Psychological Contract ，Group Cohesiveness and Organizational

Performance
SHEN Hongyan
Depatment of Economics and Mangement Huahzong University of Science and Technology Wuchang
Branch, P.R. China, 430074
Hi_shyly999@126.com

Abstract: With the constant transformation in organizational management, psychological contract,

group cohesiveness, and organizational performance become the organizational behavior and human
resources management hot spots. This paper reviewed the concept, the connation and application of
relevant research about psychological contract and group cohesiveness, has discussed the interactive
relationships among psychological contract, group cohesiveness and organizational performance in the
management practice.
Key words: Psychological contract; Group cohesiveness; Organizational performance

1 Instruction

With the constant transformation in organizational management, psychological contract, group

cohesiveness, and organizational performance become the organizational behavior and human resources
management hot spots. In the process of the organizational operation, there are cohesiveness and
psychological contract which are informal and implied in the heart of employee except for the formal
economic contract kept by written. Though they have not strong sanctions as the economic and legal
contract, they are also dominant factors in determining the attitude and obligation of employees towards
organization.

2 Group Cohesiveness

2.1 Summary of group cohesiveness

The group cohesiveness’s initial research is from Mr Dugu who called it "gathering" instinct .the
large-scale studies began in the 1940s when K. Lewin began the research of the human behavior of
groups. Compared with earlier studies, modern researches tend to take cohesiveness as a variable, and
focus on two categories of issues: First, the group behavior are affected by the various levels of
cohesiveness among the groups, second, the factors are to determine the size of group cohesiveness.
Western psychologists often directly study the interaction and feelings of emotional between members
of groups and stress the cohesiveness’s emotion ingredients. For example, the U.S. social psychologist
L. Festinger analyzes the community cohesiveness by the communication frequency and the intensity in
groups. The Soviet social psychologist's research stresses on group's joint activity, stresses the
cohesiveness’s flash-awareness, and regards as the establishment above the joint activity process
foundation's group solidarity is the community cohesive force and regards the group solidarity
established on the basis of joint activities as a group cohesiveness.

2.2 The concept and integrant part of the group cohesiveness

Festinger, who published "informal group of social interaction pressure" in 1950, proposes the
①
cohesiveness’ three integrant parts: attraction among group members; ② group’s attractive targets
③
and tasks; the prestige which one can obtain from the group. About the 1960s, the community
cohesiveness's research mostly concentrated to between individuals and between individuals and groups
to the extent. In the 1970s, with the research's thorough, some scholars thought why the group members
in the group will be attracted by other people would be very important, and there are two kinds of

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reasons: one is that people needs to work effectively diligently together with other people (task
cohesiveness force); second, needs to be together harmoniously with other people (contact
cohesiveness).
In the 1980s, the group cohesiveness force's research has made new progress, Zaccaro, et al,
described cohesiveness as a dynamic process, not static. They advocated cohesiveness should be divided
①
into two aspects at least: task cohesiveness, it is related to group's targets and performance indexes;
② contact cohesiveness, it more involves interpersonal relations, such as friendship relations and
emotional support.
Some researches showed that the level of groups cohesiveness were affected by many factors,
summarized in the following several: ① group's leadership way: Lewin et al, who did the classic
experiments that compared the each experiment group's cohesiveness and group atmosphere under the
leadership of "democracy" and "autocratic" and "laissez-faire" The results showed that the

②
Democratic-leadership group members are more friendly than other groups, the member emotion is
more positive, the thought is more active, the cohesive force is stronger. Common traits between

③
member's: If the group members have the common goals, benefits, interests and hobbies as well as the
desires and so on, the group's cohesiveness is stronger. members of the groups dependence: the
greater dependence to the group the members were satisfied with their desires from the group, the
stronger the group’s attractiveness. ④ exterior influence: The external threat can strengthen the group
member's common values, thus enhances the group cohesiveness. Groups such as the reasonable
inter-group competition can strengthen the cohesiveness. ⑤reward way and the aim of the internal
group: The different reward way has the different influence to the community member's emotion and the
expectation. The reward way which unifies with the community is advantageous to the enhancement of
the group cohesiveness. The group member's mission organically integrated can enhance the collective
ideas and group cohesiveness. ⑥ other factors: the communication ways of information are different,
the group members’ individual characteristics, interests and ideological level will also affect the
cohesiveness.

3 Psychological Contract and Group Cohesiveness

3.1 Psychological contract

3.1.1 Connotation of psychological contract
The term “psychological contract” was first used in the context of work organizations by Argyris in
1960, as a footnote in Understanding Organizational Behavior. Levinson, Price, Munden, Mandl, and
Solley elaborate the concept in a case study of a utility company. Levinson and colleagues applied
Menninger’s concept of the “psychotherapy contract,” which ascribes the intangible aspects of the
contractual relationship that exists between psychoanalysts and patients, to the work setting. They define
the psychological contract, or “unwritten contract,” as the sum of all mutual expectations between the
organization and the employee. It includes what both parties are entitled to receive and what each is
obliged to provide to the other. The underlying idea is that an exchange relationship exists between the
organization and the worker, as previously conceptualized by Barnard and Simon and elaborated in
equity theory and social exchange theory; Levinson and colleagues pointed out that psychological
contracts are largely implicit and unspoken, and they frequently antedate the formal relationship
between a person and an organization. Some of the expectations (e.g., regarding salary and workload)
concern concrete issues, but others are related to less tangible matters (e.g., dignity at work, opportunity
for growth, and a sense of being cared for by the organization), which are revealed only indirectly.
Nonetheless, all of these expectations are assumed to determine the relationship between the
organization and the employee.
In this conceptualization, the psychological contract binds together individuals and organizations. It
makes their actions predictable and helps them to realize their goals. The strategies, structures, and

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processes of organizations determine what they want from their employees and what they feel able to
offer to them, in addition to affecting the way that contract negotiations are conducted and the nature of
the contracts that are reached collectively. Research by Kotter, which aimed to develop an operation for
mutual expectations, showed that organizational expectations are difficult to operation. Because there is
no single organizational counterpart for the individual, and because the expectations of organizational
members are far from homogeneous, the two sets of expectations are difficult to balance. Rousseau
introduced a more focused view of the psychological contract, conceiving it as “an individual’s beliefs
regarding reciprocal obligations” that arises within the context of the relationship between an
organization and an employee. Such contracts encompass the perceptions that employees have of the
implicit and explicit reciprocal promises that exist between them and their organizations, and their
perceptions of what each party is entitled to receive as a function of those promises. According to this
perspective, the psychological contract does not have two levels (individual and organizational); it is an
intra-individual perception that exists in the eye of the beholder. The organization provides the context
in which the psychological contracts of its employees exist. The psychological contracts of employees
are assumed to develop from belief as individual employee feels obligated to make particular
contributions in exchange for particular benefits. According to Rousseau, psychological contracts are
perceived obligations, and not merely expectations. Psychological contracts lend structure to
expectations concerning future exchanges, thereby reducing uncertainty. The contract also plays a role
in creating social units (e.g., partnerships, organizations, joint ventures), and managing
interdependencies between individuals, groups, and organizations.
3.1.2 The characteristics of psychological contract
Psychology contract has the subjective characteristic, the psychological contract content is the staff
individual cognition to the mutual responsibility, or is one kind of subjective sensation. Because the
individual has the unique experiences and the opinions for the reciprocity relationship between himself
and the organization, therefore, the individual psychological contract is possibly inconsistent with the
employment contract's content. Next, the psychological contract has the dynamic characteristic, the
psychological contract content is a dynamic and change process. Formal employment contract is
generally stable, with little change. But the psychological contract is in a constant state of change and
revision. Any changes of organizational way, whether physical or social in nature, have an impact on the
psychological contract. The longer time people work in an organization, the more widely the
psychological contract content covers. Third, there is difference between the psychological contract and
expectation. The psychological contract not only has the expectation, but also includes the commitment
and reciprocity to the responsibility and obligation. Distinction in these two concepts have practical
significances, an unrealized expectations generated disappointment. One will be a strong negative
emotional response and follow-up actions when the psychological contract has been violated, its core is
a kind of anger, the staff feels the organization to be perfidious and be unfair.

3.2 The relationship between the psychological contract and the group cohesiveness
Now the concept of learning organization proposed by Peter – Sain is very popular, in fact, the core of
a learning organization is not only a team learning atmosphere with knowledge management, but also is
an organization with team’s vision. An enterprise wants to retain the outstanding talented person, how to
establish organization's mission, and instruct the staffs to establish their own aim, it is necessary.
Now speaks of one competitive team, we can speak of the enterprise cohesiveness to be very
important, the cohesiveness formation is a process that can be divided into three stages: First, the goal
attraction, namely the goal is attractive to the community members who have identically basic goals.
Next, the power, that plays an important role when the both sides know each other in the process of
mutual reaction. Lastly, every group should have an strong emotional attribution to all employees.
Drucker once said, for an enterprise, what to condense member’s spirit. There are several possible
answers, but one of the most important things is the enterprise employees’ degree in shared of the
organization’s mission. Actually this sharing degree is the staff and organization's psychological

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contract. To establish the psychological contract between an enterprise and employees, the enterprise's
internal training and the internal communication is very important, we know the world famous
enterprises, such as General Electric, Procter & Gamble, after the new employees enter into the
company, they will have a very long period of time to have company's training and learn the company's
idea. Such training is aim to make the employees clearly know their present locate position and check
whether they are consistent with the organization's goals at any time. Many organizations have
originated from the failure of top management's lack of clear objectives and a clear vision. As a manager,
must have forward-looking and strategic vision, and continue to implement the goals, because
employees want to work in a clear sense of direction.
Many organization's failures result from the top management’s lack of clear objectives and a clear
vision. As the superintendent, must have forward-looking and strategic vision, and continue to
implement the goals, because employees want to work in a clear sense of direction. The enterprise
which has established psychological contract to staff will greatly enhance the team cohesiveness and the
working efficiency. The level of group cohesiveness will have an important impact on the enterprise
efficiency, long-term development and corporate staff’s development. The group cohesiveness is not
only the manifestation of the spirit of enterprise, but also is the comprehensive reflection of the
enterprise’s competitiveness. The psychological contract theory helps enterprises to improve the
cohesiveness.

4 Group Cohesiveness and Organizational Performance

4.1 The relationship between each dimension of cohesiveness and organizational performance
Mullen& Copper believed that group cohesiveness including three essential factors: Interpersonal
attraction, task commitment, sense of honor and pride to group. They pointed out that the exploration to
the mutual influence about the different elements of cohesiveness, which will make it be clear to
understand some fundamental question about the mechanism that will affect team performance.
Thus, in his study, he analysed respectively the relationships between interpersonal attraction, task
commitment, sense of honor and pride to group and performance. The result showed that the task
commitment is the most crucial elements of group cohesiveness, and the others are not significant. We
extrapolate that this is because Mullen & Copper who actually used the performance in working (task)
performance, and interpersonal attraction, groups pride is a direct impact on the members of the group's
positive attitude.
Compared with the Mullen & Copper research, Beal uses meta-analysis to divide the performance in
detail. The performance is divided into behavior performance and result performance, performance
validity effectiveness and performance efficiency. . And the validity index has not considered the cost.
But the efficiency has considered the corresponding cost validity, that is, input-output ratio. The results
indicated that in the type of performance, cohesiveness and the two types of performance are related, but
the relationship between cohesiveness and behavior performance is more significantly. At the same
time, the relevant between cohesiveness and efficiency standards is higher than that of the relevance of
the effectiveness standard. In the dimensions aspect of cohesiveness, the interpersonal attraction, the
task commitment and the sense of sense of honor and pride to group obviously are related with the
performances.

4.2 The causal relationship between group cohesiveness and organizational performance
On the one hand, group cohesiveness can inspire and guide members to complete their missions
successfully. On the other hand, the prominent performance will also cause members to feel better to
group. Mullen& Copper has carried on the analysis through CLPC to timing pattern of the
cohesiveness-team performance effect. CLPC is one kind of analysis technique, carries on the survey to
two variables in two time points and explores the variable through time points and the cross time points'
correlation, analyses the possibility direction.

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Accordingly, Mullen & Copper pointed out, although the cohesiveness may bring the performance
improvement, but the performance improvement would have greater influence to the cohesiveness.

5 Psychological Contract and Efficiency

5.1 The instructive value of psychological contract to efficiency

With regulating people's interest relations, the instructive value of the psychological contract to
efficiency are focused on two aspects: First, reducing the opportunism behavior, saving transaction costs;
second, taking as a "moral capital", directly promoting the economic development, Improving the
economic efficiency.
5.1.1 Psychological contract’s system efficiency and cost-saving role
Any transaction costs are needed, especially the incomplete contract. As a conduct rule, Psychological
contract is an effective mechanism to overcome opportunism, to ensure cooperation, and to produce
"cooperation surplus". The reason why the psychological contract can restraint the transaction costs is
because it emphasized coordination interests and mutual benefit and the economic subject choose to
comply with morals, in fact, choose to respect other people's benefit to protect their own benefit, thus
effectively reducing the people to pay more expenses for preventing unethical moral behavior unethical
practices by the cost. There are a large number of redundant transactions actions between the staffs and
the organization. Such mutual exchanges, including the mutual contact in the economic life, rely on
some kind of trust. The trust takes one kind of order as a foundation. In order to maintain such order,
we must depend on rules to prohibiting all kinds of unpredictable behavior and opportunism. As an
informal rule, psychological contract, of course, should also be included.
Psychological contract takes as a moral value targets, it is a good panacea that overcome one’s
non-rational self-serving impulsion, tries to avoid all conflicts of interest caused by all kinds of
self-serving impulsion, enhances the people behavior certainty and predictability, and reduces the
business management cost. It uses the high moral behavior standard to reduce the opportunism and the
phenomenon of escaping duty, simultaneously increases the group members and the stakeholders of the
organization's confidence.
5.1.2 Productive efficiency of psychological contract as a form of social capital
As a spiritual value system, Psychological contract changes the people’s belief, becomes become a
significant intrinsic motivation to enhance economic efficiency in people’s economic activities, and
plays an important role.
According to enterprises psychological contract theory, the enterprise's essence is organizing team
production. Enterprise team which forms according to the psychological contract rule, its work
enthusiasm and initiative is bound to be increased, and forms remarkable superiority. The enhancement
of group members’ contract consciousness may improve the utilization of resources, which can save
more production costs. Thus it can be seen, that the psychological contract which takes as an ethical
value system and one kind of social resource will become the driving force to economic development

5.2 The psychological contract is the value measure and value goal of efficiency
Enterprise's survival and development take the social interaction relations as the background. The
survival and development of enterprises are in the context of social relationships. The contractual
relationship between the enterprise and the society are the key factors that would restraint or promote
the enterprise efficiency. The psychological contract attaches to the social economic efficiency, but
more emphasis on the distribution efficiency and overall long-term efficiency.

6 Conclusion

Organization efficiency is just contracted and confirmed by social contract as the means of fulfilling
their social obligations, the significance of the psychological contract’s value is to ensure the

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organization to fulfill the social obligations. The psychological contract is stipulating that the enterprise
efficiency be uniform with fairness, and it is playing the vital role in the enterprise.
Robinson et al believed the psychological contract is the key factors to a staff’s work attitude and work
behavior. Turnley et al found that the psychological contract’s fulfillment, especially the perceived
fulfillment of the psychological contract is obviously affects staff's performance and the group
cohesiveness.
The related psychological contract theory's empirical study confirmed that a responsible enterprise
can promote the formation of enterprise cohesiveness, enhance the level of commitment, staffs’ trust to
enterprises, their performance, and the employees’ loyalty.
The cohesiveness can act as “the lubricant” of organization operation, can reduce mutual frictions
between organization’s “component” in operation, can promote the improvement of production
efficiency, it can enhance the organization’s attraction and retain outstanding qualified talents, thus
promotes the whole organization’s efficiency
The above analysis shows that the cohesiveness non-correlated with performance has become an
important variable. The psychological contract is close to staff's work degree of satisfaction. The
psychological contract's maintenance is helpful in enhancing the staffs’ job satisfaction, staff's behavior.
The performance and the manner have an inseparable relation. Psychological contract strengthens the
group cohesiveness. Although the consequence of group cohesiveness and the performance is very
difficult, but one thing is certain, the higher organization cohesiveness and the higher achievements have
the close relation.

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