Contractors and their Psychological Contracts
| Author | P. M. Brewerton,L. J. Millward |
| DOI | http://doi.org/10.1111/1467-8551.00131 |
| Published date | 01 September 1999 |
| Date | 01 September 1999 |
Introduction
The rise in dependence of organizations on con-
tractors as the ‘flexible’ foundation on which to
compete in a world market has prompted changes
in the meaning of employment. Cost/economy
driven restructuring of the workplace has in-
volved mass downsizing and the introduction of
contractualization as the primary means by which
to enhance numerical and financial flexibility
(Institute of Manpower Studies, 1994). In mid-
1996, demand for temporary staff had risen by
23% on the previous year and stood at its highest
level since 1982 (Tooher, 1996).
Underpinning this movement is a shift from
traditional working patterns to a core/comple-
mentary employment structure (Handy, 1984;
Osterman, 1988; Pollert, 1988) – that is, organiza-
tions employing core long-term contract-based
and complementary short-term contract-based
employees (Institute of Manpower Studies, 1994).
Companies now outsource many of their non-core,
peripheral activities to external agencies, with
many workers consequently employed on short-
term or part-time contracts, within constantly chang-
ing work environments (Guest, 1998a, 1998b;
Sparrow and Cooper, 1998). It is estimated that
the average number of functions outsourced by
organizations has risen 225% (from 1.2 to 3.9) in
the last five years, a growth area set to continue.
As part of this growth, it is also anticipated that
‘core’ activities will be put out to tender as a means
of strategic in-house value creation (Brown, 1997).
Handy (1990), in The Age of Unreason, sum-
marizes the implications of such changes for
workers: “many will work temporary or part-time
– sometimes because that’s the way they want it,
sometimes because that’s all that’s available’.
Pritchett (1994) adds, ‘less than half the work-
force in the industrial world will be holding con-
ventional full-time jobs in organizations by the
beginning of the twenty-first century. Those full-
timers or insiders will be the new minority’. It is
clear from these comments that the world of work
British Journal of Management, Vol. 10, 253–274 (1999)
Contractors and their
Psychological Contracts
L. J. Millward and P. M. Brewerton
School of Human Sciences, Department of Psychology, University of Surrey, Guildford GU2 5HX, UK
It is commonly assumed that contractors are largely calculative, instrumental and self-
interested in their relationship with organizations and interface with them accordingly
(e.g. low corporate interest and emotional investment). This paper describes a survey
involving 117 contractors (62 on ‘permanent’ agency contracts and 55 on ‘temporary’
agency contracts) and a comparable (age, job level/grade, years of work experience)
group of 86 direct employees (on fixed-term contracts). The survey comprised measures
of the psychological contract, of organizational identification, social (corporate) attrac-
tion, team spirit and intention to leave. The findings show that contractors are not
inevitably ‘emotionally’ detached from their place of work, in some cases investing in
it as much as direct company employees. While transactional (e.g. financial gain, instru-
mentality) exchange considerations were more salient among contractors than employees,
this did not appear to preclude the development of a relational (e.g. corporate integra-
tion and long-term investment) contractual orientation. ‘Team spirit’ and ‘organizational
identification’ predicted the development of relational contracts over and above con-
tractual status. The findings and their management implications are discussed in terms
of ‘strategic partnership’.
© 1999 British Academy of Management
is fast becoming a very different one from that
familiar to us a few decades ago (O’Hara-
Devereaux and Johansen, 1994). Implications for
employees lie not only in the surface structure of
these new work patterns, but in the character of
the relationship they develop with their employ-
ing organization (e.g. Barling and Gallagher,
1996; McGinnis and Morrow, 1990; Pfeffer and
Baron, 1988; Steffy and Jones, 1990).
Where ‘employment relations’ at one time
prevailed over ‘labour contracting’, the opposite
is now increasingly the case (Pollert, 1988;
Williamson, 1991). The ‘job-for-life’ scenario of
the old employment relationship has been largely
replaced by ‘the contract’ – a shorter-term, more
tenuous arrangement, with the employee being
little more than a ‘temporary resident’ in the
organizational condominium (Handy, 1994). It
has been said that that this move to ‘external-
ization’ of employees reflects a shift away from a
reliance on social exchange considerations to a
reliance on economic exchange considerations,
with employees taken on as calculated risks (i.e. a
‘buy’ employment model) rather than as people
with needs, concerns and interests of their own
(Miles and Snow, 1980; Pfeffer and Baron, 1988).
With many large ‘role-model’ organizations
moving to ‘vendorized’ or ‘contracted out’ oper-
ations (Brown, 1997), the issue of ‘externalization’
and its psychological consequences for how
employees interface with their place of work is a
critical one (Sparrow, 1998). What then are the
psychological implications for employees and em-
ployers of the rapid rise in contractualization? We
begin by making the assumption that ‘subjectivity
is inherent in all contracts’ (Rousseau, 1989, p. 121),
whether written or unwritten. The psychology of
the employment contract pertains to the way the
contract of employment is interpreted, understood
and enacted at the interface between employees
and their place of work. Argyris (1962) was the
first to undertake a formal study of the subjective
aspects of contracts using the term ‘psychological
contract’. He described the psychological contract
as an unwritten agreement that exists between an
individual and the organization when under-
taking terms of employment. Others followed suit
(e.g. Kotter, 1973; Levinson, 1962) but it was
not until the 1980s that the concept began to enter
the vocabulary of writers on organizational life
and behaviour (Farnsworth, 1982; MacNeil, 1985;
Schein, 1980). Farnsworth (1982), for example,
used the term psychological contract to refer to
mutual expectation in the link between individuals
and their employing organization. Thus, the con-
cept of psychological contract evolved as a term
for describing and explaining what was implicit
in the agreements made between employee and
employer, and in particular, the role played by
reciprocity and exchange in the process of form-
ing these agreements.
Until the last decade, however, the term psycho-
logical contract was used mainly as a heuristic
tool (rather than a scientific construct) for talking
about what is ‘implicit’ to the employer–
employee exchange relationship. Little formal
research had been undertaken at this stage.
Since the early 1990s, the psychological contract
has acquired construct status and in so doing has
taken a major conceptual and empirical turn. It
has been transposed from being a term used to
refer to what is nebulous and difficult to access
in connection with the quality of the exchange
relationship, into a cognitive-perceptual entity. In
this form, it has been deemed to be measurable
and owned solely by the individual, as opposed to
being a property of, or framework for analysing
the relationship between two parties. This was
facilitated in part by Rousseau’s (1989) distinc-
tion between psychological and implied contracts,
later forming part of a more formal system of
thinking about the psychology of the employment
contract.
This thinking is presented in Rousseau’s 1995
book Psychological Contracts in Organizations, in
which she defines the psychological contract as
‘an individual’s belief in paid for promises, or a
reciprocal obligation between the individual and
the organization’. (pp. 16–17). The psychological
contract then became a reference to the beliefs
held by individuals about reciprocal obligations
(not the reciprocal obligations themselves), and
can be implicit or explicit to the agreements the
individual perceives that he or she is party to. It
became something specific and internal to the
individual and the way they perceived the world.
Beliefs in reciprocal obligations, notes Rousseau
(1995), can arise from overt promises (e.g. bonus
systems discussed in the recruitment process), in-
terpretations of patterns of past exchange, vicari-
ous learning (e.g. witnessing other employees’
experiences), as well as through various factors
which each party may take for granted (e.g. good
faith or fairness). By contrast, the implicit contract
254 L. J. Millward and P. M. Brewerton
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