A sensemaking model of psychological contract change: When and how do employees respond to change

This study examined the dynamic nature of the psychological contract in the context of workplace changes. Sensemaking theory was utilized as a theoretical framework to develop a set of hypotheses that focus on -- (a) the contextual factors that lead to employee evaluation of what the organization provides as part of the psychological contract; (b) employee responses to changes in psychological contract (PC) fulfillment, and (c) the role of employee cognitions of attributions of responsibility and relative deprivation in shaping employee responses to PC breach.;A review of research on psychological contract, sensemaking, and cognitive psychology was conducted to identify salient yet unexplored relationships pertaining to the focus of the current research. Hypotheses were developed, and empirically tested using a longitudinal design. Data were collected from employees of an organization undergoing significant changes due to funding issues. Employees were surveyed at two points in time: first, 10 months prior to the funding announcement and, second, a week after the announcement. Supervisors responded to surveys assessing employee responses to changes in psychological contract. Results of the analyses show that 8 hypotheses were partially supported, and 2 hypotheses were not supported. A key finding of the study is that the effect of change on employee psychological contracts differs based on the type of psychological contract an employee holds with the organization. Employees with transactional and balanced types of contracts reported changes to their psychological contracts in response to contextual triggers; employees with relational contracts were not affected by the contextual factors associated with change. Another finding of the study pertains to the role of employee cognitions that are salient when employees perceive PC breach by the organization. When employees attribute intentionality to the organization's actions, the organization's failure to fulfill its promises exacerbates employee negative responses. However, employee attributions of foreseeability and justification did not affect employee response to PC breach. The final set of results shows that when employees experienced relative deprivation, they responded more negatively to PC breach.;The results of the study have implications for theory as well as practice. These are discussed in detail along with directions for future research.