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CONSEQUENCE OF PSYCHOLOGICAL CONTRACT BREACH: THE MODERATING ROLE OF ADVERSITY QUOTIENT, PROFESSIONAL TRAINING AND TENURE Pao-Ling Chin Department of Business Administration, National Taipei University, 69, Sec 2, Jian-Kuo N. Rd., Taipei City 10433, Taiwan ROC Department of Insurance and Finance Management, Chihlee Institute of Technology, 313, Sec 1, Wun-Hua Rd., Banciao City, Taipei County 22050, Taiwan ROC Min-Li Hung Department of Business Administration, National
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  CONSEQUENCE OF PSYCHOLOGICAL CONTRACT BREACH:THE MODERATING ROLE OF ADVERSITY QUOTIENT,PROFESSIONAL TRAINING AND TENURE  Pao-Ling Chin Department of Business Administration, National Taipei University,69, Sec 2, Jian-Kuo N. Rd., Taipei City 10433, Taiwan ROC  Department of Insurance and Finance Management, Chihlee Institute of Technology,313, Sec 1, Wun-Hua Rd., Banciao City, Taipei County 22050, Taiwan ROC Hung  Department of Business Administration, National Taipei University,69, Sec 2, Jian-Kuo N. Rd., Taipei City 10433, Taiwan ROC ABSTRACT Insurance companies face fierce competitions within their respective markets inTaiwan and insurance companies all find any ways to increase the efficiency andreduce cost to ensure their success in the market. Reducing turnover rate is one of thekey strategies organizations take. The purpose of this paper is to explore howindividuals differ in their intent to quit such as psychological contract breach. Morespecifically, we propose that relationships between psychological contract breach andthe intent to quit are moderated by Adversity Quotient (AQ), professional training andtenure. The results of the study show that the higher psychological contractfulfillment, the lower intent to leave and the relationship between psychologicalcontract breach and intent to quit is moderated by AQ.Because the psychological contract fulfillment is multidimensional, we also examinethe moderating role of AQ, professional training and tenure across multiplecomponents of the contract. And, the results also state that AQ is all significantlynegatively moderated the intent to quit while the relational, transactional andtraining/development contract are fulfilled. However, the moderate role of  professional training and tenure in selling experience are not the significant on therelationship between psychological contract breach and intent to quit. Practical andmanagerial suggestions are also provided.Keywords : Psychological contract fulfillment, Intent to quit, Adversity Quotient(AQ) INTRODUCTION Although there are thousands of new insurance agents enrolled into the life insuranceassociation, the turnover rate for insurance agent is above 50% every year in Taiwan.Due to low qualifications required, insurance agent is one of the choices for freshmenas their first job in Taiwan. Selling insurance products are not easy due to fiercecompetition in insurance sector, as there are 30 life insurance companies in Taiwan. 1  To any service companies such as insurance companies, people are the most importantasset. Therefore, it is essential for insurance companies to recruit qualified sales andretain them as longer as possible to reduce to costs of recruitment and trainings andenhance effectiveness of human resource activities. Therefore, it is valuable tomanage employee’s intent to quit reduce the actual turnover rate.It is an emerging research topic to understand the intent to quit of employee from psychological contract breach. The renewed interest in the concept of the psychological contract has come to the fore in attempts to describe, understand and predict the consequences of changes occurring in the employment relationship.Therefore, this study tests the relationship between psychological contract and intentto quit of insurance agents in Taiwan.The data from insurance association shows, in recent 5 years, the insurance sales’turnover rate of 30% life insurance companies is higher than 50%. One of the reasonscausing high exit rate is the difficulties of the job nature of insurance sales. It iscommonly agreed that the job difficulties of insurance agent in Taiwan. As Darymple& Cron (1998) and McManus & Kelly (1999) state that life insurance sales easilyreceive rejection from customers and their works are with high frustrations.Psychological contract and Adversity Quotient are both constructs of psychology. Toour knowledge, there is no researches test the moderate effects of Adversity Quotienton the relationship between psychological contract breach and intent to quit toinsurance sales. It is reasonable to think that, while one feels their psychologicalcontract with organizations are violated, those who have greater AQ would havegreater abilities to face the frustration and then reduces the intent to quit.The psychological contract researches emerged from 1990. Research directions can begenerally classified as (1) how psychological contract be formed (Rousseau, 1990);(2) how psychological contract is broken (Schalk & Freese, 1997; Thomas &Anderson, 1998); and (3) the psychological contract breach (Morrison & Robinson,1997; Turnely & Feldman, 2000). Previous empirical researches showed that psychological contract breaches would negatively affect employees job satisfaction,organizational commitment (Robinson & Rousseau, 1994), organizational citizen behavior (Robinson & Rousseau, 1994), contract behavior (Coyle-Shapiro & Kessler,2000) and performance (Robinson, 1996). Research on psychological contract breach has focused on organizationalcircumstances that have created changes in the employment relationship, but notconcerning the impact of individual differences. It has been argued that a rapidlychanging work environment has altered the nature of the psychological contract. Toremain competitive, it is important that managers understand how individualdifference variables impact employee responses to the breach of psychologicalcontract. Raja, Johns and Ntalianis (2004) examined the moderating role of Extraversion, Conscientiousness, Neuroticism, equity sensitivity, self-esteem andlocus of control in the relationship between breach and outcomes. This study take afirst stem toward understanding these reactions by examining the moderating role of Adversity Quotient, professional training and tenure on the relationship between psychological contract breach and intent to quit. 2  LITERATURE REVIEW AND HYPOTHESES The concept of Psychological Contract was first used by Argyris (1960) and has beendeveloped further by the works of many researchers like Levinson et al. (1962),Schein (1980), and most recently by Rousseau (1989; 1995; 2000). Psychologicalcontract is an implicit exchange relationship between the employer and the employeesencompassing mutual expectations and obligation of each party towards the other.According to Rousseau (1989), psychological contract is promise based and over time, takes the form of a schema which is relatively stable. A schema is defined as ”acognitive structure that represents organized knowledge about a given stimulus – a person or situation – as well as rules that direct information processing” (Fiske &Taylor, 1984). Schema refers to an individual’s beliefs, frames of references, perceptions, values and concepts. Schema provides a base that serves as a guide to anindividual for information collection, assimilation, interpretation, actions, andexpectations, thereby simplifying cognitive processes by which people make sense of events and situation in which they may find themselves (Fiske & Taylor, 1984).Schemas typically influence the perception of incoming information, retrieval of stored information, and inferences based on that.It is commonly believed by researchers that psychological contract is an individual’s belief about the term and conditions of a reciprocal exchange agreement with anemployer – a belief that some form of promises have been made and that the terms areaccepted by all involved. By these observations, psychological contract becomes anunwritten set of expectations between everyone in an organization and unlike awritten contract, is of dynamic in nature. Although the contract is unwritten, it mayhave significant effect on employee behavior on the job, employee morale, performance and desire to leave the job. Rousseau (1995) also suggested that psychological contract depends on theemployee’s understanding of the explicit and implicit promises regarding theexchange of employee contributions (such as efforts, loyalty and ability) andorganizational inducements (such as pay, promotion, job security). Types of Psychological Contract  Two major types of psychological contracts have been evaluated: relational andtransactional (e.g. Rousseau 1990, 1995; Herriot, Manning & Kidd 1997; Anderson &Schalk 1998; Millward & Hopkins 1998; Millward & Brewerton 1999). Relationalcontracts characterize beliefs about obligations based on exchanges of socio-emotional factors (e.g. loyalty and support) rather than purely monetary issues. Akinto the traditional working 'partnership' between employee and employer, a relational-type relationship can engender feelings of affective involvement or attachment in theemployee, and can commit the employer to providing more than purely remunerativesupport to the individual with investments like training, personal and career development, and provision of job security. Transactional contracts, by contrast,centre on short-term monetary agreements with little close involvement of the parties.Employees are more concerned with compensation and personal benefit than with being good organizational citizens. Rousseau and McLean Parks (1993) argue thatthese contract types differ with respect to focus, time-frame, stability, scope andtangibility. Relational contracts tend to describe perceived obligations that areemotional and intrinsic in nature, whilst transactional contracts describe obligations 3  that are economic and extrinsic. Relational contracts are seen to have an open-ended,indefinite duration whilst the time frame for transactional contracts is more specificand short-term. Consequently, transactional contracts are also said to be static whilstrelational contracts are dynamic and evolving. In addition, the scope of relationalcontracts is more general and pervasive, subject to clarification and modification ascircumstances evolve. Relational contracts are, therefore, more subjective and lesstangible in comparison to transactional contracts. Millward and Herriot (2000) pointout, however, that the transactional-relational divide is not necessarily an exclusiveone. They suggest that the exchange relationship is better characterized as containingvarying degrees of both relational and transactional elements. In other words,individuals are not one versus the other and can instead have elements of both types intheir own individual psychological contract (see also Robinson, Kraatz & Rousseau1994). In addition to transactional or relational contract, Kickul and Lester (2001)further identify training as one category of psychological contract to respect the needof training for modern enterprises. Training contract is associated with continuing professional training, opportunities for personal growth, and career guidance.  Psychological Contract Breach Psychological contract is more subjective than a legal contract and has beendistinguished from the broader construct of expectations. The promissory expectationsin a psychological contract are “only those expectations that emanate from perceivedimplicit or explicit promises by employers” (Robinson, 1996, p. 575). The psychological contract breach is defined as the employee’s perception regarding theextent to which the organization has failed to fulfill its promises or obligations(Robinson & Rousseau, 1994). Although the term breach and violation is usedcommonly in psychological contract researches and not easily distinguished, wedefine the violation as an outcome of breach as researchers thought breach is thecognitive evaluation (Morrison and Robinson, 1997) and then violation is theemotional and affective state that may follow from the breach cognition.According to Zhao, Wayne, Glibkowski and Bravo (2007), there are commonly threeways breach has been measured which are composite measure, global measure andweighted measure. Composite measure differs from the other measures in that it refersto various content items of the psychological contract (e.g., high pay, training, and jobsecurity) and asks respondents how much the organization has fulfilled its obligationor promise on each item. The global measure does not refer to any specific contentitem but directly assesses subjects’ overall perceptions of how much the organizationfulfilled or failed to fulfill its obligations or promises. And, the weighted measure issimilar to the composite measure in that it uses a number of content-specific items of the psychological contract and asks respondents their perceptions of breach in thesecontents. However, it also asks subjects to indicate the importance on each of thecontent items. Each raw breach score is multiplied by the respective perceivedimportance score and then summed or averaged to yield a weighted breach score.Prior research suggests that an organization's failure to honor its promises(psychological contract breach) often has a negative impact on employee attitudes(Gakovic & Tetrick, 2003; Rousseau, 1995). In addition to the negative effect onemployee attitudes, prior research also suggests that psychological contract breachmay negatively impact employee behaviors (Kickul, Neuman, Parker, & Finkl, 2001;Robinson & Morrison, 1995). In general, social exchange theory has been used to 4
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