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Trust and the

Trust and the psychological psychological
contract contract
Carol Atkinson
Manchester Metropolitan University Business School, Manchester, UK 227
Received January 2006
Abstract Revised May 2006
Purpose – This paper aims to contribute empirical data to the under-researched relationship between Accepted June 2006
trust and the psychological contract.
Design/methodology/approach – A case study approach is used carrying out 41 interviews in
three case study firms, adopting a critical incident technique (CIT).
Findings – Trust is present in all psychological contracts and its different bases, cognitive and
affective, underpin transactional and relational obligations respectively.
Research limitations/implications – A small-scale study using CIT which identifies especially
salient issues but is not necessarily exhaustive. Provides a base for more detailed study of the
relationship.
Practical implications – Demonstrates the impact of the differing bases of trust on the employment
relationship. This information could contribute to better managing the employment relationship.
Originality/value – There are few extant empirical data on this relationship and a contribution is
made to debates on the role of trust within the psychological contract by providing detailed empirical
data.
Keywords Psychological contracts, Trust, Employee relations
Paper type Research paper

Introduction
The psychological contract has achieved prominence as an investigative paradigm
within organisational research (Marks, 2001), providing a broad explanatory
framework for understanding employee-organisation linkages (Rousseau, 1989;
McFarlane Shore and Tetrick, 1994; Guest, 1998a). Despite this, there remains much
debate around its terms (Roehling, 1997) and there have been a number of critiques of
the concept (Guest, 1998a), which have led to calls for more rigorous theoretical and
empirical examination of it (Guest, 1998b).
The empirical data presented in this paper is intended to contribute to theoretical
development of the psychological contract, particularly in respect of trust and the
psychological contract which is argued to be under-explored (Robinson, 1996).
Arguments are presented in respect of the transactional/relational nature of the
contract and the cognitive/affective bases of trust and the relationships between the
constructs are explored. To support this, the study draws on Guest and Conway’s
(2002) definition the psychological contract which is argued to consist of the
perceptions of both parties to the employment relationship, organisational and Employee Relations
Vol. 29 No. 3, 2007
individual, of the reciprocal obligations implied in that relationship. This definition is pp. 227-246
adopted as it supports exploration of multiple perspectives of obligations within the q Emerald Group Publishing Limited
0142-5455
contract, those of both employer and employees, in three case study firms. DOI 10.1108/01425450710741720
ER In summary, this paper addresses a research question that considers the bases of
trust within transactional and relational psychological contracts in order to provide
29,3 theoretical development of psychological contract literature.

Conceptual overview
Trust is argued to be fundamental to the psychological contract (Guest and Conway,
228 1998), albeit there is limited consideration of trust in respect of the nature of the
psychological contract, that is, the extent to which it is transactional or relational, such
nature being considered by many to be central to the understanding of psychological
contracts (MacNeil, 1985; Rousseau, 2004). Consideration is thus given here first to the
nature of the psychological contract, so that the implications of transactional and
relational contracts for trust can then be further explored.

The nature of the psychological contract

Transactional contracts have been defined as specific, monetisable exchanges between
parties, the focus being on providing monetary remuneration for services provided by
the employee (De Meuse et al., 2001) and establishing the notion of “a fair day’s work
for a fair day’s pay” (Rousseau and Wade-Benzoni, 1994). Such contracts are premised
upon economic exchange perspectives (Rousseau, 1989). Relational contracts, however,
are presented as open-ended, less specific agreements that establish and maintain a
relationship, being based on emotional involvement as well as financial reward
(Robinson et al., 1994) and emerging from social exchange perspectives (Blau, 1964).
These definitions present transactional and relational contracts as being separate
entities, however, more recently it has been suggested that this may not be the case and
that there may be a continuum along which a contract is based, rather than it being
simply at one of the two extremes (Coyle-Shapiro and Kessler, 2000).
A range of research has produced an array of obligations that are purported to form
the psychological contract, albeit there is no clear agreement as to what a broadly
applicable set of obligations may be (Milward Purves and Cropley, 2003). There has
been similar debate over categorisation of obligations as either transactional or
relational, with a lack of clarity as to which obligations belong to which type of
contract (Arnold, 1996). Categorisation of patterns of employer and employee
obligations as either transactional or relational, rather than the contract itself does,
however, support the argument presented above that contracts may sit upon a
transactional/relational continuum rather than being at extremes.
Rousseau’s (1990) categorisation of obligations as transactional or relational is
shown below (Table I), albeit this is not universally accepted. Stiles et al. (1997), for

Employer obligations: Employer obligations: Employee obligations: Employee obligations:

transactional relational transactional relational

Advancement Training Notice Overtime

High pay Job security Transfers Loyalty
Table I.
Merit pay Development No competitor support Extra role behaviour
Categorisation of
Support Proprietory protection
employer and employee
Minimum stay
obligations as
transactional or relational Source: Adapted from Rousseau (1990)
example, argue that advancement (or career progression) is a relational employer Trust and the
obligation. psychological
It should be noted that Rousseau’s (1990) research is based, as is the research of
many of the US psychological contract researchers, on a sample of MBA students. It contract
may be that the obligations identified in this study do not have broad applicability
across a more diverse employee population.
Challenge to the transactional/relational continuum discussed above is raised by 229
Herriot et al.’s (1997) argument that transactional obligations operate as hygiene
factors (Herzberg et al., 1959), preventing a relational contract from developing until
they have been fulfilled. This debate is as yet unresolved and will be a focus of
investigation within this study.
A common theme within psychological contract literature is that of “breach” of the
psychological contract. Breach is relevant to this study as it is argued to have
implications for both the nature of the psychological contract and trust within the
contract. The following section, therefore, considers breach of the psychological
contract.

Breach and violation of the psychological contract

The term “breach of the psychological contract” refers to failure to fulfil obligations.
Perceived breach can and does occur in the absence of actual breach (Robinson, 1996)
and perceptions of whether or not obligations are fulfilled are not always shared by
employer and employee (Guest and Conway, 2001), arising from lack of mutuality in
the contract, that is, the extent to which the parties to the contract share perceptions of
its content. Perceptions of breach arise from a complex and sometimes imperfect sense
making process (Morrison and Robinson, 1997), but whether the breach is real or
perceived, its potential effects will be the same (Robinson and Morrison, 2000). It may
lead to violation, which in turn can lead to intense attitudinal and behavioural reactions
towards the employer (Morrison and Robinson, 1997), involving anger, resentment and
a sense of injustice (Rousseau, 1989; Robinson and Morrison, 1995; Roehling, 1997) and
to dissatisfaction and possibly the dissolution of the relationship itself (Robinson and
Rousseau, 1994).
The focus in the limited research on breach is on the employees’ view of breach
(Guest, 1998a). While data on the employer perspective is developing (Guest and
Conway, 2001; Conway and Briner, 2002), further research is required both into
employee breach of the contract (Robinson and Rousseau, 1994) and the employers’
view of breach (Guest, 1998a) and this study will conduct empirical investigation into
both the employer’s and the employee’s perspective on breach of obligations.
Research suggests that reaction to breach may vary depending on the nature of the
psychological contract (Robinson et al., 1994), there being general agreement that a
psychological contract becomes more transactional after a breach (Herriot and
Pemberton, 1996; Pate et al., 2003). In transactional contracts, breaches of obligation
may create perceptions of inequity in economic exchange and lead to feelings of
injustice and betrayal, the likely response being that the employee perceives his
obligations are reduced or employer obligations are increased (McFarlane Shore and
Tetrick, 1994), albeit those with a more transactional contract may have a less
averse reaction to breach, making emotions of violation less likely (Robinson and
Rousseau, 1994).
ER Thus, breaches of relational obligations are likely to have much stronger effects
29,3 than breaches of transactional obligations (Robinson et al., 1994), as employees place
greater emphasis on the employment relationship itself and will thus be more
negatively influenced by breach (Robinson and Rousseau, 1994). Breach in a relational
contract may change the nature of the social relationship (MacNeil, 1985), leading to
erosion of trust and relational obligations on the part of both the employer and
230 employee. Indeed, breaching relational obligations may destroy the relationship itself
(Robinson et al., 1994).
Discussion has thus far focused on the nature of the psychological contract and the
impact of breach upon this. As noted at the outset, however, exploration of trust and its
implications for understanding the nature of contract is essential, and some indication
is given in the above discussion of breach as to its impact upon trust. The discussion
now turns, therefore, to a detailed consideration of trust in order to suggest how trust
more be more fully integrated into psychological contract theory.

Trust and the psychological contract

In this paper, Lane’s (1998) perspective of trust as a social phenomenon rather than an
aspect of personality or an attitude is adopted, as this is seen to be consistent with its
role within the psychological contract. Trust is thus considered at the interpersonal
level, reflecting the relationship between employer and employee (Marlow and Patton,
2002).
In considering trust in relation to the nature of the psychological contract, Rousseau
(1995) and McFarlane Shore and Tetrick (1994) are among those who argue that trust
exists in relational contracts only. This view derives from the social and economic
exchange perspectives underlying the two types of contract, whereby trust is
considered to be fundamental to social exchange given its long term and diffuse nature,
but is not required in limited, short-term economic exchanges (Blau, 1964). Fox (1974),
while recognising the legitimacy of the argument regarding lack of trust within a
transactional contract, asserts, however, that a contract can never be totally devoid of
trust and that minimal trust must exist in some degree:
[. . .] the notion of a work relationship wholly without trust is only a polar extreme of a
theoretical construct and cannot be found in practice (Fox, 1974, p. 77).
It is thus argued in this paper that there is a need to investigate in more detail the
extent to which trust is present in transactional and relational contracts and how it
may differ across such contracts.
Such consideration of trust requires its definition, however, there are many varied
definitions of trust and no widely adopted consensus (Mayer et al., 1995; McKnight
et al., 1998). One credible definition (Whitener, 1997; Aryee et al., 2002) is:
[. . .] the willingness of a party to be vulnerable to the actions of another party based on the
expectation that the other will perform a particular action important to the trustor,
irrespective of the ability to monitor or control that other party (Mayer et al., 1995, p. 712).
This paper, however, adopts Butler’s (1991) assertion that knowledge of what causes
trust is more important than definitions of it and addresses Pate and Martin’s (2002)
call for detailed conceptualisations of trust to be integrated into models of the
psychological contract by considering the bases of trust. Turning to the trust literature,
rational calculative perspectives based on cognition have dominated models of trust,
albeit such perspectives have been criticised for ignoring the social context of trust, in Trust and the
which affect or emotion is a critical element of trust between persons (Tyler and psychological
Kramer, 1996). This has led to a number of treatments of the bases of trust, the most
prominent being cognitive and affective trust (Lewis and Weigert, 1985; McAllister, contract
1995) or similar (Lane, 1998; Atkinson and Butcher, 2003; Tyler, 2003). This paper
adopts a conceptualisation of trust that incorporates both its cognitive and affective
bases (Lewis and Weigart, 1985) and considers how these may relate to the nature of 231
the psychological contract. Cognitive trust is defined as being rational and calculative,
focusing on an individual’s gains, usually material, and emerging from an economic
exchange relationship (Tyler and Kramer, 1996). Affective trust, however, consists of
relational bonds between the parties, respect and concern for one’s welfare (Lewis and
Weigart, 1985), it is emotional in nature and not dependent on rationality, emanating
from a social exchange perspective (McAllister, 1995).
In developing an argument as to how this conceptualisation may help explain trust
within contracts of differing nature, this paper draws upon both social and economic
exchange theory. Both transactional contracts and cognitive trust are argued above to
arise from economic exchange perspectives and that obligations such as pay are
underpinned by a rational, calculative form of trust has intuitive resonance. Similarly,
relational contracts and affective trust are both argued above to emanate from social
exchange perspectives and again it seems plausible that obligations such as support
will be predicated upon a more emotional form of trust in which mutual respect and
concern for the others welfare are fundamental. It is, therefore, argued that
transactional contracts will incorporate cognitive trust, relational contracts being
dependent upon affective trust and investigation of this forms a key objective of this
paper.

Breach of trust and breach of the psychological contract

Such a fundamental role for trust in the psychological contract is supported by the
work of Robinson (1996) who considers trust and psychological contract breach. She
argues that, while breach of psychological contract obligations produces unmet
expectations, this alone cannot account for the effects of breach and that understanding
breach of trust is key to understanding breach of the psychological contract. Again,
however, her focus is on trust generally and more detailed conceptualisations are not
applied. Drawing on the conceptualisation adopted in this paper, consideration is given
to how breach of trust may impact on the nature of the psychological contract.
Models of trust development suggest that cognitive trust must exist before affective
trust can develop (Lewicki and Bunker, 1996), cognitive trust in the economic
relationship providing the required basis on which more emotional trust can develop.
Further, once affective trust has developed, cognitive trust becomes less important as
socio-emotional concerns dominate, albeit breach of affective trust may lead to a return
to reliance on cognitive trust (McAllister, 1995). Affective trust may, however, continue
in the face of certain breaches, as the high value placed on this kind of trust can lead
individuals to ignore disconfirming evidence of breach of a minor (cognitive) nature in
order to preserve their trusting intent (Robinson, 1996). Breach of cognitive trust is
likely to have a limited impact on the employment relationship, whereas breach of
affective trust can undermine, or even destroy, such a relationship, impacting as it does
on the very basis upon which the relationship has been established (Lewicki and
ER Bunker, 1995). These processes are argued to closely mirror the empirical data on
29,3 breach of contract, whereby breach of a relational contract renders it more
transactional, moving from affective to cognitive trust, and breach of a transactional
contract is likely to have a more limited impact. This further reinforces the argument
as to the relationship between type of contract and base of trust.
In summary, it is argued here that the relationship between trust and the
232 psychological contract is under-explored and that there is a need, adopting detailed
conceptualisations of trust, to further explore trust within transactional and relational
contracts, together with the implications of breach of contract for trust. This paper
goes on to provide empirical data in respect of these issues.

Methodology
The work of early writers on the psychological contract (Argyris, 1960; Levinson et al.,
1962) was characterised by a qualitative perspective (Rousseau, 2000), although more
contemporary work has tended to adopt a quantitative perspective (Conway and
Briner, 2002). Work in the field of trust has been similarly dominated by a quantitative
perspective (Bijlsma and Koopman, 2003). Increasingly, however, there have been calls
for a more qualitative approach in both fields (Tyler and Kramer, 1996; Robinson and
Morrison, 2000; Atkinson and Butcher, 2003).
The psychological contract is perception based (Guest et al., 1996), idiosyncratic
(Rousseau, 1989), context dependent (Conway and Briner, 2002; Pate et al., 2003) and a
social construction of reality (Rousseau, 1995). The literature on trust similarly
establishes the notion of trust as a social construction (Bijlsma and Koopman, 2003).
This paper argues for adopting a qualitative methodology to effectively explore these
constructs, as such an approach generates data that provides well-grounded, rich
descriptions and explanations of processes in identifiable local contexts (Miles and
Huberman, 1994), putting an emphasis on explicating the perspectives of the
participants in a given social situation (Shaw, 1999).
The research reported in this paper adopts a case study approach (Yin, 1994),
investigating trust and the psychological contract within three small firm case studies,
each employing between 60 and 95 employees. Each case study is analysed and
findings presented separately to preserve the context in which the data was collected
(Pate et al., 2003). Semi structured interviews (Breakwell, 2000), using a critical incident
technique (CIT) approach (Herriot et al., 1997), were conducted. CIT has been used in
the investigation of both the psychological contract and trust and requires that
respondents cite incidents that they believe are relevant to the issues under discussion,
in this case, fulfilment or breach of obligations within the psychological contract
(adapted from Herriot et al., 1997) and trust (adapted from Butler, 1991). A total of 41
interviews lasting 30-60 minutes were conducted, 12 interviews taking place in case
study one, 14 in case study two and 15 in case study three. An owner manager was
interviewed in each small firm, in order to investigate the employer’s perspective, and a
sample of employees was selected, from volunteers, in each firm to reflect a variety of
job roles and lengths of service to present the employee perspective.
The interviews were transcribed verbatim and analysed using a template approach
(King, 2004) to coding and analysis which establishes a coding book that is used to
structure data analysis and identify key themes. Codes were allocated to segments of
text that, according to the researcher”s interpretation, were relevant to the issues under
consideration, that is, obligations within the contract and trust. The interviews from Trust and the
the second case study (14 in total) were separately coded by an independent researcher psychological
and a coding match of 85 per cent is argued to provide evidence of reliability in the
coding process (Easterby Smith et al., 2002). contract
Analysis was enhanced by use of a software package that facilitated not only code
and retrieve searches, but also searches to identify intersections of descriptive and
interpretative code (Miles and Huberman, 1994), rendering possible more complex 233
levels of analysis. Data is thus presented in this paper not only via rich descriptions
drawn from interview transcripts, but also by numerical representation in data display
tables of critical incidents cited in interview (Lyons, 2000). However, no statistical
significance is claimed for the data displayed in this way, rather it is a numerical
representation of the researcher’s interpretation of themes within the data which also
makes an assumption that because an obligation was cited by a larger number of
interviewees, it had more salience to the respondents as a whole (Cassell and Walsh,
2004). It is argued that the patterns thus demonstrated are highly relevant and
beneficial in enriching the interpretation of data collected.

Findings and discussion

The interviews yielded a number of critical incidents in respect of the perceptions of
both parties of employer and employee obligations (Table II). While the identification
of these obligations is discussed and justified in significant detail in the broader
research project (Atkinson, 2005), the focus of this paper is the links between
obligations and the bases of trust and the obligations will thus be taken as given for the
purposes of examining issues of trust in more depth.
The rest of the findings are presented within the case study context as it is argued in
this paper that this is fundamental to understanding of the psychological contract. It is

Obligation Steel Co. Insurance Co. Technology Co.

Employer obligations:
a a a
Pay (T)
a a a
Benefits (T)
a a a
Career (T/R)
a a a
Environment (T/R)
a a a
Security (R)
a a
Support (R)
a
Recognition (R)
a a
Appraisal (R)
a a
Consultation (R)
a a
Training (T/R)
a
Job Content (T)
Employee obligations:
a a a
Work (T)
a a a
Overtime/flexibility (R)
a a a
Extra role behaviour (R)
Table II.
Notes: The (T) and (R) denote transactional and relational obligations respectively; aSignifies that Obligations within the
level of salience is determined by researcher influence from the interviews conducted psychological contract at
Source: Adapted from Rousseau (1990) the three case study firms
ER worth noting, however, both that the obligations identified are not fully consistent with
29,3 those identified by Rousseau (1990), which may derive from her very specific sample of
MBA students. Further, in comparing the employer obligations across the three case
study firms, a variety of obligations are perceived to exist within the different contracts.
The categorisation of these obligations as either transactional or relational was
made initially according to Rousseau’s (1990) categorisation (Table I). In some
234 instances, however, this categorisation did not cover the obligations identified and, in
others, it did not “fit” the obligation under consideration. In these instances,
categorisation was made by researcher inference and, as can be seen, resulted in a
number of variations from Rousseau’s categorisations. These will be discussed in the
findings that follow.

Case study 1: Steel Co.

The case study firm is in the manufacturing sector, employing 65 people, in the North
West of England. It is a limited company with most shares being held by two owner
managers, although some shares are owned by employees as part of an Employee
Share Ownership programme. Trading conditions are difficult and the firm has made
little profit in the previous few years, operating in an intensely competitive market
with tight margins.
Employer obligations were identified as being pay, benefits, career and
environment, together with security, support and recognition. Employee obligations
are perceived to be work, overtime and extra role behaviour (Table II). The most salient
obligations, inferred by the number of incidents cited, are pay and work which,
adopting Rousseau’s (1990) categorisation of obligations (Table I), would appear to
render the contract highly transactional.
The incidents cited refer to the perception of the existence of an obligation, not
necessarily its fulfilment; indeed, a high number of incidents demonstrate perceived
breaches of obligations by both employer and employees. For example, the employer is
perceived to have breached the highly salient obligation of pay:
In general, I think the worst thing that has happened here in the last 4 or 5 years, is that we
haven’t had one pay rise. You get inflation, I know it’s pretty low, but it’s still not gone . . . In
the mid-90s they made millions this company, and we never got nothing. Because things have
gone wrong, we still get nothing . . . We’ve had nothing at all for the last five years . . . That’s
the biggest bugbear (Machine operative).
In turning to consider trust in respect of the psychological contract, incidents cited by
interviewees demonstrating issues relating to trust were coded in respect of both
obligations within the contract and the base of trust to which they relate, be it either
fulfilled or breached (Table III).
The pattern of incidents clearly demonstrates that cognitive trust dominates within
the psychological contract at Steel Co., albeit that breach of such trust is almost as
common as its fulfilment, a not unexpected finding given the indication above as to the
extent of the perceived failure to fulfil obligations. These breaches of cognitive trust
lead to a low level of trust in the employment relationship, it is thus perhaps not
surprising that affective trust plays a limited role within the psychological contract,
and that there are numerous breaches of such trust where it exists.
The pattern of incidents further demonstrates that transactional obligations are
based in cognitive trust, the relational obligations having predominantly affective trust
 Breach of Breach of
Trust and the
Cognitive trust cognitive trust Affective trust affective trust psychological
Employer obligations:
contract
Pay (T) 18 15 0 0
Benefits (T) 5 3 0 0
Career (T) 0 2 0 0 235
Environment (T) 3 1 0 0
Security (R) 1 0 2 1
Support (R) 1 0 3 4
Recognition (R) 0 0 1 2
Employee obligations:
Work (T) 14 17 2 0
Overtime (R) 1 0 1 0
Extra role behaviour (R) 0 0 4 5
Total 43 38 13 12 Table III.
Obligations and the bases
Note: The (T) and (R) denote transactional and relational obligations respectively of trust – Steel Co.

as a base. The transactional/cognitive trust link is especially clear is respect of the

obligation already identified as most salient, that is, pay. The following is a typical
example:
I trust them to pay me my wages every month. I can’t think of any other incidents of trust
(Factory operative).
Trust in being paid clearly has a cognitive base, being part of an economic exchange.
Many other instances of trust were about breach rather than the existence of trust, the
example below being breach of cognitive trust:
I think they are unfair about when people are off sick, they don’t seem to help in anyway,
especially if someone is off long-term sick, they don’t really do much. I know that from
personal experience. [SSP] is £42.00, which doesn’t pay anything (Factory operative).
Thus, cognitive trust is breached in that employees do not believe that the employer
fulfils its obligations in respect of payment systems. The transactional obligation of
work also has predominantly a cognitive base, although again breaches of this trust
are perceived to be common.
The focus on transactional aspects is reinforced by breach of relational obligations
based in affective trust. For example, breach of the support obligation, as evidenced by
this view on the treatment by the owner manager of employees following the work
place accident that lead to the death of an employee:
Apart from me and [Senior Manager], no-one, not the Chairman or [owner manager] sat and
talked to them about it and people were low. That’s bad treatment from them . . . there is still
bad feeling about [owner manager] (Middle manager).
This evidences the employees’ perception that the owner manager is not interested in
their emotional wellbeing and lacks concern for them, a breach of affective trust.
Breach of affective trust is also apparent in respect of the relational obligation of
overtime, such breaches reflecting the views of the owner manager, who expects
ER employees to go “above and beyond” their job role, and is frustrated when they do not,
29,3 feeling that they do not support him in his business efforts.
Earlier discussion suggested that a cognitive base of trust is required before
affective trust can develop. These findings may suggest that limited affective trust is
related to extensive breach of cognitive trust and thus low trust levels in general.
Where affective trust has developed, however, it also seems to confirm the suggestion
236 that it is possible for it to exist, even if cognitive trust then disappears. The Supervisor
is an example of this: he was given his job back at the firm after a two year period of
absence related to personal difficulties and this treatment led to the development of
affective trust. He was then given additional duties without extra pay, leading him to
believe that cognitive trust had been breached. Despite this, he continued to have
affective trust in the owner manager in terms of the support offered to him.
In summary, Steel Co. demonstrates an extremely transactional psychological
contract, where the breach of salient transactional obligations situated in cognitive
trust leads to low levels of such trust and difficulties building affective trust.

Case study 2: Insurance Co.

The case study firm is in the financial services sector, employing 95 people, in the
North West of England. It is a limited company with all shares being held by three
owner managers. The firm is expanding rapidly, enjoying successful business
performance despite a highly competitive market.
Employer obligations are perceived to be pay, benefits, career progression and
environment, together with security, support, appraisal consultation and training.
Employee obligations are perceived to be work, flexibility and extra role behaviour
(Table II). The most salient obligations, inferred by number of incidents cited, are pay,
support and extra role behaviour. Obligations are generally perceived to be fulfilled,
resulting from strong mutuality in employer and employee perceptions as to what the
obligations are. Adopting Rousseau’s (1990) categorisations, the salience of relational
obligations such as support and extra role behaviour would suggest that the
psychological contract is predominantly relational, indeed employees referred to the
working environment as being one resembling a “community” and both employer and
employees felt well treated by each other.
While the transactional obligation of pay appears to have relatively limited salience
for employees, it must be of importance, perhaps confirming the suggestion that
transactional obligations serve as “hygiene” factors, losing their salience once fulfilled
and the focus turning to relational obligations. The obligation of career is deemed to be
relational in nature in Insurance Co. which is at odds with Rousseau’s (1990)
categorisation. This is discussed further below in relation to issues of trust.
In turning to consider trust in respect of the psychological contract, incidents cited
by interviewees demonstrating issues relating to trust were coded in respect of both
obligations within the contract and the base of trust to which they relate, be it either
fulfilled or breached (Table IV).
The pattern of incidents clearly demonstrates that affective trust dominates within
the psychological contract at Insurance Co. While there are a significant number of
breaches of cognitive trust in relation to the number of incidents cited, there are
relatively few instances of breach of affective trust. Breaches of cognitive trust appear,
 Trust and the
Breach of Breach of
Cognitive trust cognitive trust Affective trust affective trust psychological
Employer obligations:
contract
Pay (T) 8 3 0 0
Benefits (T) 0 0 0 0
Career (R) 0 0 6 0 237
Environment (R) 0 0 0 0
Security (R) 0 0 3 0
Support (R) 0 0 31 0
Appraisal (R) 0 0 1 0
Consultation (R) 0 0 6 1
Training (R) 0 0 4 0
Employee obligations:
Work (T) 3 1 0 0
Flexibility (R) 0 0 0 0
Extra role behaviour (R) 0 0 10 0
Total 11 4 61 1 Table IV.
Obligations and the bases
Note: The (T) and (R) denote transactional and relational obligations respectively of trust – Insurance Co

however, to have little salience, having limited impact on the broader employment
relationship, which is situated in affective trust:
I’ve been misled by a manager about what’s going to happen with pay . . . It was only last
week when I found out. I’m still happy with the company and everything. I wouldn’t leave, it
was a misunderstanding (Administrator).
Despite what appears to be a very clear breach of the pay obligation and associated
cognitive trust, the employee does not express emotions of violation that may arise
from the relational nature of the psychological contract.
This again supports the argument that, while cognitive trust may be required for
affective trust to develop, once in existence, breaches of cognitive trust do not
necessarily reduce affective trust. For example, a supervisor was concerned that a new
employee did not get a pro-rata bonus payment for his first quarter in employment, but
discounted this on the basis that treatment is generally of a very high standard.
Breaches of affective trust cited are on the whole relatively minor and do not, in the
main, appear to have led to emotions of violation which may again indicate a
willingness to discount minor breaches in a highly trusting relationship. The strength
of emotion that can be created by breach of affective trust is, however, clearly
demonstrated by the owner manager:
I would trust all my staff implicitly in all ways. Which is why, whenever I find somebody has
done something to me, it really upsets me. For instance, a particular manager, this is again an
example of me not following procedure, but this manager said he had done something . . . and
this was the first time ever that I had checked and he hadn’t done it. I just went unreasonably
mad, calling him all sorts of names, because I felt personally affronted. And I hope the staff
get that we don’t go around checking people . . . I think people know that they are trusted
(Owner manager).
ER The pattern of incidents also demonstrates that transactional obligations are based in
29,3 cognitive trust, the relational obligations having predominantly affective trust as a
base. The relational/affective trust link is especially clear is respect of those obligations
that have already been identified as being most salient, that is, support and extra role
behaviour. The strength of the views expressed by employees in respect of the support
obligation should not be underestimated:
238
In my own circumstances, I can only relate to when my parents died. Apart from just the
general time off for dependants, they were very kind and very caring . . . it was made clear,
that I would get the support if I needed it and I have no reason to doubt that (Administrative
officer).
This sentiment was expressed frequently by many employees in respect of a number of
issues, clearly demonstrating that they trust the employer to have their best interests at
heart.
The focus within the employee obligations is on the link between affective trust and
extra role behaviour, as the following quote indicates:
We’ve got a thing in force at the moment called project management . . . where something that
needs doing or improving, rather than just the managers doing it and then laying down what
you are going to do. We got ourselves in teams and basically came up with a lot of ideas
ourselves . . . they [managers] just left us to our own devices and that was something that has
made a massive difference . . . It’s alright telling somebody that they can do that and then go
away, but more often than not you are told, “no you can’t (Supervisor).
These sentiments are reflected many times in the data and reinforce the suggestion in
the literature that affective trust leads to employees seeking opportunities to enhance
their contribution (McAllister, 1995).
The links between the obligation of career progression and trust are, however,
contrary to expectation. Rousseau’s (1990) categorisation of career progression is as a
transactional obligation, but in this context it appears to be situated in affective trust.
The lack of clarity over categorisation of obligations was noted earlier and there is a
strong case for arguing in this context that career progression should be a relational
obligation. This is demonstrated by the following:
I’m very happy working for [Insurance Co.]. Obviously my length of service shows that. They
have been particularly good with me because I could still be just the company typist doing
insurance. They trusted me enough to give me a chance . . . So, my own personal working life
here, they have been very, very good to me. And the trust is there, they trusted me to do the
job and I’ve obviously trusted them. I trust them to treat me well, which they do (Personal
assistant to CEO).
The obligation seems to stem from personal relationships and the parties valuing each
other and clearly has an affective base of trust, as opposed to more transactional
underpinnings such as developing a portfolio to make oneself employable, as may be
the case if it were a transactional obligation. It may, therefore, be that categorisation of
certain obligations as transactional or relational owes more to context and the
underpinning base of trust than to the obligation itself.
Insurance Co., therefore, demonstrates a highly relational psychological contract,
where obligations are in the main fulfilled and affective trust leads to a positive
psychological contract and high employee performance, cognitive trust having a lesser Trust and the
role. psychological
contract
Case study 3: Technology Co.
The case study firm is a software house, employing approximately 90 people, 70 of
whom are based in the North West of England, across two sites, and 20 of whom are 239
based in the USA. Despite being leader in its specific niche market, the firm faces
market saturation and falling revenues, barely breaking even. Financial constraints
have led to two redundancy programmes in the previous three years.
Employer obligations are perceived to be pay, benefits, career progression and
environment, together with security, appraisal, consultation, training and job content.
Employee obligations are perceived to be work, flexibility and extra role behaviour
(Table II). The most salient obligations, inferred by the number of incidents cited, are
security and consultation. Adopting Rousseau’s (1990) categorisation of obligations
(Table I), the emphasis within the psychological contract upon security and
consultation should render it predominantly relational. However, there is significant
breach of these obligations, particularly job security and the contract in Technology
Co. cannot be described as relational. It is rather in transition as a result of a changing
context and the breach of relational obligations renders it predominantly transactional,
the focus being on the transactional job content obligation which, given that the
majority of employees are highly technical and value these skills, appears to offset
many of the other problems in the employment relationship:
Sometimes it’s fantastic, and sometimes its dreadful [working for Technology Co]. Fantastic
is we write a fantastic product, the actual software we make it’s, from a programmers point of
view, it’s very interesting and very unusual challenges. It’s used in labs, so everything has to
be done with one hand, so you’ve got to be able to control the software from one hand on the
keyboard, so it means you can’t do two key presses, totally unusual challenges. I would hate
to work for a company that runs software for a bank or an accountancy package or for mobile
phones, because I couldn’t imagine anything more boring. This is highly unusual, it’s really
interesting (Software developer).
The “dreadful” referred to in the above quote relates to lack of job security, career
prospects and the increasingly formal working environment but, this appears to be
significantly mitigated by the content of the job itself.
The obligation of training is deemed to be transactional in nature in Technology Co.
which is at odds with Rousseau’s (1990) categorisation. This is discussed further below
in relation to issues of trust.
In turning to consider trust in respect of the psychological contract, incidents cited
by interviewees demonstrating issues relating to trust were coded in respect of both
obligations within the contract and the base of trust to which they relate, be it either
fulfilled or breached (Table V).
The patterns above very clearly demonstrate that affective trust dominates within
the psychological contract at Technology Co. While this does not immediately seem to
be congruent with a transactional psychological contract, the majority of incidents
cited in respect of affective trust refer to its breach, this being likely to render the
psychological contract more transactional. The majority of such breaches surround the
job security obligation:
ER Breach of Breach of
29,3 Cognitive trust cognitive trust Affective trust affective trust

Employer obligations:
Pay (T) 1 5 0 1
Benefits (T) 0 0 0 1
Career (R) 0 0 1 1
240 Environment (R) 0 0 2 2
Security (R) 0 0 2 28
Appraisal (R) 0 0 0 0
Consultation (R) 0 0 22 10
Training (T) 4 4 0 0
Job content (T) 3 2 0 0
Employee obligations:
Work (T) 1 7 0 0
Flexibility (R) 0 0 3 3
Extra role behaviour (R) 0 0 5 0
Table V. Total 9 18 35 50
Obligations and the bases
of trust – Technology Co. Note: The (T) and (R) denote transactional and relational obligations respectively

Then there was one [redundancy programme] at the end of 2002, and then there was another
one in October 2003. And what upset us about the October 2003 one was that they said in
December 2002, “we won’t have to have any more redundancies” and ten months later 14
[employees] went (Systems analyst).
Cognitive trust has a lesser salience, although again breaches of such trust
predominate over its fulfilment. The patterns demonstrated above render it difficult to
describe Technology Co. a high trust environment, the owner manager’s comments in
this respect being illuminating:
Trusting people, no . . . I’m struggling. I don’t take much on trust. As an accountant, you tend
to want to see things [happen]. Fundamentally, I’m always very cautious, whilst I may allow
people to get on with things, some how I’ll check it’s happening. I don’t necessarily trust
people to do what they’re expected to. I’m a low trusting individual (Owner manager).
The pattern of incidents displayed also reinforces the argument that transactional
obligations are predicated upon cognitive trust, this relating to the pay, benefits,
training, job content and work obligations, and, while such obligations are generally
felt fulfilled, a small number of breaches of cognitive trust are cited for each. Similarly,
relational obligations are predicated upon affective trust, or its breach. This perhaps
reflects the shift from a formerly relational contract to a more transactional contract,
the emphasis within such breaches being clearly on the job security obligation:
Obviously, the redundancies, I think undermined trust throughout the entire company,
particularly as I say when you were being told everything is fine, and that you are all doing a
great job, and then suddenly it’s like six weeks later . . . we are going to have to have another
round of what is called restructuring (Software developer).
The breach of affective trust in respect of the job security obligation has led to
emotions of violation, employees expressing anger and outrage, and leading them to
focus on the transactional aspects of the relationship. The exception to this is the
consultation obligation, which in some instances is felt fulfilled, albeit there are also a Trust and the
number of incidents cited in respect of breach of the consultation obligation, employees psychological
suggesting that the firm treats them poorly. Employees indicate that they are invited to
take part in employee opinion surveys, but either refuse to do so or are not honest in contract
their feedback as a result of fears over lack of confidentiality and reprisals.
Despite this, employees continue in some cases to fulfil the relational obligation of
extra role behaviour, this being for the benefit of the firm, part of an ongoing social 241
relationship that goes beyond the economic and rational:
Just before Christmas we had a release going out and were working very, very hard to a very
tight deadline, and I think the whole of the development team, who were involved, worked
way over their hours, their regular and flexi-time hours, they came in at weekends (Owner
manager).
Thus, employees may continue to fulfil relational obligations, even where they believe
the employer to have breached its own obligation.
The categorisation in this case study of both the career and training obligations are
at odds with that of Rousseau (1990). The career obligation is categorised as relational
for the purposes of this case study on the basis that it is perceived to be desired as part
of an ongoing social exchange that employees view in terms of the firm valuing them
and constituting part of an ongoing, diffuse relationship as opposed to employees
operating as “human capital”, gaining experience that they may transfer to another
employer as it suits them. This does not necessarily mean that this obligation is
fulfilled, the impact of such breach having a profound impact on the psychological
contract.
Additionally, training is categorised here as a transactional obligation as its focus is
on equipping employees with the skills to deliver their technical responsibilities, that
is, it is predicated on notions of economic exchange and cognitive trust, as opposed to
Rousseau’s relational categorisation which considers longer term development of
employee potential which derives more from social exchange and affective trust.
Again, it seems that categorisation of an obligation may depend more on the context of
the employment relationship and trust within it than on the obligation per se.
The findings presented support the trust literature in that breach of affective trust
will lead to emotions of violation and a focus on cognitive trust, consistent with breach
rendering a relational contract more transactional.
In summary, the psychological contract in Technology Co. is complex, being in
transition. Breach of obligations as a result of redundancy programmes has led to a
contract in which breach of affective trust dominates and employees focus increasingly
on transactional obligations.

Conclusions
The socially constructed nature of the psychological contract is evidenced within this
paper, especially in Steel Co., where there is low mutuality in perceptions of
obligations, leading to perceptions of breach of such obligations. The importance of
mutuality in avoiding breach of the psychological contract and building a positive
relationship is also apparent, primarily in Insurance Co.
It further seems that there is no definitive set of obligations that form the content of
the psychological contract (Millward Purvis and Cropley, 2003). These vary by
ER individual and by organisation, recognition for example being present in the contract
29,3 at Steel Co. but not Insurance Co. and training in the latter but not the former. While it
seems possible that generalisations can be drawn within an organisation as to what the
obligations are, across organisations this “deal” is likely to vary widely. This reinforces
the need for a robust theoretical framework with which to analyse psychological
contracts within specific contexts and also underlines the importance of qualitative
242 research methods, which again work within specific contexts to tease out nuances
within the employment relationship.
The data also supports argument that transactional obligations act as hygiene
factors, rendering the development of relational obligations difficult until they are
fulfilled. For example, the transactional contract at Steel Co. limits the meaningful
development of relational obligations, most being cited in breach rather than
fulfilment. This further explains the seemingly low salience placed by employees at
Insurance Co. on transactional obligations, although intuitively it would seem that
issues such as pay must be of importance. It may be that such obligations act as
hygiene factors, losing salience once fulfilled and the focus then moving onto relational,
or “motivational” obligations.
The real contribution of this study, however, is in exploring the nature of trust
within the psychological contract, having earlier indicated that it is under-researched.
Using economic and social exchange perspectives, it was proposed that transactional
obligations would be situated in cognitive trust and relational obligations in affective
trust. The findings presented suggest that trust is indeed present in all psychological
contracts, albeit that it differs in nature. Cognitive and affective trust is demonstrated
to prevail to different extents across contracts that differ in nature, clear links being
evident between relational obligations and affective trust and transactional obligations
and cognitive trust.
The findings presented also seem to confirm suggestions in the trust literature that
cognitive trust needs to develop prior to affective trust being possible, but that once
established, affective trust can continue in the absence of cognitive trust. Affective
trust also seems to be linked to employees enhancing their contribution, clear examples
of extra role behaviour being presented at Insurance Co., whereas breach of the work
obligation is perceived, at least by the owner manager, to be frequent at Steel Co.
The links between trust and breach of the psychological contract are also in
evidence and shed light on this under-researched area. Failure to fulfil perceived
obligations leads to breaches of both cognitive trust and affective trust. Breaches of
cognitive trust seem to render an already transactional contract even more so, but such
breaches seem less likely to impact on a relational contract. Breach of affective trust
within a relational contract, however, seems likely to lead to strong emotions of
violation and a consequently more transactional contract, as evidenced at Technology
Co.
A further point of note is in respect of the lack of clarity over the categorisation of
obligations as transactional or relational. The obligation of career progression is
suggested by Rousseau (1990) to be transactional, on the basis that career issues are
situated in economic exchange perspectives, an employee taking what he or she can
from the organisation and then moving on when appropriate, having developed
“employability”. In Insurance Co. and Technology Co., however, career progression
seems to be firmly situated within affective trust (or its breach). This develops from
social exchange perspectives where employees see themselves having a long term Trust and the
ongoing relationship with an employer who values them and invests in them, psychological
developing them into new roles. While it seems likely that certain obligations will
always be situated in a particular basis of trust, for example, pay having a cognitive contract
base, it is possible that other obligations may depend for categorisation on the basis of
trust that underpins them, and that this may change by context. This would certainly
help to explain the existing lack of clarity over the categorisation of obligations, again 243
suggesting that such issues are context dependent.
In summary, this paper presents empirical data that demonstrates that trust is
present in all psychological contracts, but may differ in nature and that this has
implications for the transactional or relational nature of the psychological contract.
Understanding the bases of trust that operate in the psychological contract and the
implications of their manner of operation may well have practical implications for the
management of the employment relationship. For example, an employer is unlikely to
be able to develop and benefit from affective trust if there are frequent breaches of
cognitive trust. Cognitive trust and transactional obligations appear to operate as
hygiene factors that must be adequate before the relationship can move to a more
relational/affective level.
While the study has limitations, in that it is small scale and the critical incident
technique adopted raises issues of salience but may not cover all issues
comprehensively, it makes a valuable contribution to the debate on trust and the
psychological contract, while raising areas for further investigation. Further
examination of the link between the nature of trust and the transactional or
relational nature of an obligation, and the extent to which the two are interdependent
would be of value, as would an exploration of these issues in other contexts. It seems
that trust is a key element within the content of the psychological contract and
understanding this more fully can only help in exploring and perhaps managing the
employment relationship.

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About the author

Carol Atkinson is a Senior Lecturer at Manchester Metropolitan University where she teaches
Employee Resourcing, Performance Management and Research Philosophy to Masters in HRM
students. Her research interests include the psychological contract and working time flexibility.
She is currently engaged with colleagues in a British Academy funded research project
investigating working time flexibility for older workers in small and medium sized firms. Carol
can be contacted at: c.d.atkinson@mmu.ac.uk

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