Communicating the psychological contract:

an employer perspective
David E. Guest, Kings College, London and
Neil Conway, Birkbeck College, University of London
Human Resource Management Journal, Vol 12 No 2, 2002, pages 22-38

The concept of the psychological contract, with its focus on the exchange of perceived
p romises and commitments, is increasingly used as a framework to study the
employment relationship. Yet re search has predominantly focused on employee views
and has largely neglected the organisational perspective and the management of the
psychological contract. This article begins to redress the balance by reporting a study,
based on a survey of 1,306 senior HR managers, that explores the management of the
psychological contract and in particular the role of organisational communication.
T h ree distinct and relevant aspects of organisational communication are identified,
concerned with initial entry, day-to-day work and more future-oriented, top-down
communication. Effective use of these forms of communication is associated with what
managers judge to be a clearer and less frequently breached set of organisational
promises and commitments, as well as with a fairer exchange and a more positive
impact of policies and practices on employee attitudes and behaviour. The ndings are
discussed within the context of the wider literature on psychological contracts,
organisational culture and HRM. The study con rms that the psychological contract
offers managers a useful framework within which to consider and manage the
employment relationship.
C ontac t: David E. Guest, Management Centre, Kings College London, 150
Stamford Street, London SE1 9NN. Email: david.guest@kcl.ac.uk

`T

he management of psychological contracts is a core task for rms that attempt to

develop people-building rather than people-using organisations in an
organisational climate characterised by trust (Schalk and Rousseau, 2001). This
plausible assertion presents a challenge for organisations, since the same authors also assert
that: `The organisation cannot be considered as a single party to the psychological contract
and it does not always speak with one voice (op cit). This raises a number of intriguing
questions about how organisations do in fact seek to manage the psychological contract and
in particular whether they try to use communication mechanisms that promote a single
organisational `voice or whether they accept that this is not feasible.
The concept of the psychological contract is not new but it has been used increasingly in
recent years as a framework within which to study aspects of the employment relationship.
One reason for this is that it provides an analytic framework that can be applied in nonunion and union settings and at diffe rent levels in the organisation. There is no clear
consensus on the de nition of the psychological contract (for a discussion of this, seeGues t,
1998). However, most researchers accept that it should be viewed as a two-way exchange of
perceived promises and obligations. Slightly adapting a de nition provided by Herriot and
Pemberton (1997), we therefore de ne the psychological contract as `the perceptions of both
parties to the employment relationship organisation and individual of the reciprocal
promises and obligations implied in that relationship.
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David E. Guest and Neil Conway

As Schalk and Rousseau (2001) suggest, there are interesting issues about who speaks
for the organisation. There are also questions about how feasible it is to draw a clear line
between expectations, promises and obligations.
The issues are wider than the management of the psychological contract, presenting a
challenge to the way we conceptualise and seek to manage employment relations as well
as organisational climates and cultures. Martin (1992), in her analysis of organisational
culture, draws a distinction between academic perspectives that emphasise integration,
differentiation and fragmentation. The idea of `managing organisational culture can be
associated with an integrationist perspective and the belief that a single view, based
perhaps on shared corporate values and an accepted vision and mission statement, can
be sought. Some have suggested, largely on empirical grounds, that this is unreali stic,
that some degree of differentiation on the basis of criteria such as corporate division or
interest group is inevitable and that management of organisational culture should start
from this viewpoint. The third perspective fragmentation is even less optimistic about
the feasibility of managing organisational culture because it views culture as myriad
complex relationships. This perspective may well come close to common views of the
range of psychological contracts that can exist between each individual and his or her
boss who, in this context, represents the organisation. Yet we might expect that the idea
of managing the contract will at least mirror the management of culture in tempting
senior management to seek a degree of integration.
Support for nding some integration through organisational communication can be
found in the research by Smidts et al (2001) who demonstrate that a construct they term
`communi cation climat e plays an import ant role in fostering org a n i s a t i o n a l
iden ti cation. This is concerned with the way in which information is communicated
and they nd, at least with respect to organisational identi cation, that it is the process
rather than the content of communication that is more important. Building on earlier
work on organisational identification by Ashforth and Mael (1989) and Dutton et al
(1994), Smidts et al argue that extensive top-down communication and use of multiple
channels of communication are likely to increase organisational identification, with
positive consequences for self-esteem, organisational commitment and co-operative
behaviour. By implication, the process of communicating the psychological contract can
be as important as its content.
This raises empirical questions about the sort of model of the psychological contract
held by senior management, how they seek to communicate it and, more speci cal ly,
what it is that they seek to communicate. It must be acknowledged at the outset that a
focus on the management of the contract and the communication processes associated
with this neglects the two-way reciprocal exchange that lies at the heart of the concept.
The same neglect is of course apparent in the bulk of the published res earch that ignore s
the employers perspective. The aim of this article is not to explore the full range of
issues associated with the psychological contract but to begin to redress the imbalance in
the research by focusing on its management and, in particular, on the core issue of how
communication contributes to its successful management.
The study is informed by two theoretical perspectives. The rst, already noted, is the
work on organisational culture. It is possible to draw parallels between processes designed
to `manage organisational culture and attempts to `manage the psychological contract. In
this respect, we might expect to see a different emphasis in patterns of communication of
the contract where diff e rent implicit assumptions about the nature of org an i s ati on al
c u l tu re, and there f o re the appropriate means of communicating it, are held by
management. Speci call y, those who adopt an integrated model are likely to emphasise
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Communicating the psychological contract: an employer perspective

top-down communication directed at all employees and also to place some emphasis on
careful communication to newcomers to ensure that they are effectively socialised into the
norms and values of the organisation. As noted above, they may also use a range of
channels of communication to enhance organisational identi cation. In contrast, those who
accept a diffe rentiation model will place less emphasis on standardised, top-down
communication and more on consistent local activity concerned with the work and the
wellbeing of individuals. Finally, those who consider culture to be fragmented will be less
concerned with communicating in a consistent way and will permit a more laissez faire
approach to communication. While in such contexts there may be one-to-one negotiation of
the psychological contract, there will be less emphasis on consistent and extensive
communication. A culture-based analysis therefore suggests that there may be differing
emphases in the process and content of organisational communication and, in this context,
in the way it is used to manage the psychological contract and the employment
relationship more generally. At the same time, it raises questions about whether forms of
communication fall into distinct patterns and groups. It does not, of course, imply that
forms of organisational communication are mutually exclusive.
The study is also informed by existing theoretical work on psychological contracts.
This literature, too, draws attention to three areas of communication. Robinson and
Morrison (2000) highlight the importance of communicating the psychological contract
during the process of recruitment, while Herriot and Pemberton (1997) and Stiles et al
(1997) emphasise the importance of ongoing interaction between the employer and the
employee in relation to the job and to personal issues such as workload, development,
work-life balance and career prospects. Indeed, certain kinds of org a n i s a t i on a l
communication, su ch as t he p erfo rmance appraisal process, are re g a rded as
opportunities to establish and clarify expectations with employees (Herriot and
Pemberton op cit; Rousseau, 1995). More broadly, Turnley and Feldman (1999) highlight
the importance of formal top-down communications, such as mission statements for
the psychological contract. These three areas also span communication between the
organisation and the employee over time from the initial introduction, to ongoing
interaction, to statements of future intent and direc tion. All t hese studies are
suggesting that effective organisational communication will lead to a more explicit and
potentially more effective psychological contract. Taken together, they also emphasise
the potential breadth of the contract. Since various types of communication activity are
almost inevitable, even in the most fragmented organisational culture, our analysis will
focus on management ratings of the effectiveness, rather than simply the use, of forms
of communication:
Hypothesis 1 The content of the psychological contract is more likely to be explicit ie
consist of explicit rather than implicit promises where communication is
rated more effective
Most employee studies (eg Turnley and Feldman, 2000; Robinson and Morrison, 2000)
lend support to psychological contract violation as a major explanatory variable for
attitudes and behaviour. There have, however, been very few studies that have
cons i d e red antecedents to such contracts and, by implication, the contexts in which
violation is more or less likely. Furthermore, while violation has been extensively studied
from an employee perspective, little res earch to date has explored employer perceptions
of contract violation. Research on realistic job previews (Wanous et al, 1992) has
highlighted the importance of clear communication at the point of entry to organisations
if perceptions of either unmet expectations or breach of promises and commitments are
to be avoided. Furthermore, as Morrison and Robinson (1997) highlight, lack of
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David E. Guest and Neil Conway

communication is likely to lead to incongruence between employer and employee

perceptions of obligations one of the causes of contract breach:
Hypothesis 2 Perceived contract breach is less likely to be reported by managers where
communication is rated more effective
Some communication of promises and commitments of the sort associated with the
psychological contract is likely to occur in almost any organisation. However, it may not
be part of an integrated approach to the management of contracts called for by Herriot
and Pemberton (1997) and Schalk and Rousseau (2001). What they are suggesting is that,
where it does form part of a deliberate attempt to manage the psychological contract, it
will be more focused and more effective. In other words, there will be bene ts, both in
terms of a clearer contract and less likelihood of breach, if its management is explicitly
conside red and there fore if the psychological contract, including communication of that
contract, is used as a framework for managing the employment relationship:
Hypothesis 3 A deliberate attempt to use the psychological contract as a framework to manage
employee relations is likely to be associated with a more explicit and less frequently
breached psychological contract with more positive outcomes
Psychological contracts have consequences above and beyond analysis of the extent to
which promises and commitments have been met or in some way breached. They should
be associated with a more positive view of the exchange (Rousseau, 1995) that lies at the
heart of the psychological contract or what is sometimes termed the state of the
psychological contract (Guest, 1998). This can be measured through the extent to which
the contract has been met or breached and also through indicators of trust and fairness.
In this analysis we focus on fairness of the exchange. This has the advantage of building
in some indication of recipro city, and we can expect it to be associated with the content of
the contract and the extent to which it has been met or breached. At the same time, if
communication of the psychological contract is a key element of the contracting process
(Herriot and Pemberton, 1997), then we should expect it to explain some of the variance
in perceived fairness of the exchange. Ideally, this would be assessed by employees as
well as by representatives of the organisation, and this is an approach extensively
adopted by Guest and Conway (see, for example, 1999, 2001b). However, in this case the
focus is on the organisational perspective, and fairness can be judged as much from an
employer as from an employee perspective:
Hypothesis 4 The perceived fairness of the exchange will be greater where there is more effective
communication of the contract
In line with re search on contract ful lment and breach (Rousseau, 1995) and on the state
of the psychological contract (Guest, 1998; Guest and Conway, 1999, 2001b), such
contracts can be expected to have an impact on a range of signi cant outcomes. Many of
these outcomes re ect employee attitudes and behaviour and, while managers will form
views about them, they may best be assessed by asking employees. On the other hand,
senior policy-makers act on the basis of the information and perceptions they have about
the consequences of their policies and practices. We therefore asked questions about a
range of outcomes but, in this context, we focus more narrowly on managers assessment
of the impact o f attempts by the organisation to co mmunicate promises and
commitments to employees. Drawing on the rese arch concerning the communication of
realistic job previews (Wanous et al, 1992), on the benef its for motivation and
performance of communicating clear goals (Locke and Latham, 1990) and clear and
public communication of commitments for behavioural commitment (Salancik and
Pf effe r, 1978), we expect effective communication of the psychological contract to be
associated with a range of positive responses from employees:
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Communicating the psychological contract: an employer perspective

Hypothesis 5 A m ore positive perception of the impact of promises and commitments

on employeesattitudes and behaviour will be associated with more
effective communication
The main contributions of this article are therefore that it is among the rst to study, to
outline systematically and to test the relationship between organisational communication
and the content, ful lment and impact of the psychological contract. Secondly, it will do so
from an employers perspective, thus contributing to the small body of work that has begun
to examine this aspect (Coyle Shapiro and Kessler, 1998, 2000; Guest and Conway, 2000;
Lewis-McClear and Taylor, 1998; Tsui et al, 1997). As such, it broadens our understanding of
psychological contracts and begins to explore policy issues in their management.
M ETHOD
Sample and procedure
The study had two stages. The rst consisted of qualitative interviews in four organisations
with a total of 80 managers and staff at different levels. Three aims of this qualitative phase
are of particular relevance in the present context. The rst was to determine whether
managers at various levels were regarded as agents of the organisation. The second was to
identify the forms of communication considered by staff to be relevant to the psychological
contract. The third, in the absence of any established list or conceptual framework, was to
identify the content of psychological contracts across a cross-section of managers and staff.
A key aspect of this was that, where appropriate, those with managerial positions were
asked about the content both in their role as managers and as employees of the organisation
(for a fuller account, see Guest and Conway, 2000; see also previous work by Herriot et al,
1997, which explores the content of the psychological contract among a small but fairly
representative UK sample). The interviews con rmed that managers were viewed as agents
representing the organisation, although the seniority of the manager placed in this role
depended on the seniority of the respondent. For example, junior staff might identify a head
of department in this role, while more senior staff, themselves in management positions,
were more likely to identify someone at board level. The interviews also provided the list of
methods of communication and the content of the psychological contract that formed the
basis, together with a wider review of the literature, for the main stage of the study, namely,
a survey of senior managers.
In stage two a questionnaire was sent to 3,000 senior members of the CIPD, the
professional body for HR practitioners. Only senior members were chosen, since they
would be more likely to be engaged in policy decisions concerning the employment
relationship. Effective ly, senior managers were asked to provide the organi s ati on s
perspective on the psychological contract. Replies were received from 1,306 or 43 per cent.
M easures
Managers were asked to respond to questions with respect to how the org ani s a ti on
communicated with, treated and perceived its employees generally, rather than any
particular employee. Unless stated otherwise, items were turned into scales by
computing a mean.
Background variables Four organisational variables were included in the study and
were measured using single items: the number of employees in the organisation in the
UK, the number of employees at the particular location of the respondent, the industrial
sector (private or public) and whether the organisation recognised a trade union or staff
26

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David E. Guest and Neil Conway

association. Two individual variables were used as additional control variables: one
concerned the seniority of managers and the second was whether or not they worked in
an HR department.
HR practices In line with the importance of `people building identi ed by Schalk and
Rousseau (2001), HR practices were measured using 14 items broadly covering what
writers such as Pfeffer (1998) have described as a high-commitment approach to HRM.
Examples included `provides opportunities for training and development, `provide s
regular employee performance appraisals and `has provisions to help employees deal
1
with non-work responsibilities . Managers were asked to indicate the proportion of the
workforce to which the policies and practices applied. A count was made of the number
of practices currently in operation in the organisation that applied to more than 50 per
cent of the workforce (alpha = 0.77).
Deliberate use of the psychological contract A single item asked respondents whether
they explicitly used the psychological contract to help them manage the employment
relationship. Answers were coded either no (0) or yes (1).
Communication Respondents were asked whether each of 13 methods of communication
were used in their organisation in seeking to communicate its promises and commitments
to employees. For each method used, we then asked them to rate how effective it was on a
Likert-type ve-point scale, ranging from not at all effective (1) to very effective (5). A factor
2
analysis of these 13 methods was conducted. In line with expectations, this revealed three
clear factors. The rst, `communication through recruitment, consisted of four items (alpha
= 0.67) including `recruitment processes and `induction and initial training. The second
factor, `top-down communication, consisted of two items (alpha = 0.69), covering `mission
statements and `annual company meetings with, and reports to, staff. Finally, `job and
personal communication consisted of six items (alpha = 0.82) including `individual targets
and objectives and `informal day-to-day interaction. The full list is shown in Table 2.
Content of the psychological contract Content was measured using 13 items derived from
the initial interviews in stage one and which overlapped considerably with items typically
included in measures of psychological contract content (eg Robinson, 1996). Respondents
were asked to report the extent to which the organisation had promised or committed itself
to provide the items. Typical items included `opportunities for promotion, `a safe working
e n vi ronment and `not to make unreasonable demands on employees . A fo ur-p oi n t
response format was used, where 1 = no promise made; 2 = suggestion of a promise
nothing actually said or written down; 3 = strong suggestion of a promise nothing actually
said or written down; and 4 = written or verbal promises have been made. The `explicitness
of the psychological contract content was assessed by taking a mean across all the items on
which a promise was made (alpha = 0.81). The full list is shown in Table 3.
Psychological contract breach/ful lment Where promises had been explicitly made or
strongly suggested, organisational representatives were asked to indicate to what extent
the promises had been kept by the organisation. A four-point response format was used,
wh e re 1 = exceeded, 2 = met, 3 = met to some extent and 4 = not met. The re l evan t
responses are shown in Table 3. For the subsequent analysis, mean scores across the items
w ere computed to provide an indication of the overall level of psychological contract
breach or ful lment (alpha = 0.86), with a higher score indicating a greater breach of the
psychological contract by the organisation. A lower score indicated a perception by the
manager that the organisation had met its promises and obligations or even exceeded
them. There is an interesting issue about whether exceeding a promise or obligation
represents another form of breach (Guest, 1998), although this will not be pursued here.
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Communicating the psychological contract: an employer perspective

Psychological contract reciprocity The survey also covered an aspect of reciprocity by

including two items addressing fairness of the exchange. These were `Overall, comparing
what the organisation puts into its relationships with its employees with what it gets in
return, the deal is fair and `Overall, I feel the organisation invests more into its employees
than it receives back from them in return. Responses were provided on a ve-point Likert
scale from `strongly disagree (1) to `strongly agree (5). Contrary to expectations, these did
not emerge as a single factor, so the items had to be treated independently. In the analysis
we there fore use the single item, the rst listed above, on fairness of the deal.
Psychological contract outcomes A range of outcomes of the psychological contract were
expl ored. Here we focus on a general management evaluation which explicitly asked
about the impact of the organisations management of its promises and commitments on
six outcomes covering aspects of employee attitudes and behaviour. These were
performance, commitment, employee relations, employee wellbeing, motivation and
employee trust in the organisation. Responses seeking assessment of the impact were
provided on a ve-point scale from `de nite negative impact (1) to `de nite positive
impact (5). Factor analysis indicated that these formed a single general measure of
impact (alpha = 0.92) and it is the scores on this scale that are used in the analysis.
Analysis Factor analysis was conducted as described above and used to compute the three
main communication variables and some other measures. The hypotheses were tested by
regressing each of the dependent variables of the explicitness of the psychological contract,
contract breach/ful lment, fairness of the exchange and impact of the contract on the set of
independent variables including the background factors, HR practices, use of the contract
in employment policy and the three measures of communication effectiveness. Hierarchical
regression was used to identify any independent additional effect of the communication
items above and beyond background factors and HR practices. It should be noted that
communication is likely to be closely associated with HR practices, which Rousseau (1995)
among others has identi ed as an important means of signalling promises; this is why
these practices are controlled for in the analysis.
RESULTS
The summary of descriptive results, including means, standard deviations and intercorrelations, are shown in Table 1.
Before considering the multi-variate results, it is worth noting that 62 per cent of the
sample consisted of either directors or senior executives and the remainder were either
managers or senior of cers. Eighty-six per cent worked in an HR role. Sixty-eight per cent
felt either `very con dent or believed that to `a very great extent their views represented
those of the organisation. All but 4 per cent of the remainder were `somewhat sure of this.
Thirty-six per cent said their organisation was using the concept of the psychological
contract to help them to manage employee relations. Forty-three per cent worked in
private sector service companies, 20 per cent in manufacturing, 3 per cent in utilities and
34 per cent in the public sector. Almost 60 per cent worked in organisations employing
more than 1,000 workers and 61 per cent recognised a trade union.
The main descriptive results on use and effectiveness of communication methods are
shown in Table 2 (overleaf). Most managers reported that their organisation used most of the
methods of communication. Indeed, use ranged in a narrow band from 100 per cent who
used re cruitment processes to communicate promises and commitments to 84 per cent
who used team targets and annual meetings with and reports to staff. This con rmed
that it was sensible to focus on effectiveness of communication methods on which there
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David E. Guest and Neil Conway

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Communicating the psychological contract: an employer perspective

TABLE 2 Methods of communicating org anisation s promises and commitments to e mployees

Not
used

Not
effective Slightly Somewhat
Very
at all effective effective Effective effective

Job communication
Individual objectives and targets
Team targ ets
Performance appraisal
Informal day-to-day interaction
Br ie ng by line management
Training and development

3
16
4
1
2
1

3
5
2
2
2
1

11
18
10
11
12
10

33
30
32
32
34
36

34
23
37
36
36
36

17
8
14
18
13
17

Recruitment communication
Job descriptions
Induction and initial training
Recruitment proce ss
Staff handbook/manual

8
1
0
12

13
2
1
5

21
10
9
12

32
32
33
26

20
39
43
31

6
16
13
15

Top-down communication
Mission statements
9
Annual company meetings with staff 16

14
10

26
19

24
22

17
21

10
13

Effectiveness was only assessed for those organisations that used the method of communication.
W h e re an organisation did not use a speci c method of communication, the factor score is based on the
average of the methods in the factor that they did use.

N ranges from 1,214 to 1,302

was a considerable range of response. Forms of job-related and re cru i tme nt-re l a te d
communication are generally rated effective. Top-down communication is considered to
be rather less effective.
The descriptive results for the responses addressing the content of the psychological
contract are shown in Table 3. These show that rm promises are most likely to be made
about training and development, a safe working environment, feedback on performance
and fair treatment. For each of these items, more than 50 per cent said that a rm promise
had been made. In contrast, more than a quarter said that their organisation had made
no promises about avoiding unreasonable demands on employees, providing reasonable
job security and interesting work. However, across most items, at least half of the
respondents said their organisations had made either firm promises or a stro n g
suggestion of a promise. Table 3 also shows whether promises had been met, not met or
exceeded by the organisations. Generally, managers claimed that the organisation has
met its promises `to some extent. Promises were more likely to be fully met or exceeded
in more than half the organisations with respect to not making unreasonable demands
on employees, providing recognition for innovative ideas, opportunities for promotion,
allowing open two-way communication and providing interesting work. In contrast,
promises were least likely to be met with respect to providing a pleasant and safe
working environment, job security, an effective bene ts package and fair pay.
Results for items assessing the perceived impact of the organisations management of
its promises and commitments on a range of employee-related outcomes are shown in
Table 4 (overleaf). These items formed a single factor. The impact is perceived as generally
positive, although a sizeable minority, perhaps understandably, reported no impact on
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David E. Guest and Neil Conway

TABLE 3 Promises made to employees by organisation and extent to which it has kept them

Training and development

opportunities

A. Extent to which
organisation has promised
or committed itself to
provide items listed

B. Extent to which
organisation has met its
promise or commitment
(only those responding to last
two categories in section A)

19

73

45

46

Opportunities for promotion

18

24

33

25

43

50

Recognition for
innovative or new ideas

25

27

20

27

38

46

9
2

11

25

61

51

41

Interesting work

Feedback on performance

27

29

33

11

43

47

Fair rate of pay

13

16

35

36

12

58

27

Attractive bene ts package

24

20

27

29

15

54

28

Not to make unreasonable

demands of employees

39

25

24

13

40

44

12

Fair tre atment

10

28

56

64

27

Reasonable job security

29

20

32

19

15

56

25

Pleasant working
environment

23

26

33

18

16

47

33

Safe working environment

21

71

16

67

17

Open two-way
communication

15

35

44

38

48

N ranges from 1,283 to 1,296

employee wellbeing. A negative impact was most likely to be reported in the areas of
employee trust in the organisation and employee motivation. The relatively low
proportion of extreme responses, either positive or negative, may indicate either a
limited impact or uncertainty on the part of these managers about the impact.
The results of the re g ression analysis testing Hypothesis 1 and dealing with the
association between communication and the explicitness of the content of the
psychological contract are shown in the rst column of Table 5 (overleaf). Note that we
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Communicating the psychological contract: an employer perspective

TABLE 4 Perceptions of impact of psychological contract management on employee-related outcomes

Impact of organisations management

of its promises and commitments on:
Employee performance
Employee commitment
Employee trust in the org anisation
Employee motivation
Employee wellbeing
Employment re lations

De nite
negative
impac t
%

Slight
negative
im pact
%

3
4
8
4
3
3

8
11
17
15
10
11

No
effect
%

17
19
24
23
36
19

Slight
positive
impac t
%

De nite
pos itiv e
im pact
%

51
48
39
48
41
48

21
19
12
10
9
18

N ranges from 1,234 to 1,262

TABLE 5 Effects of communication on psychological contract explicitness and breach:

regression analyses
Variables
Organisation size
Establishment size
Sector (public = 1, private = 0)
Recognised union
Respondent in HR department
Respondent is senior manager
DR2
Use psychological contract
Number of HR practices
DR2
Job communication
Top-down communication
Re cruitment communication
DR2
R-square
adj R-square
F
* p < .05; ** p < .01; *** p < .001

Psychological contract
explicitness

Psychological
contract breach

.09*
.04
-.05
-.03
-.03
.02
.03
.05*
.40***
.29
.11***
.12***
.10***
.05
.37
.36
63.69***

.15***
-.04
.16***
.01
.01
-.06*
.09
-.04
-.18***
.13
-.20***
-.04
-.19***
.09
.31
.30
48.41***

In this and the two subsequent tables DR rep resents the change in R-square on entering each block of
independent variables into the analysis. Standardised be ta weights are reported after all blocks of
variables were entere d.
2

N ranges from 1,200 to 1,230

show the nal reg ression table but also present the R at each step to show the extra
2
variance accounted for by each set of items. In Tables 5 and 6 all changes in R are
signi cant at the p = < 0.001 level.
Hypothesis 1 is supported. Greater explicitness or clarity of the psychological contract
is positively associated with recruitment communication ( = 0.10, p < 0.001), personal
and job commu nicat ion ( = 0.11, p < 0.001), and top-down comm unication
2
( = 0.12, p < 0.001). The adjusted R g ure indicates that all the variables in Table 5
explain 36 per cent of the variation in the explicitness of the psychological contract. The
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David E. Guest and Neil Conway

asterisks against the numbers indicate the items that have a statistically significant
association with the degree of explicitness. Among the six background factors, only
organisation size has a signi cant association. However, use of the psychological contract
to manage the employment relationship and, more particularly, use of a greater number
of HR practices with a majority of the workforce, also have a signi cant association. As
we noted above, we might expect greater application of HR practices to have a
2
si gni cant effect, and these two items are associated with the largest change in R of 0.29.
What is important to note is that the three forms of communication have an additional
e ffect above and beyond that of HR practices, adding a further 0.05 to the amount of
variance in explicitness in the psychological contract.
The results for the re gression on contract ful lment or breach are shown in the nal
column of Table 5. This provides a test of Hypothesis 2 which anticipates that perceived
breach of the psychological contract is less likely to be reported where communication is
rated effective.
The result s in Table 5 support Hypothesis 2. They show a significant negative
association between psychological contract breach and recruitment communication
( = -0.19, p < 0.001) and personal and job communication ( = -0.20, p < 0.001), but not
with top-down communication ( = -0.04, p non-signi cant). In other words, effective
job-related and recruitment-related communication is associated with less breach of the
psychological contract. As we saw in Table 5, top-down communication was generally
rated as less effective. However, these results suggest that, even where it is effective, it
2
has no impact on contract breach or contract ful lment. As the change in R indicates,
and as we might expect, HR practices are also strongly associated with contract
breach/ful lment and once again the two signi cant elements of communication have a
clear effect above and beyond that of HR practices. Table 5 also shows that larger
organisations and those in the public sector are associated with more breaches of the
contract. This is supported, at least for parts of the public sector, in a separate study
comparing perceptions of the psychological contract among workers in the public and
private sectors (Guest and Conway, 2001b).
Hypothesis 3 proposes that the deliberate use of the psychological contract in the
management of employee relations will be associated with a more explicit, less
frequently breached psychological contract with more positive outcomes. This was tested
by entering the item concerned with deliberate use of the contract into all the re gression
analyses. Analysis of the re gression tables reveals that in all but one case psychological
breach it was signi cantly associated with a more positive outcome. In general the
results are only marginally signi cant, except in the case of perceptions of the impact on
e mployee-related outcomes. In this case, the deliberate use of the psychological contract
has a highly significant association with more positive outcomes. Hypothesis 3 is
therefore largely supported by the results.
Hypothesis 4 suggested that effective communication will be associated with a fairer
exchange, while Hypothesis 5 proposed that effective communication will be associated
with perception of a more positive impact of management of the psychological contract
on a range of employee-related outcomes. The relev ant result s relating to these
hypotheses are shown in Table 6. In this nal table we have added breach/ful lment of
the psychological contract into the equation in the expectation that it would be associated
with lower fairness and poorer outcomes.
The results in the rst column in Table 6 (overleaf) show that fairness of the exchange
was associated with more effective personal and job communication ( = 0.08, p < 0.05)
and with more effective recruitment communication ( = 0.10, p < 0.01), but not with
effective top-down communication ( = -.04, p non-signi cant). The results there fore
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33

Communicating the psychological contract: an employer perspective

TABLE 6 Effects of communication on exchange fairness and psychological contract outcomes:

regression analyses

Variables
Organisation size
Establishment size
Sector (public = 1, private = 0)
Recognised union
Respondent in HR department
Respondent is senior manager
DR2
Use psychological contract
Number of HR practices
DR2
Job communication
Top-down communication
Rec ruitment communication
DR2
Psychological contract breach
DR2
R-square
adj R-square
F

Exchange
fairness

Psychological
contract outcomes

-.00
.01
-.01
-.09**
-.06*
.07*
.04
.06*
.12***
.06
.08*
-.04
.10**
.02
-.14***
.01
.13
.12
15.04***

.04
-.01
-.01
-.03
-.02
.11***
.06
.11***
.14***
.20
.19***
.14***
.09**
.11
-.24***
.04
.41
.40
67.10***

* p < .05; ** p < .01; *** p < .001

N ranges from 1,181 to 1,195

provide partial support for Hypothesis 4. Once again both the number of HR practices
used and the deliberate use of the psychological contract to manage the employment
rel ations hip are also asso ciated with a fairer exchange, so t he two forms of
communication have an impact above and beyond other aspects of HR and employment
relations management. It is worth noting that where there was a recognised trade union,
managers believed that the exchange was less fair. The strong implication was that a
union presence resulted in the organisation getting less back for what it put into the
exchange. Interestingly, managers who worked in an HR department, who formed 86 per
cent of the sample, believed that the exchange was less fair than the other 14 per cent.
Also, on this as on a number of other items, more senior managers generally gave a more
positive assessment. Finally, it should be noted that the background, HR and other
variables accounted for only a relatively modest 12 per cent of the variation in managers
assessment of the fairness of the exchange. Communication items added only 2 per cent
and breach/ful lment of the psychological contract, perhaps surprisingly, only 1 per cent
to the overall variation in perceived fairness.
Hypothesis 5 is strongly supported by the results in the second column in Table 6. A
positive impact of the management of the psychological contract was associated with
effective re cruitment communication ( = 0.09 p < 0.01), personal and job communication
( = 0.19, p < 0.001) and top-down communication ( = 0.14, p < 0.001). Once again this
finding appears after taking account of HR practices and use of the contract in
employment relations policy. Both the communication items and the assessment of
bre ach/ful lment of the psychological contract add signi cantly to the explanation of
the variation in the impact of the psychological contract.
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David E. Guest and Neil Conway

DISCUSSION
The results con rm all the hypotheses. They there f ore support the distinctive role of
communication in managing the psychological contract. If, as Herriot and Pemberton
(1997) suggest and our results appear to confirm, a more explicit contract results in
i n c reased fairness and trust, we would expect its more extensive and eff e c t i v e
communication to have positive bene ts for both employees and organisations. To the
extent that effective communication reduces perceived breach of the psychological
contract and is associated with better employee-related outcomes from management of
the contract, this appears to be the case. While previous studies, as noted, have drawn
attention to the importance of aspects of the way in which the psychological contract is
communicated, this is the first study to draw together the range of communication
methods and systematically assess their effectiveness.
Despite the generally positive results, the three categories of communication had rather
d i ff e rent associations with outcomes. Bro a dl y, job-related and re c ru i tm en t- b as e d
communication had a consistent positive association with contract explicitness, lower
breach, a fairer exchange and management perceptions of the impact of the psychological
contract on employee-related outcomes. Top-down communication had a less consistent
association; in the descriptive results, it received the lowest ratings of effectiveness. Yet, even
where it was effective, the results suggest that its impact was more inconsistent. In the
context of Martins (1992) analysis of organisational culture, this would appear to con rm
the problems of attempting to manage an integra ted culture through top-down
mechanisms, more particularly in large organisations. It also reinforces the dif culty noted
by Schalk and Rousseau (2001) facing managements that would like the organisation to
speak with one voice. There is some evidence in this study and in other ndings that
managers are aware of the limitations of top-down communication. For example,
Marchington et al (2001), in their study of employee voice in which they compared changes
over a 10-year period in a number of case studies, found a greater emphasis on local jobrelated communication and a relative decline in the importance attached to formal topdown mechanisms in 2001, compared with 10 years earlier. This may present dif culties for
organisations eager to pursue organisational identi cation among employees but it also
suggests that this is not always seen as a key priority.
The focus in this analysis has been on the effectiveness of communication. The evidence
suggests that the importance of communication is acknowledged in most organisations and
many now engage in a wide range of communication practices. This has been
independently con rmed at the workplace level for organisations of comparable size by
Cully et al (1999) in their analysis of the results of the 1998 Workplace Employee Relations
Survey, covering more than 2,000 workplaces. However, as the results of the present survey
suggest, it would be unwise to assume that the presence of a practice means that it is being
effectively applied. This is strongly reinforced in research on the relationship between HRM
and performance, where the effectiveness of practices appears to mediate the relationship
between the presence of practices and their impact on a range of outcomes (Guest et al,
2000). At the same time, the results suggest that managing the process of communicating the
psychological contract is highly complex and organisations where this is left to chance will
be likely to have a poorer relationship with employees.
A surprisingly large proportion of respondents 36 per cent said their organisation
made deliberate use of the psychological contract as a concept to help them shape their
employee relations. Its deliberate use was associated with a cleare r, more explicit
psychological contract, with a fairer exchange and with perceptions of a positive impact
of the management of promises and commitments, including managing employment
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Communicating the psychological contract: an employer perspective

relations. The associations were generally quite small but con rm the apparent bene ts
of using the psychological contract as an explicit policy framework for employee
relations management. The large minority already using it suggests that they nd it a
helpful way of analysing and managing the employment relationship. At the same time,
th ere is a need for further res e arch to gain a fuller understanding of what managers
mean when they say that their organisation makes deliberate use of the psychological
contract to manage employee relations.
The re s e a rch confirms that senior managers responsible for releva nt policy
acknowledge that their organisations often fail, partially or more completely, to keep their
promises and commitments. This is an important con rmation of the widespread nding
in studies of employees who consistent ly report that organisations breach their
psychological contract (Morrison and Robinson, 1997; Robinson and Morrison, 2000). The
regression analysis con rms that a breach of the contract is associated with a more negative
assessment of the impact of the management of promises and commitments on employeerelated outcomes. When even senior managers acknowledge the damaging impact of
contract breach and of less effective communication, the policy implications are clear.
There is a consistent and strong association between use of a greater number of HR
practices and all the dependent variables in the study. We used the count of HR practices as
a control variable because of its expected association with aspects of organi sati ona l
communication. In practice, as Table 1 reveals, the correlations are relatively modest. The
results con rm that HR practices consistently show the strongest association with the
various outcomes, in line with expectations. At the same time, the various groups of
communication methods have a signi cant independent association, above and beyond HR
practices. While this con rms the importance of communication, it is not clear how useful it
is to consider its various aspects independently of the wider range of HR practices.
Certainly, the evidence indicates that it would be unwise to emphasise communication to
the neglect of more general HRM. Further research is needed to clarify this issue.
The study has limitations. In particular, the emphasis on a cross-sectional, self-report
survey creates the risk of response consistency bias and a danger in asserting any causal
relationships. There may also be doubts about the ability of senior managers to report
accurately on certain worker- related outcomes, although the data presented addre ss
managers perceptions of the impact of policy and practice on outcomes rather than
details of the outcomes per se. Despite claims by a majority of managers that their views
re presented those of their organisation, there are still questions about how far any
individual can know what is happening and what informal deals are being made in
organisations of the size represented here. On the other hand, a majority of respondents
w ere in senior positions where they had responsibility for employee relations policy and
could re-present the aspirations of that policy. Furthermore, the policy was likely to be
shaped in part by the perceptions they reported in this study. It is also worth noting that
many of the findings were corroborated in the more in-depth qualitative interviews
using a variety of direct and indirect questioning. Nevertheless, future re search should
explore both employer and employee views on the exchange, ideally in the context of a
longitudinal research design.
Despite the limitations noted above, the study extends our understanding of
organisational and managerial perspectives on the psychological contract. It does so by
indicating the importance for a more effective psychological contract, as judged by
managers, of HR practices in general and communication practices in particular. It shows
that personal, job-related and rec rui tme nt-related communication appears to be more
important for effective management of the psychological contract than top-down
communication. It illustrates that managers can be quite critical of attempts by the
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David E. Guest and Neil Conway

organisation to manage the contract. The study also shows an association between
management perceptions of organisational breach of the psychological contract and more
negative outcomes that have interesting parallels with the much wider body of research
on employee perceptions of breach by managers in the organisation and its consequences
for their attitudes and behaviour. This suggests that managers are quite sensitive to the
potential consequences of management policy and practice; at the same time it raises
b roader questions about why the organisation persists with such behaviour if it is
associated with negative outcomes. Finally, the study con rms that management of the
psychological contract, as Schalk and Rousseau (2001) suggest, is a core task of
management and acknowledged as such by many senior HR and employment re lations
managers, and shows that it has a positive association with a range of outcomes within
the employment relationship and is a useful way of conceptualising that relationship.
Acknowledgements
We would like to acknowledge the support of the Chartered Institute of Personnel and
Development in providing funding and access for this res e arch and in particular the
support of Mike Emmott. The Institute bears no responsibility for the opinions expressed
in this article. The re search also provides an input to an ESRC ROPA award (R022250141)
on `Reconceptualising the employment relationship. An earlier version of the article was
presented to the American Academy of Management, Washington, DC, 3-8 August 2001.
We would like to thank HRMJs editor and two anonymous re fe rees for their helpful
comments on the initial version of this article.
Notes
1. A full list of these and all other descriptive items used in the study can be found in
Guest and Conway (2001a).
2. One of the items referring to the general use of brie ng groups loaded heavily on two
factors and was thus omitted from later analyses.
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