Promises Made, Promises Broken: An Exploration of Employee Attraction and Retention Practices in Small Business
Kickul, Jill, Journal of Small Business Management
Entrepreneurial organizations have undergone substantial workforce changes and transformations during the last two decades in order to compete successfully on a global scale. The ability to attract and retain reliable and competent employees has become a key component in developing an effective and sustainable competitive advantage. The purpose of this study is to investigate the role of the psychological contract and the types of promises made and communicated by small business organizations to attract and retain their employees. From a sample of 151 employees within small businesses, the results demonstrate that perceived unfulfilled promises can have a considerable impact on workplace attitudes, commitment, and intentions to leave the organization. Implications and recommendations for small businesses as well as directions for future research are discussed.
While the tendency towards restructuring and globalization continue to be an integral part of the economic and employment landscape, entrepreneurial organizations are increasingly pressured to make rapid changes and accommodations to their workforce and employment policies (Cappelli 1999; Coffey, Cook, and Hunsaker 1994; Hitt 1998; Kreitner and Kinicki 1995). Underlying all of these changes is the fact that organizations of varying sizes and capabilities are finding that they must manage, renegotiate, and in some cases, violate the employment relationship or psychological contract that they have established with their employees (Rousseau 1995; Rousseau and McLean Parks 1993). Psychological contracts, in general, are the set of promises held by an individual employee about the terms of the exchange agreement between the employee and his/her organization (Rousseau 1989). For example, an employee may perceive that he/she has been promised competitive wages, promotional opportunities, job training, challenging an d meaningful work, and in return has promised to give the organization his/her energy, time, technical skills, and commitment. Unlike formal employee-employer contracts, the psychological contract is inherently perceptual, and therefore one party's interpretation of the terms and conditions of the obligations within the contract may not be shared by the other (McLean Parks and Schmedemann 1994; Rousseau 1995, 1998).
Objectives of the Study
The purpose of this study is to explore the role of the psychological contract within small businesses in order to better understand the type of inducements these businesses offer their employees to attract and retain their skills and expertise. While some research that has shown that large and small firms differ in terms of their employment and human resource management (HRM) practices (Aldrich and Langton 1997; Deshpande and Golhar 1994; Ng and Maki 1993; Morissette 1993), previous work in the psychological contract area (for example, Robinson 1996; Rousseau 1989; Rousseau and Tijoriwala 1998) has not specifically addressed the types of promises small firms may convey to their employees. These promises, based on employees' perceptions, can influence an employee's future performance and intrapreneurial behavior that extends beyond an employee's job or role requirements (Robinson 1996; Robinson and Morrison 1995). Because small firms tend to have personalized and informal human resource practices (Aldrich and Auster 1986; Aldrich and Langton 1997), the explicit and implicit promises these organizations make in order to appeal to their employees takes on added significance.
Additionally this study also examined how unfulfilled employer promises influence employees' attitudes and intentions to leave the small firm. As discussed by Baker and Aldrich (1999), Deshpande and Golhar (1994), Hornsby and Kuratko (1990), and Stevenson et al. (1999), the selection and retention of a competent and qualified workforce is a vital and important issue in managing and operating a small business. The ability to adequately provide competitive compensation, employee participation initiatives, and effective training and development are some of the critical factors associated with the effective and efficient operations of a small firm (Golhar and Deshpande 1997; Hornsby and Kuratko 1990). By examining the psychological contract and the attitudinal outcomes (negative affect toward the firm, commitment, and intentions to leave) that can occur when perceived promises are not fulfilled, researchers and practitioners in the entrepreneurship field may be better able to recommend how to establish an effecti ve employee-employer relationship. The formation of this exchange relationship begins during the recruitment and selection process and continues throughout an employee's tenure with a small business organization.
Promised Inducements: The Psychological Contract
Earlier studies by Argyris (1960), Levinson et al. (1962), Schein (1965), and Kotter (1973) argue that the psychological contract is conceptually different from both a formal and an implied contract in that it considers an individual's beliefs about the terms and conditions of an agreement between the individual and his/her employer. This concept of the relationship between an employee and his/her organization has been accepted and noted in many different forums, including academic journals (Guzzo, Noonan, and Elron 1994; Morrison and Robinson 1997; Robinson, Kraatz, and Rousseau 1994), practitioner journals (Ehrlich 1994; Sims 1994; Wilhelm 1994), and management textbooks (KoIb, Osland, and Rubin 1995; Makin, Cooper, and Gox 1996; Schein 1980).
The types of promises in an employee's contract can be explicitly or implicitly communicated in several ways: written document, oral discussion, or organizational practices and procedures (Rousseau 1989; Rousseau and Greller 1994; Rousseau and McLean Parks 1993; Sims 1994). Because of the pervasive norms of reciprocity that are a part of any exchange agreement between an individual and his/her organization (Rousseau 1989), an individual often expects, seeks out, and creates a psychological contract as a means of understanding and representing the employment relationship with the employer (Shore and Tetrick 1994). For example, employees may perceive that their firm has promised them fair pay, attractive benefits, opportunities for growth, advancement, a supportive work environment, and sufficient tools and resources (Rousseau and Tijoriwala 1998). While large firms may have the resources to promise their employees the opportunity for career development and advancement in specialized roles and jobs, small firms may offer their employees the opportunity to learn a broad set of skills and abilities across multiple functions and areas of the organization (Aldrich and Auster 1986; Aldrich and Langton 1997).
When Small Firms Break Their Promises: Psychological Contract Breach
When breaches or violations occur within an employee's psychological contract, it can be experienced as a unique form of distributive injustice, as a variety of unfulfilled promises can deprive the employee of desired outcomes and benefits (Robinson and Morrison 1995; Robinson and Rousseau 1994). From an equity theory perspective, individuals try to find an equitable balance between what they receive from the organization and their own contributions. When employees perceive that their employer has failed to fulfill promised inducements, they may withhold their own designated contributions (Robinson and Morrison 1995).
Robinson and Rousseau (1994) found that approximately 55 percent of employees believed their psychological contract had been breached or violated by their organization during the past two years. In the same study, the authors examined the impact that psychological contract breach can have on the employment relationship. Employee trust and satisfaction were negatively related to violations of the psychological contract. In addition, violations were positively related to actual turnover. Robinson (1996) found moderate relationships between specific breaches and trust, civic virtue, performance, and intentions to remain with the organization. Pay based on current level of performance, training, career development, and responsibility were associated with trust. High pay, training, and development were all related to extra-role behavior. Promotion and responsibility were associated with actual turnover, while development was related to job performance. In a more recent study by Shore and Barksdale (1998), employee s had higher levels of perceived organizational support, commitment, and lower levels of turnover intentions when their employment relationships were characterized by mutual high obligations (both employee and employer obligations were consistently perceived to be high).
According to Morrison and Robinson (1997, p. 230), perceived contract breach "represents a cognitive assessment of contract fulfillment that is based on an employee's perception of what each party has promised and provided to the other." When employees perceive that their psychological contract has been breached, they feel deceived and mistreated, and these feelings can have a pervasive impact on the relationship between the individual and his/her employer (Rousseau 1989). Unfulfilled promises or breaches of the psychological contract deny individuals desired outcomes, an issue of outcome fairness often related to perceptions of inequity.
These perceptions of inequity can cause employees to have intense attitudinal and behavioral reactions toward their employer (Morrison and Robinson 1997; Rousseau and McLean Parks 1993; Robinson, Kraatz, and Rousseau 1994). When employees perceive that their company has failed to fulfill its promised inducements (for example, competitive salary, increasing responsibilities, challenging and interesting work, opportunities for training and development), they often feel anger, frustration, and resentment, resulting in particularly adverse attitudes toward the firm. These negative feelings toward the small firm often translate into lower levels of commitment to the organization. Because commitment is often conceptualized within an exchange perspective (Meyer, Allen, and Smith 1993), any discrepancies in contract fulfillment may lead to decreased loyalty and commitment since a breach indicates to employees that the firm does not value and appreciate their performance contributions. They will often balance the equi ty in the exchange relationship by decreasing their commitment to the organization. Finally, employees who feel that the firm has broken an exchange agreement are much more likely to repudiate their side of the contract and consider leaving the firm for other employment opportunities.
Given the preceding arguments, the following hypotheses were proposed for this study:
[H.sub.1]:Psychological contract breach will be positively related to an employee's negative affect toward the small firm.
[H.sub.2]:Psychological contract breach will be negatively related to an employee's commitment to the small firm.
[H.sub.3]:Psychological contract breach will be positively related to an employee's intentions to leave the small firm.
Although there is generally no acceptable definition that differentiates small and large firms, this study relied on the U.S. Small Business Administration (SBA) definition of a small business, that is, an organization employing fewer than 500 employees. Participants were 151 full-time employees from a variety of small business organizations. These employees were enrolled in a part-time Master of Business Administration (MBA) program at a large, Midwestern university Of the 151 participants, 44 percent were male and 56 percent were female. The average age was 29.41 years, and the average tenure of employment within the respective organizations was 3.86 years. Approximately 81 percent were Caucasian, five percent were Hispanic or Puerto Rican, eight percent were Asian or Pacific Islander, and six percent were African-American. Participants had worked in an average of 3.04 organizations before joining their current employer. Over 29 percent of the respondents (n = 44) were in supervisory positions. The distribu tion of firm type was as follows: professional services, 37 percent; finance, insurance, and real estate, 21 percent; personal services, 17 percent; manufacturing, 12 percent; retail trade, 9 percent; transportation, three percent; and construction, 1 percent. The average age of the small business organization was 19.43 years, with a mean size of 154.54 employees. Employees came from a variety of occupational fields including: finance and banking, sales and marketing, computer science, accounting, engineering, and organizational consulting.
Overview and Procedure
All participants were told that the purpose of the research study was to better understand the relationship between an employee and his/her small business organization. In their questionnaire, employees were asked to provide their beliefs about the promises their organization has made to them (assessment of their psychological contract) and their work-related attitudes (negative affect, commitment, and intentions to leave).
Psychological Contract. Participants were asked to indicate those obligations that the organization has promised to them.  It was explained that these obligations may have been communicated to them explicitly (verbally or in writing) or implicitly (simply implied through other statements or behaviors). This set of items was adopted from Kickul (in press) and includes the following promises: competitive salary, health care benefits, adequate equipment to perform job, challenging and interesting work, increasing responsibilities, and opportunities for promotion and advancement.
After specifying the promises that the organization has made to them, respondents were asked to indicate how well their organizations have fulfilled each of those promises. Participants were asked to indicate the extent to which their employer fulfilled each of the marked promises, using a five-point Likert scale (from 1 = "not at all fulfilled" to 5 = "very fulfilled"). All rated items were then reverse coded in order to represent psychological contract breach.
In order to better understand the underlying factors in the psychological contract, the data were submitted to a factor analysis using principal factors extraction with varimax rotation. The data were those promises coded as 0 (not promised) or 1 (promised) prior to rating the extent of fulfillment. A five-factor solution resulted from the interpretation of the scree plot. Although the first factor accounted for 28.64 percent of the variance, the other four factors accounted for an additional 24.87 percent and each had a eigenvalue greater than 1.0. In this five-factor solution, three items failed to load over the .40 on any of the factors and were therefore dropped from further analyses. Table 1 displays the final results. Factor 1 (nine items), autonomy and growth, measures those promises related to having meaningful work, challenging and interesting work, autonomy and control, and the opportunity to develop new skills. Factor 2 (four items), benefits, assesses those promises related to many of the benefits offered by organizations including health care, vacation, and retirement. Factor 3 (five items), rewards and opportunities, measures those promises associated with pay and bonuses and opportunities for promotion and advancement. Factor 4 (three items), job security and work responsibilities, measures those promises related to having defined job responsibilities and job security with the organization. Finally, factor 5 (two items), assesses those promises associated with having adequate resources and equipment to carry out the role requirements of the job. Gronbach's alpha (internal consistency) for the five psychological contract scales was .85, .81, .74, .72, and .76, respectively.
A composite score for each of the five factors was then formed by taking the sum of the ratings within each factor and dividing this total by the number of promises marked within that particular factor. For example, for the autonomy and growth factor, if an employee rated five breach items and the sum of these ratings totaled 22, then this employee's composite score on this factor would equal 4.40 (22/5 = 4.40).
Negative Affect toward the Small Firm. The negative affect subscale of Job Affect Scale (JAS; Brief, Burke, George, Robinson, and Webster 1988) was used to measure an employee's negative affect. Sample items of the JAS include angry, frustrated, spiteful, distressed, disappointed, and hostile. For each of the 14 items in JAS, participants were asked to indicate how they felt toward their small business on a five-point Likert scale (from 1 "very slightly or not at all" to 5 = "very much"). Cronbach's alpha of this subscale was .94.
Commitment. The affective commitment subscale from Meyer, Allen, and Smith (1993) was used to measure commitment to the small firm. Sample items include "I would be very happy to spend the rest of my career with my organization," and "I do not feel a strong sense of 'belonging' to my organization" (reverse scored). Responses were indicated on a seven-point Likert scale (from 1 = "strongly disagree" to 7 = "strongly agree"). This six-item measure had a Cronbach's alpha of .85.
Intentions to Leave. Intentions to leave the small firm were measured using a three-item scale from Meyer, Allen, and Smith (1993). Responses to the items were made on a seven-point scale (from 1 = "strongly disagree" to 7 = "strongly agree"). The Gronbach's alpha was .87 for this scale.
Control Variables. This study included several control variables that could influence many of the attitudes examined in this study. Previous work has found breach perceptions and employee attitudes to be significantly related to a number of demographic and position variables (Robinson 1996; Rousseau 1995). Thus, individual age, tenure, and supervisory status were included as control variables in the prediction of breach perceptions and employee attitudes.
Promises Made: Psychological Contract in Small Firms
In order to understand the type of promises small businesses make to their employees, an analysis of the frequencies and descriptives of the psychological contract factors was performed at the item level. Table 2 displays the five-factor scale and each item's n size, mean, and standard deviation. Some of the promises reported by many of the employees included benefits, opportunities for promotion and advancement, increasing responsibilities, opportunities for personal growth, opportunity to develop new skills, and pay and bonuses tied to performance. Many of these items also happened to be some of the most highly rated contract breach items (for example, opportunities for promotion and advancement, pay and bonuses tied to performance, and opportunities for personal growth).
Promises Broken: Relating Psychological Contract Breach to Employee Attitudes
The means, standard deviations, zero-order intercorrelations, and internal consistency for the measures are reported in Table 3. Internal consistency reliabilities were above .70, as recommended by Churchill (1979) and Nunnally (1978). With the exception of the psychological contract breach factor "benefits," all other four factors were significantly related to negative affect and intentions to leave. Autonomy and growth, rewards and opportunities, and job security and work responsibilities were negatively associated with commitment.
Hierarchical multiple regression was used to examine the relationships between contract breach and work-related attitudes. In the first step, each dependent variable was regressed only on the control variables. In the second step, each of the psychological contract breach factors was added to the equation. Tests were completed to see if the assumptions for the regression analyses were met. Residuals were examined for magnitude, normality, homoscedasticity, and linearity after each step (Cohen and Cohen 1983; Tabachnick and Fidell 1989). No violations of these assumptions were identified. With a p [less than] .001 criterion for Mahalanobis distance, there were no outliers among the cases (Cohen and Cohen 1983).
Table 4 depicts the results of the predictors (control variables and breach factors) for negative affect toward the small firm, commitment, and intentions to leave. The table displays the standardized regression coefficient ([beta] represents those values when the control variables and breach factors have all been added to the equation). The table also shows the F-statistic, amount of variance accounted for after each step ([R.sup.2]), and the incremental variance accounted for ([[delta]R.sup.2]) between the first step (control variables) and the second step (breach factors).
This analysis found support for the hypothesized relationships between specific contract breaches and employee work-related attitudes. More specifically, for the first hypothesis, which proposed that contract breach was positively related to negative affect, the contract breach factors of autonomy and growth, rewards and opportunities, and job security and work responsibilities were significantly related to negative affect toward the small firm ([beta]= .22,.32, and .18, respectively). As for the second hypothesis, which posits a negative relationship between contract breach and commitment, both autonomy and growth as well as rewards and opportunities were associated with commitment ([beta] = -.36 for both predictors). Finally, in testing the third hypothesis, which posits a positive relationship between contract breach and intentions to leave, the breach factors of autonomy and growth, and rewards and opportunities were found to be positively related to intentions to leave the small firm ([beta]=.22 and .34, respectively).
The purpose of this study was to explore the role of the psychological contract and the types of promises small businesses have communicated, explicitly or implicitly, to attract and retain skilled employees. From the employee's perspective, previous research has not specifically investigated the type of inducements these businesses communicate to their employees to appeal to their employees' needs, aspirations, and motivations. While respondents reported promises made that may satisfy an employee's extrinsic needs (pay and bonuses tied to performance, and benefits), results indicate that there was a substantial number of promises perceived that may fullfill an employee's intrinsic needs (increasing responsibilities and opportunities for personal growth). In small firms, many of these promises may not be made explicit through the kinds of formal HRM procedures (employee handbooks) that are often standard in large organizations (Aldrich and Auster 1986; Aldrich and Langton 1997), but rather are conveyed throug h oral discussion and interaction with various members of the firm. Instead of having explicit job assignments, job descriptions, and training programs that are traditionally seen within large organizations (Aldrich and Auster 1986; Aldrich and Langton 1997), small firms and their founders may rely on informal techniques to communicate their organizational benefits and rewards to guide and assist employees in understanding their psychological contract with the small business.
The results also demonstrate that perceived unfulfilled promises can have a considerable impact on workplace beliefs and behavioral intentions to leave the organization. More specifically, when the promises related to autonomy and growth and rewards and opportunities were breached, an employee was more likely to report negative feelings and attitudes toward the small business, lower levels of commitment, and greater intentions to leave the small business. Employees who felt that the organization failed to give them challenging and interesting work, freedom to be creative, opportunities to develop new skills, and autonomy and control were more likely to be express negativity and lack of loyalty toward their employer. The feelings of anger, frustration, hostility, and disappointment were many of the emotions felt by employees due to these perceived breaches in their psychological contract. These adverse feelings and beliefs were also seen when the employees did not receive opportunities for promotion and advanc ement, pay and bonuses tied to their performance, as well as job and professional training.
Many of the unfulfilled promises identified are similar to those regarded by small firm owners as being critical to building a quality workforce and organization (Golhar and Deshpande 1997; Hornsby and Kuratko 1990). Since the employees felt they could no longer depend on the small firm for its promised inducements, they also tended to have lower feelings of identification with and attachment to their employer. By lowering their levels of commitment, employees are balancing equity in the exchange relationship. Finally employees demonstrated less loyalty to remain with their employer and felt the need to explore other avenues of employment following contract breaches related to having meaningful work and opportunities for personal and professional growth as well as being recognized for their accomplishments. Then employees leave, it can cost the small firm a great deal in terms of time, support resources, and capital to find competent and qualified individuals who can immediately assist in the operations and g rowth of the firm.
Implications and Recommendations for Small Businesses
By examining the psychological contract, this study was also able to incorporate a global assessment of those promises small businesses offer to their employees. The final measure of the psychological contract included 23 items--conveyed either explicitly or implicitly--aimed at tapping all of the various promises these businesses can make to their employees. For small firms in which employees may be given a fair amount of job autonomy and discretion, it may become impossible to formalize in advance all work requirements and arrangements. By allowing employees the opportunity to rate perceived promises made by their organizations, this study was able to capture a comprehensive and meaningful set of obligations that extends beyond the traditional employment contract.
From an organizational development perspective, when an aspect of the psychological contract is breached, both procedural and interpersonal remedies may be utilized to restore or reduce some of the adverse consequences for the small firm (Morrison and Robinson 1997; Rousseau 1995). Remedies to re-establish a relationship may include instituting communication mechanisms that inform employees how decisions and fulfillment of promises are made and implementing procedures that allow employees to challenge or appeal job decisions made by the firm. Moreover, the supervisory and managerial personnel within small businesses should receive guidance on giving employees adequate justification and explanations on all determined decisions and on dealing with their employees with dignity and respect throughout the entire decision process.
Additionally, small firms should focus more energy on openly communicating to employees what they can reasonably expect in terms of organizational inducements and practices. Implementing many of the principles of open-book management (Case 1996; McCoy 1996) is not only critical to helping an employee understand his or her role in the firm, but can also be used to empower and motivate employees toward the common goal and strategy of the small firm (Davis 1997). By sharing a broad array of organizational information (for example, promises and obligations, as well as financial and marketing practices), the small firm is helping its employees recognize their contribution and significance to the success of the business. In addition, a firm employing open-book management will also be able to provide better explanations when its ability to fulfill psychological contract obligations is negatively impacted by factors that may be beyond the firm's control (for example, market, industry, and competition reasons; see Mor rison and Robinson 1997; Rousseau 1995).
Finally, small business organizations should attempt to manage employment promises by giving realistic information concerning an employee's job/position within the company (Wanous 1973, 1980). This information should be made salient to the individual throughout the employee's tenure in the firm, beginning during the recruitment and selection process. By communicating to employees those promises that may typically be found in small firms, such as increasing responsibilities and opportunities to learn new skills, small firms may be better able to find, develop, and retain competent employees who may be better suited for these types of employment challenges and possibilities.
A recent meta-analysis by Phillips (1998) found that employees who were given realistic job previews prior to hiring were less likely to withdraw themselves from the selection process than those not receiving such previews and were also less likely to leave the organization once hired. Phillips was also able to calculate the dollar value of utilizing realistic job previews to reduce voluntary turnover. Since the mean correlation between realistic job previews and turnover was --.09, she calculated that a business with an annual job survival rate of 50 percent could make 17 fewer new hires per year per 100 retained workers if it implemented realistic job previews. By taking the estimated average cost per hire in 1996 of $4,183, Phillips calculated an organizational savings of $71,111 in voluntary turnover costs (per 100 retained workers) as a result of using realistic job previews. Given these findings, small business organizations may want to re-evaluate their recruitment policies and procedures to see whethe r they allow the applicant to fully understand the type of job, work-group, organization, and employment relationship that they can anticipate. The costs associated with using realistic job information is minimal and could be utilized by a small business to not only reduce turnover, but also to increase employee satisfaction and performance (Wanous 1980; Phillips 1998). Additionally, by giving realistic information, the small firm could set the foundation for employment practices that assist the small firm in achieving its strategic goals (Baker and Aldrich 1999).
Limitations and Directions for Future Research
One of the limitations of this research study is that the relationship between the predictors (contract breach factors) and attitudes and behavioral intentions include common method variance. These predictors and beliefs were taken from one source (the employee), so the correlations found could be attributed to a response bias on the part of the employee. Further work should incorporate perspectives from other employees in the organization, including co-workers, team members, and managers. Other employee perspectives and viewpoints would be useful in under-standing the role that unfulfilled contracts have in determining employees' feelings, commitment, and behavior toward the small firm. Moreover, the study was a cross-sectional study, yet the relationships suggest causal direction. Causal inferences created from cross-sectional designs are only inferences (Spector 1981). Further longitudinal studies are needed to establish causal direction among the relationships investigated in this study. For example, in a longitudinal study, it may be possible to observe over time if contract breach measured at one point is associated with negative beliefs and outcomes at a later point. This approach would be more powerful than the cross-sectional design in detecting the effects of unmet employer obligations and the deteriorating employment relationship between the employee and his/her organization. In addition, a longitudinal study would be able to further examine the changing nature of the psychological contract throughout an employee's tenure, with emphasis on management's policies and reactions to maintain equity and fairness in the exchange agreement.
While the concept of the psychological contract has grown in acceptance in both the workplace and the literature, this study also sought to identify many of the underlying dimensions and factors of this construct. Rousseau and Tijoriwala (1998) have called for further methodological development and the use of alternative methods of operationalizing psychological contracts. Although this study was able to identify five psychological contract factors, more work is needed to refine and validate these factors (for example, the two-item work facilitation factor) in order to better understand employer promises exchanged within the context of the small firm employment relationship.
Additional work should also investigate the founder's or leader's role in determining how human resource practices and policies are communicated and expressed to new recruits and organizational members. For example, in a founder-led and/or family business, the various ways in which the small firm conveys its promises to its employees may be more personalistic, with less emphasis on formal and standardized methods and techniques (for example, conversations with the founder, family members, and co-workers). Conversely, small firms with a hired CEO may have organizational systems and processes in place (human resource manuals and job descriptions, for example) that are consistent with the CEO's management experience, style, and operating strategy. Managing an employee's psychological contract may be less complicated in this type of small firm since new employees would have explicit guides to assist them in the socialization process.
Although this study did focus on an employee's perception of the psychological contract with his/her small business, further investigation should examine the role of the organization and its environment. Shore and Tetrick (1994) argue that "the psychological contract is an inherently subjective phenomenon, in part due to individual cognitive and perceptual limits, but also because there are multiple sources of information which may influence the development and modification of contracts" (p. 92). It may be useful to incorporate such characteristics of the small business as its overall business strategy, human resource policy and practices, and organizational culture/climate to understand how they are associated with an employee's perception of the psychological contract.
As the current trend moves toward restructuring in response to increased competition and globalization, small businesses should also consider the management of the psychological contract to be a critical component of their human resource strategy in building a sustainable competitive advantage (Rousseau 1995; Rousseau and Greller 1994). Given the negative ramifications of breaching a psychological contract with an employee, it is important that both entrepreneurship researchers and practitioners understand the adverse employee consequences and outcomes. Because of the rapid economic and organizational changes facing small business today one of the many challenges is preserving a positive employment relationship, which can be an integral part of managing and operating a successful small business organization.
Dr. Kickul is assistant professor of management in the Charles H. Kellstadt Graduate School of Business at DePaul University in Chicago, Illinois. Her research interests include entrepreneurial intentions and behavior, intrapreneurship and innovation, and entrepreneurial strategy and growth.
(1.) Questionnaire available from author upon request.
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Table 1 Principal Factors Extraction with Varimax Rotation Variable Autonomy and Benefits Growth Meaningful work .68 Challenging and interesting work .65 Participation in decision-making .61 Freedom to be creative .54 Opportunity to develop new skills .53 Increasing responsibilities .52 A job that provides autonomy and control .51 Recognition of my accomplishments .46 Career guidance and mentoring .43 Health care benefits .84 Vacation benefits .80 Retirement benefits .72 Tuition reimbursement .50 Opportunities for promotion and advancement Opportunities for personal growth Pay and bonuses tied to performance Job training Continual professional training Well-defined job responsibilities A reasonable workload Job security Adequate equipment to perform job Enough resources to do the job Eigenvalue 7.44 2.76 Variable Rewards and Opportunities Meaningful work Challenging and interesting work Participation in decision-making Freedom to be creative Opportunity to develop new skills Increasing responsibilities A job that provides autonomy and control Recognition of my accomplishments Career guidance and mentoring Health care benefits Vacation benefits Retirement benefits Tuition reimbursement Opportunities for promotion and .70 advancement Opportunities for personal growth .47 Pay and bonuses tied to performance .44 Job training .41 Continual professional training .40 Well-defined job responsibilities A reasonable workload Job security Adequate equipment to perform job Enough resources to do the job Eigenvalue 1.40 Variable Job Security and work Responsibilities Meaningful work Challenging and interesting work Participation in decision-making Freedom to be creative Opportunity to develop new skills Increasing responsibilities A job that provides autonomy and control Recognition of my accomplishments Career guidance and mentoring Health care benefits Vacation benefits Retirement benefits Tuition reimbursement Opportunities for promotion and advancement Opportunities for personal growth Pay and bonuses tied to performance Job training Continual professional training Well-defined job responsibilities .64 A reasonable workload .46 Job security .43 Adequate equipment to perform job Enough resources to do the job Eigenvalue 1.27 Variable Work Facilitation Meaningful work Challenging and interesting work Participation in decision-making Freedom to be creative Opportunity to develop new skills Increasing responsibilities A job that provides autonomy and control Recognition of my accomplishments Career guidance and mentoring Health care benefits Vacation benefits Retirement benefits Tuition reimbursement Opportunities for promotion and advancement Opportunities for personal growth Pay and bonuses tied to performance Job training Continual professional training Well-defined job responsibilities A reasonable workload Job security Adequate equipment to perform job .76 Enough resources to do the job .57 Eigenvalue 1.04 Table 2 Frequencies, Means, and Standard Deviations of Psychological Contract Factors Psychological Contract Items n Mean Autonomy and Growth Meaningful Work 79 2.16 Challenging and interesting work 90 2.37 Participation in decision-making 79 2.54 Freedom to be creative 84 2.43 Opportunity to develop new skills 99 2.46 Increasing responsibilities 103 2.21 A job that provides autonomy and 63 2.37 control Recognition of my accomplishments 85 2.68 Career guidance and mentoring 54 2.96 Benefits Health care benefits 117 1.97 Vacation benefits 122 1.84 Retirement benefits 100 2.06 Tuition reimbursement 76 2.09 Rewards and Opportunities for promotion and 92 2.83 Opportunities advancement Opportunities for personal growth 102 2.55 Pay and bonuses tied to performance 92 2.64 Job training 73 2.66 Continual professional training 90 2.51 Job Security and Work Well-defined job responsibilities 80 2.66 Responsibilities A reasonable workload 71 2.56 Job security 61 2.26 Work Facilitation Adequate equipment to perform job 89 2.20 Enough resources to do the job 90 2.47 Factors Standard Deviation Autonomy and Growth 1.13 1.10 1.15 1.17 1.19 1.12 1.08 1.09 1.37 Benefits 0.99 0.94 1.14 1.32 Rewards and 1.21 Opportunities 1.24 1.18 1.18 1.11 Job Security and Work 1.18 Responsibilities 1.33 1.26 Work Facilitation 0.93 1.06 Note: Means and standard deviations are based on those participants who had indicated that these items had been promised to them by their small business (n). Scale items are based on a five-point Likert scale (1 = "not at all fulfilled"; 5 = "very fulfilled"). Items were then reverse-scored to represent psychological contract breach. Table 3 Descriptive Statistics, Correlations, and Reliabilities Variable Mean SD 1 2 3 4 1. Age 29.41 7.73 (--) 2. Tenure in Organization 3.86 4.91 0.64 (--) 3. Supervisory Status 0.29 0.46 0.15 0.14 (--) 4. Autonomy and Growth 2.44 0.87 0.13 0.15 0.19 (.85) 5. Benefits 1.97 0.82 0.04 0.10 0.11 0.08 6. Rewards and Opportunities 2.64 0.97 0.15 0.13 0.06 0.65 7. Job Security and 2.49 1.12 0.09 0.12 0.03 0.44 Work Responsibilities 8. Work Facilitation 2.34 0.96 0.23 0.03 0.09 0.31 9. Negative Affect 2.12 0.94 -0.17 0.05 0.05 0.47 10. Commitment 4.12 1.36 0.14 0.10 0.15 -0.41 11. Intentions to Leave 3.78 1.96 -0.19 0.03 0.02 0.41 Variable 5 6 7 8 9 1. Age 2. Tenure in Organization 3. Supervisory Status 4. Autonomy and Growth 5. Benefits (.81) 6. Rewards and Opportunities 0.24 (.74) 7. Job Security and 0.23 0.45 (.72) Work Responsibilities 8. Work Facilitation 0.26 0.40 0.49 (.76) 9. Negative Affect 0.03 0.50 0.46 0.29 (.94) 10. Commitment -0.04 -0.49 -0.33 -0.13 -0.61 11. Intentions to Leave 0.06 0.45 0.24 0.17 0.68 Variable 10 11 1. Age 2. Tenure in Organization 3. Supervisory Status 4. Autonomy and Growth 5. Benefits 6. Rewards and Opportunities 7. Job Security and Work Responsibilities 8. Work Facilitation 9. Negative Affect 10. Commitment (.85) 11. Intentions to Leave -0.64 (.87) Note: n = 151. All correlations above .30 are significant at .01 level while correlations above .16 are significant at .05 level. Where appropriate, internal consistency reliabilities (Cronbach's alpha) are provided along the diagonal in parentheses. Table 4 Summary of Hierarchical Regression Analysis for Psychological Contract Breach Factors Predicting Negative Affect, Commitment, and Intentions to Leave the Small Firm Variable Negative Affect [beta] [R.sup.2] Step 1: Control Variables Age -.37 [***] Tenure .14 Supervisory Status .14 .06 Step 2: Psychological Contract Beach Factors Autonomy and Growth .22 [*] Benefits .07 Rewards and Opportunities .32 [***] Job Security and Work Responsibilities .18 [*] Work Facilitation .06 .38 Variable [delta][R.sup.2] F Step 1: Control Variables Age Tenure Supervisory Status 3.14 [*] .32 [***] Step 2: Psychological Contract Beach Factors Autonomy and Growth Benefits Rewards and Opportunities Job Security and Work Responsibilities Work Facilitation 10.84 [***] Variable Dependent Variables Commitment [beta] [R.sup.2] Step 1: Control Variables Age .12 Tenure .16 Supervisory Status .11 .01 Step 2: Psychological Contract Beach Factors Autonomy and Growth -.36 [***] Benefits -.16 Rewards and Opportunities -.36 [***] Job Security and Work Responsibilities -.16 Work Facilitation -.02 .45 Variable [delta][R.sup.2] F Step 1: Control Variables Age Tenure Supervisory Status .26 .44 [***] Step 2: Psychological Contract Beach Factors Autonomy and Growth Benefits Rewards and Opportunities Job Security and Work Responsibilities Work Facilitation 5.90 [***] Variable Intentions to Leave the Organization [beta] [R.sup.2] Step 1: Control Variables Age -.33 [***] Tenure .12 Supervisory Status .04 .05 Step 2: Psychological Contract Beach Factors Autonomy and Growth .22 [*] Benefits .07 Rewards and Opportunities .34 [***] Job Security and Work Responsibilities .04 Work Facilitation .02 .30 Variable [delta][R.sup.2] F Step 1: Control Variables Age Tenure Supervisory Status 2.37 .25 [***] Step 2: Psychological Contract Beach Factors Autonomy and Growth Benefits Rewards and Opportunities Job Security and Work Responsibilities Work Facilitation 7.63 [***] n = 151. [delta][R.sup.2] = is the incremental variance explained between each step. (*)p[less than].05 (**)p[less than].01 (***)p[less than].001…
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Publication information: Article title: Promises Made, Promises Broken: An Exploration of Employee Attraction and Retention Practices in Small Business. Contributors: Kickul, Jill - Author. Journal title: Journal of Small Business Management. Volume: 39. Issue: 4 Publication date: October 2001. Page number: 320. © 2002 Journal of Small Business Management. COPYRIGHT 2001 Gale Group.
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