Journal of Organizational Culture, Communications and Conflict (Print ISSN: 1544-0508; Online ISSN: 1939-4691 )


Design of Psychological Contracts in Japanese Firms and their Binding Force

Author(s): Yasuhiro Hattori

This study examines the design of psychological contracts for permanent employees hired as new university graduates in Japanese firms from a contract feature-oriented perspective. Analysis revealed that psychological contracts for such new-graduate hires are more implicit and less formal than for other employee categories. This shows that the reciprocal obligations between Japanese firms and regular employees hired at graduation are almost never described in detail in the form of written contracts and seem to support that notion that the employment relationship of regular employees at Japanese firms truly starts based on a ‘white stone plate.’ The analysis results of the present study also failed to indicate any differences between these new-graduate hires and other types of employees in terms of the other contract features examined: flexibility, level and negotiation. In general, based on this study, we can conclude that psychological contracts of regular employees at Japanese firms hired at graduation, at least in terms of how they compare to those of mid-career hires and part-time workers, are more implicit and informal. However, we cannot claim there were any differences between these employee categories for the features of flexibility, level and negotiation. The analysis results revealed that employees have stronger perceptions of their employer upholding their end of their psychological contract when the employer’s obligations are explicit and when these obligations are established through negotiations between the employee and the organization. Explicitness helps to align the perceptions of superiors with those of the employees themselves. Contracts being established by reciprocal negotiation also had a positive effect on the degree of employer contract fulfillment perceived by employees. The negotiation process itself likely helps to coordinate perceptions between superiors, HR officials and employees. Contracts being written did not significantly influence their binding force. Whether or not obligations are put into writing may not be as important in explaining the apparent advantages of explicitness-both in coordinating the perceptions of superiors and subordinates and in committing superiors to fulfill their end of the contract-as whether or not said obligations are expressed in clear language. And, as expected, level had a negative effect on the perception of contract breach. Employees commit more strongly to their own individualized contract than they do to collective contracts: consequently, their assessments of employer contract fulfillment should be stricter and it becomes more likely for them to perceive contract breach. With regard to flexibility, while a statistically significant relationship was observed in the analysis of the complete sample between it and contract breach, no such correlation was observed in the respondent segment of newgraduate hires. Normally, when contractual obligations can be modified dynamically, it would become more likely for changes to occur that employees can perceive and accordingly easier for them to detect employer breach of contract. In addition, such flexible obligations also represent situations where once-established agreements can be readily reneged on from the standpoint of superiors (the employer’s agents), which should reduce the likelihood of contract fulfillment. In the case of new-graduate hires, however, such apparent changes to contract terms may not occur as readily, preventing divergences in opinion from occurring between them and superiors. And finally, we discuss the meaning of these results and its implications.