independent samples T-test.
In the next chapter the difference testing and the factor analysis is presented. In chapter 5 a model is presented to test the relation of themes with commitment, and a model is presented to test if contract type moderates the relation of fulfilment and commitment.
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4 Results
4.1 Measures for Expectations and Fulfilment
The questionnaire response was ranged on a double 5 point Likert scale. The first column indicates the expectation of the employee regarding this item. The second column indicates the fulfillment of the organization or the employee on this item. The different items are grouped into the psychological contract themes. Affective commitment and quit intention are together the measure for commitment. The results in appendix II show the mean differences of the answers of the employees to the individual questions.
To gain insight in the differences between the internal and the external employee an analysis of different responses to each individual question is starting point. In the upcoming sections, all individual questions are first analyzed per theme. Second, each question is analyzed to evaluate if a significant difference between the mean of the internal and external employees exists. Third, the statistical validity on the answers to be used as one component is presented.
It has been described that the first six themes are related to employer obligations. The seventh and eight themes are related to employee obligations. The ninth and tenth themes of the psychological contract, affective commitment and quit intention, are both indicators for an employees’ commitment to the organization. Therefore only one component is constructed from the themes affective commitment and quit intention.
4.1.1 Content of the work
The first six individual questions are the questions regarding the content of the work. Content of work is measured with the following six individual questions: 1. Variety in work; 2. Exciting and stimulating work; 3. Balance in work pressure; 4. Interesting work; 5. Performing your own work; 6. Ability to provide quality. The values of the mean are tested with a T-test per individual question and shown in table 1 at the
26 bottom of this section. This table shows the difference and the significance level of the difference between internal and external employees’ expectations and fulfilment. Expectations were found significantly different, for all questions of the content of work except for question 6. Individual questions, related to the items measuring the expectation of the content of work, are mainly regarded differently between internal and external employees.
Concerning the perceived fulfillment of these employer obligations related to the content of work, internal and external employees show no significant differences in any of the six individual questions related to the content of the work. This indicates that no significant difference is present in internal and external employees regarding the different items measuring fulfillment of the content of work. In the table it is shown that the difference of the third item of fulfilment, balance in work pressure, has a negative value. This means that in contrast to all other questions, internal employees seem to regard the employers’ fulfilment of the balance in work pressure lower than external employees. However, this difference is relatively small and not significant.
Table1. Item Analysis within Content of Work
Expected Fulfillment Individual questions Difference
(Internal -External)
p-value* Difference
(Internal -External)
p-value* Variety in work 0,87 (0,001) 0,35 (0,138)
Exciting and stimulating work 0,50 (0,034) 0,22 (0,365)
Balance in work pressure 0,81 (0,004) -0,13 (0,680)
Interesting work 0,49 (0,027) 0,13 (0,581)
Performing your own work 0,48 (0,049) 0,30 (0,174)
Ability to provide quality 0,30 (0,131) 0,45 (0,140) *Significant level < 0,05
For deciding if the different questions of the content of work can be validated as a theme, a factor analysis is executed. Because this research is testing results to confirm the themes retrieved by Freese, et al. (2008) their criteria are maintained. At the bottom of this section a table with a summary of the factor analysis presenting the Cronbach’s alpha and T-test on the mean difference is provided. Freese, et al. (2008) use a minimum Cronbach’s alpha of 0.7, which therefore is also used in this analysis. For testing the component the pattern matrix in appendix III is provided, showing the
27 factor loading of the items within the theme content of work. The rotated loading in the pattern matrix suggests better loading of items 3, 5 and 6 on a possible other component. The other three questions, 1, 2 and 4, have a higher factor loading than 0.5 on the first component and are in this dataset more representative for the theme content of work. To validate the theme the Cronbach’s alpha is decided to be most relevant. The Cronbach’s alpha of the first six questions representing the expectations from the content of work is 0.811. This validates the six individual items of content of work to be regarded as one theme. The factor analysis further shows that this validated has an Eigen value of 3.20 indicating that 53 percent of the variance in the questions is described by the theme. This analysis is validating the items to be used as one theme.
In table 2 the outcomes are summarized and this table shows that there is a significant difference between internal and external employees regarding the expectation of the content of work. The hypothesis that external employees differ from internal employees on the mean valuation of the expectation of the theme content of the work (hypothesis 1a) is therefore accepted.
For the fulfillment of the content of work the same factor analysis is executed. The analyses on the items indicate that constructing one component would be most useful. No other components with these questions together would have an Eigen value larger than one. If this occurs the factor analysis cannot be rotated, and the component matrix, instead of the rotated pattern matrix is presented in appendix III. It shows that the questions have a factor loading higher than 0.5, except for question 6. The Cronbach’s Alpha is 0.879 and is high enough to validate the theme fulfilment of the content of work, as was indicated by Freese et al. (2008). The Eigen value indicates that 65 percent of the variance in the items is described by the theme. The difference in the mean between internal and external employees is calculated. The fulfillment of the content of work as regarded by the employee, shows no significant difference between internal and external employees. The hypothesis that internal and external employees on the mean valuation of fulfilment content of the work (hypothesis 2a) is therefore not accepted.
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Table2. Principal Component on Content of Work
K=6 Expected Fulfillment Eigen value 3.20 3,90 Cronbach’s Alpha* 0,811 0,879 Difference Difference (Internal -External) p-value** Difference (Internal -External) p-value** Content of the work 0,58 (0,001) 0,22 (0,290) * Cronbach’s Alpha Minumum value > 0,7
** Significant level < 0,05
Note: In the pattern matrix in the appendix III it can be noted that the factor loading
values of questions 2, 3 and 6 show an indication to represent another component. It could be an indication that the items represent multiple components. But it has to be remarked that the dataset is quite small to perform a full factor analysis. Therefore is decided to relate the themes in this dataset to the themes Freese, et al (2008) already indicated. The factor analysis is merely performed to validate further analysis with the indicated themes. However, this is a major limitation of this research due to a small dataset.
4.1.2 Career development
The six following questions regarding career development are analyzed in this section. Career development has been measured with six questions: 7. Switching roles, 8. Attaining training; 9. Support within the role; 10. Professionalizing; 11. Learning from the job; 12. Use of knowledge and skills within the job. Differences in mean of internal and external employees’ expectations of the obligations of the employer regarding career development are highly significant for the four items 7, 8, 10 and 11. For question 9 and 12 no significant difference is shown. Internal employees do differ significantly from internal employees on most of the questions of expectation of career development.
Concerning the regarded fulfillment that internal and external employees have from their employer concerning career development, there are significant differences between questions 8, 10 and 11. Regarding these differences between the mean fulfilment within career development, question 7, 9 and 12 are not significantly
29 different between internal and external employees. It is shown that only half of the questions related to the fulfilment of the theme career development are significantly different. Observing the table shows the first item of fulfilment, switching role, has a negative value. This indicates that internal employees regard the employers’ fulfilment of switching roles lower than external employees do. The difference is small and is not significant.
Table3. Item Analysis within Career Development
Expected Fulfillment Individual questions Difference
(Internal -External) p-value* Difference (Internal -External) p-value* Switching role 1,37 (0,000) -0,11 (0,752) Attain trainings 1,73 (0,000) 0,77 (0,003)
Support on the job 0,18 (0,374) 0,16 (0,552)
Professionalize 1,03 (0,000) 0,60 (0,031)
Learning from the job 1,12 (0,000) 0,68 (0,007)
Use knowledge and skills on the job 0,21 (0,312) 0,35 (0,170) *Significant level < 0,05
The pattern matrix in appendix III shows two components within expectation of career development with an Eigen value larger than 1. In the pattern matrix the component with the largest Eigen value show questions 9 and 12 have a factor loading smaller than 0.5. The Cronbach’s Alpha of the expectations within career development is 0.821. The Eigen value is indicating that by the theme 55 of the variance in the questions is explained. These two are high value which indicates that the items together present a useful measure for the theme career development.
The difference of the mean between internal and the external employees’ expectations within career development is significant. The hypothesis that internal employees differ from external employees on the expectation of career development can be accepted (hypothesis 1b).
The fulfillment regarding career development, shows all items have a high factor loading with only question 7 at 0.47, and therefore can together be regarded as one theme. The Cronbach’s Alpha is 0.832, and the Eigen value indicates that 57 percent
30 of variance in the questions is described by the theme. Fulfilment of career development can be regarded as one theme.
The fulfillment from regarding career development as a theme shows significant differences between internal and external employees. The hypothesis that internal and external employees value the fulfillment towards the theme career development different can be accepted. (hypothesis 2b)
Table4. Principal Component on Career development
K=6 Expected Fulfillment Eigen value 3,31 3,44 Cronbach’s Alpha* 0,821 0,832 Difference Difference (Internal -External) p-value** Difference (Internal -External) p-value** Career development 0,94 (0,000) 0,41 (0,036) * Cronbach’s Alpha Minumum value > 0,7
** Significant level < 0,05
4.1.3 Social atmosphere
The third theme of the psychological contract is social atmosphere. Social atmosphere has been measured with the following five questions: 13. Good atmosphere; 14. Working together; 15. Support from colleagues; 16. Being regarded as valuable; 17. Support from superiors. The table shows differences between internal and external employees’ expectations of social atmosphere were found to be significantly different, for three of the five questions. The differences between internal and external employees in questions 13 and 17 were not significant. External employees have some different expectations within the individual questions within the theme of social atmosphere.
Concerning the fulfillment of career development by the employer, internal and external employees show no significant differences at any question. According to external and internal employees there is no significant difference made regarding the questions about fulfillment of the obligations within the theme social atmosphere.
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Table5 Item Analysis on Social Atmosphere
Expected Fulfillment Individual questions Difference
(Internal -External) p-value* Difference (Internal -External) p-value* Good atmosphere 0,47 (0,053) 0,09 (0,731) Working together 0,57 (0,007) 0,23 (0,404)
Support from colleagues 0,55 (0,010) 0,12 (0,678)
Being regarded as valuable 0,82 (0,000) 0,10 (0,721)
Support from superior 0,26 (0,146) 0,14 (0,664) *Significant level < 0,05
The pattern matrix shows that for the expectations within the theme social atmosphere questions 13 till 17, at least three individual questions have a very high factor loading even larger than 0.8. Question 16 has a lower than 0.5 factor loading and 17 even has a negative loading. This indicates that these two questions within social atmosphere might not explain much of this component. The Cronbach’s Alpha of the expectations of social atmosphere is 0.841 and the Eigen value shows that the theme explains 62 percent of the variance in the questions.
When measuring the difference between the internal and external expectations of the theme social atmosphere a strong significant difference is shown. The hypothesis that internal and external employees differ regarding the expectation of social atmosphere can therefore be accepted. (hypothesis 1c)
Regarding the fulfillment of social atmosphere all values have a factor loading higher than 0.5. The Cronbach’s Alpha for the fulfillment of the theme is 0.852 and the Eigen value indicates 64 percent of the questions’ variance is explained by the theme. Social atmosphere can be regarded as one theme.
The difference of social atmosphere means between internal and external employees is not significant. The hypothesis that there is a difference between internal and external employees fulfilment of social atmosphere can therefore not be accepted. (hypothesis 2c)
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Table6. Principal Component on Social Atmosphere
K=5 Expected Fulfillment Eigen value 3,08 3,20 Cronbach’s Alpha* 0,841 0,852 Difference Difference (Internal -External) p-value** Difference (Internal -External) p-value** Social Atmosphere 0,54 (0,004) 0,14 (0,582) * Cronbach’s Alpha Minumum value > 0,7
** Significant level < 0,05
4.1.4 Organizational policy
The fourth theme to be described is the organizational policy. Organizational policy has been measured with the following seven questions: 18. Involved in decisions; 19. A rightful superior; 20. Feedback on work performance; 21. Clear and fair rules; 22. Being informed about company changes; 23. Open and clear communication; 24. Ethical policy regarding society. The differences between internal and external employees’ individual questions on expectations about organizational policy were found significant for the four questions 19, 20, 22 and 23. The other questions are not significant with the p<05 but are for p<0.1
Concerning the fulfillment of organizational policy, internal and external employees show no significant differences on any of the questions, with the exception of question 24. Only the regarded fulfillment concerning question 24 about ethical policy regarding society was significantly different for internal and external employees. The first item of fulfilment, about involvement in decisions, has a negative value. Indicating internal employees regard the employers’ fulfilment of getting involved in decisions lower than external employees do. The difference is too small to be significant.
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Table7. Item Analysis on Organizational Policy
Expected Fulfillment Individual questions Difference
(Internal -External) p-value* Difference (Internal -External) p-value* Involved in decisions 0,62 (0,082) -0,13 (0,688) A rightful superior 0,38 (0,036) 0,14 (0,613)
Feedback on job performance 0,52 (0,004) 0,17 (0,502)
Clear and fair rules 0,36 (0,059) 0,20 (0,501)
Being informed about company changes 0,69 (0,001) 0,38 (0,136)
Open and clear communication 0,46 (0,030) 0,06 (0,822)
Ethical policy regarding society 0,47 (0,053) 0,63 (0,017) *Significant level < 0,05
The pattern matrix in the appendix III shows that for the expectations within the theme organizational policy out of seven, four questions have a sufficient factor loading of 0.5. The Cronbach’s Alpha for the expectation of this theme is 0.741 and the Eigen value shows 44 percent of the variance in the items is explained by the theme. The expectation of organizational policy can be regarded as one theme. The difference between internal and external employees for the expectations of organizational policy is significant. The hypothesis can be accepted. (hypothesis 1d) Regarding the fulfillment of organizational policy by the employer three questions have a factor loading larger than 0.5. The Cronbach’s Alpha for this theme fulfillment is still 0.823 and the Eigen value indicates 49 percent of the variance is explained. The fulfilment of organizational policy can be regarded as one theme.
The difference between internal and external employees fulfillment of this theme is not significant. The hypothesis that the mean fulfilment of external employees is different from internal employees cannot be accepted. (hypothesis 2d)
Table8. Principal Component on Organizational Policy
K=7 Expected Fulfillment Eigen value 3,11 3,43 Cronbach’s Alpha* 0,741 0,823 Difference Difference (Internal -External) p-value** Difference (Internal -External) p-value** Orgnizational policy 0,50 (0,001) 0,21 (0,279)
* Cronbach’s Alpha Minumum value > 0,7 ** Significant level < 0,05
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4.1.5 Work-privacy balance
The fifth theme to be analyzed is the work and privacy balance. Work-privacy balance has been measured with the following four questions: 25. Regard for personal situations; 26. Working time and free time; 27. Working from home; 28. Flexibility in work and free time. The differences between internal and external employees’ expectations of work-privacy balance were found significantly different for all four questions.
Concerning the fulfillment of work-privacy balance by which internal and external employees measure the employer, there are no significant differences measured between the individual questions.
Table9. Item Analysis on Work Private Balance
Expected Fulfillment Individual questions Difference
(Internal -External)
p-value* Difference
(Internal -External)
p-value* Regard personal situation 1,00 (0,000) 0,28 (0,265)
Working time and free time 0,66 (0,001) 0,04 (0,862)
Working from home 0,99 (0,002) 0,23 (0,404)
Flexibility in work and free time 0,93 (0,001) 0,17 (0,502) *Significant level < 0,05
The pattern matrix for the expectation of work private balance is presented in appendix III. It shows that for the work and privacy balance, questions 25 till 28 all have a high factor loading on one component. The Cronbach's Alpha value is 0.845 and the Eigen value shows that the theme explains 69 percent of the variance in the questions. When analyzing the expectation of work-privacy balance as one theme, it is shown that there is a highly significant difference between internal and external employees regarding the expectation of work and privacy balance. (hypothesis 1e) The fulfillment of the work-privacy balance also has a very high factor loading for each answered question. Seemingly, the work-privacy balance can very well be measured with these questions. The Cronbach’s Alpha of the fulfillment of work privacy balance is 0.848 and the Eigen value indicates 70 percent of the variance in the questions is explained.
35 The fulfillment by the employer regarding the work and privacy balance shows no significant difference between internal and external employees. The hypothesis that there is a difference between the fulfilment of work-privacy balance cannot be accepted. (hypothesis 2e)
Table10. Principal Component on Work Private Balance
K=4 Expected Fulfillment Eigen value 2,77 2,79 Cronbach’s Alpha* 0,845 0,848 Difference Difference (Internal -External) p-value** Difference (Internal -External) p-value** Work private balance
0,90 (0,000) 0,18 (0,441)
* Cronbach’s Alpha Minumum value > 0,7 ** Significant level < 0,05
4.1.6 Rewards
The sixth theme to be discussed concerns the rewards. Rewards have been measured with the following five questions: 29. Job security; 30. Salary; 31. Performance rewards; 32. Remuneration for education; 33. Secondary agreements. The differences between internal and external employees’ expectations about rewards were found significantly different, for all five questions.
Concerning the fulfillment, the way in which internal and external employees rate their employer regarding rewards, only question 31 is not significantly different. There are significant different valuations by external and internal employees regarding the questions about fulfillment of rewards by the employer.
