Psychological contracts in the virtual environment

Psychological Contracts in the Virtual
Environment
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“An in-depth research on the relationship between the
psychological contract and virtual team effectiveness.”

by
Hjalmar van Marle
2010

STATEMENT OF AUTHENTICITY

I have read the TiasNimbas Business School Regulations relating to plagiarism
and certify that this project is all my own work and does not contain any
unacknowledged work from any other sources.

I confirm that the Word Count as per the Regulations is 19.290 words.

Signed:

Date:
September 9th, 2010

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KEYWORDS & ABSTRACT

Name: Hjalmar van Marle
Title: Psychological Contracts in the Virtual Environment

KEYWORDS
Psychological contract; Inferred Promises; Reciprocal Obligations;
Psychological contract Violation; Virtual team; Virtual Team effectiveness; Team
Dynamics.

ABSTRACT
This study involves research on the psychological contract of the members of a
virtual project team. Its aim is to define whether there is a relationship between
the psychological contract of virtual team members and their team’s
effectiveness. Working with virtual teams is becoming increasingly popular at
the beginning of the twenty-first century. Advances in technology and the
changes on the labour market enable organizations to be flexible on the one
hand, but threaten job security their employees on the other. Virtual teams are
an example of this increase in flexibility, facilitated by advanced technology.
This virtual environment however does introduce a new set of challenges to
members of virtual project teams.

The objective of this study is to gather information about the psychological
contract of virtual team members and gain more insight in its effects on the
virtual team’s effectiveness. An inductive approach is taken and qualitative data
will be gathered through in-depth interviews with twelve virtual team members
that have been working on the same virtual project.

Research results clearly show decreased levels of trust, commitment and
cohesiveness. This indicates a more fragile environment in which psychological
contract violation is more likely to occur. Team effectiveness will be negatively
influenced in the events of contract violation.

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Recommendations based on this research will include implications for human
resources and project managers. These groups will be concerned most with the
design of a virtual team and the success of the virtual project.

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PREFACE

After a period of seven years of study, everything I have learned will finally
come together in this thesis project. Seven years feel like quite a long time, but
they went by so fast. It has been a difficult, but an inspiring period, in which I
have put my dearest and myself to the test. A period in which sacrifices have
been made, but that brought many new opportunities as well.

The final two years at TiasNimbas have brought closure to this period, as I am
about to leave this business school as an International MSc in Business
Administration, specialized in Marketing Management. It has given me a
platform to not only broaden my knowledge, but to define the purpose for my
future career as well.

It is hardly possible to thank everyone, but some people deserve to be
mentioned. The very first person I would like to thank is my girlfriend Ingrid,
whom has had to endure the most difficult times with me. She has given me all
the support necessary. She has brought up the patience to review my work and,
even more important, she brought up the patience to live with me those years.

More thanks go to my family. My mother, brother, sister and father have made
this study possible by being patient and supportive at all times.

Of course, I would also like to thank my supervisor Prof. Alf Crossman for his
contribution to this piece of work. He has brought up the best in me and I could
not have had a better companion to work with.

This thesis describes the psychological contract and its implications in the
virtual environment. This subject has been of my interest ever since the lectures
of my supervisor and it will certainly stay that way for quite a while.

Hjalmar van Marle
Utrecht, September 9th 2010

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TABLE OF CONTENTS

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LIST OF FIGURES

LIST OF TABLES

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Psychological Contracts in the Virtual Environment 9 of September 2010

Chapter 1
INTRODUCTION

This document is the result of the master thesis project, written as part of the
master program International Business & Marketing at the TiasNimbas
Business School in Utrecht. From July until September research has been done
on the relationship between the psychological contract and virtual team
effectiveness. This chapter provides an introduction on the subject matter,
background information, the aims and objectives, theoretical relevance, and
information on what to expect of the structure of this thesis project.

1.1 Subject matter
Most people are not familiar with the term psychological contract. Most of us are
not even aware of the fact that we have one ourselves, until we find ourselves in
a situation in which it emerges. Imagine your latest performance appraisal. Did
you not feel betrayed your supervisor did not give you promotion? Did you not
feel, that you deserved that raise, because your manager said you have
performed excellent? Well then... You should have written it all down.

Psychological contracts are derived from inferred promises and obligations
between two parties. They include every unwritten agreement that resides in the
mind of an individual and to which each party is held responsible by the
individual. The psychological contract has been thoroughly researched by
academics. It is an increasingly hot topic in the field of HR, as the current
macro-economic situation opposes a threat to job security and stability.

Another macro-environmental factor becomes increasingly important. The
emerging virtual environment sets a new stage for organizations. A stage in
which internationally assembled teams can work on the same project, enabling
them to work across space, time and culture. Virtual projects are subject of
research since the 1980s, but due to the technological advances that have been

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made the last decades multinationals make increasing use of them. However,
virtual working does come with a new set of characteristics. Virtual project
teams are different than traditional project teams. They require different inputs
in terms of design, resources, skills and abilities. Socio-emotional and task
processes need a different approach as well.

These changes in the environment we do business in are bound to have an
effect on the productivity and effectiveness. This thesis project is concerned
with the relationship between the two variables described above and the way
they affect the results of virtual project teams.

1.2 Background information
Although the psychological contract has been introduced already more than four
decades ago, research on this topic received significant attention from the
beginning of the ‘90s (Rousseau 1989; Rousseau 1990; Robinson and
Rousseau 1994). Early research described the psychological contract as
reciprocal obligations between an employees and his/her organization.
Rousseau's research has set the basic framework around the psychological
contract, being individual employees’ beliefs about the mutual exchange
relationship between employer and employee (Rousseau 1989).

From the beginning of the 90s to later in the 90s, research on the psychological
contract was done on different subjects related to it, being violation, trust and
breach (Robinson 1996) and the perceptions of both parties and their offering
on the written contract (Herriot and Pemberton 1995). These perceptions,
together with the unwritten promises would lead to mutual obligations, which are
partly put on record in the written formal contract of employment, but are for the
most part implicit, covertly held and only infrequently discussed (Anderson and
Schalk 1998).

In the beginning of the 21st century, virtual teams became a topic in the field of
Human Recourse Management (HRM) and organisational behaviour. This has
led to numerous reports on how working virtually affected the outcome of the

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project (Maznevski and Chudoba 2000; Kayworth and Leidner 2002; Kirkman,
Rosen et al. 2004) and virtual team processes (Jarvenpaa and Leidner 1999;
Piccoli and Ives 2003).

Jarvenpaa and Leidner (1999) were the first to actually relate virtual teams with
trust, which in its turn is linked to the psychological contract. Their research
focussed on whether it was possible for trust, or swift trust, to exist between
virtual team members, concluding there were at least some forms of trust
created within virtual teams. Later on in the 2000s, several more articles have
been published, relating trust (Piccoli and Ives 2003; Coppola, Hiltz et al. 2004;
Crossman and Lee-Kelley 2004) to team dynamics and behaviour control.

Team effectiveness in virtual teams has only recently been a subject of study
(Maznevski and Chudoba 2000; Kayworth and Leidner 2002). Their studies
mainly focus on how working in a virtual environment affects the perceived team
effectiveness. In their research, the relationship with the psychological contract
explicitly, is not subject of study, forming the so called gap which this thesis
attempts to fill.

This report will contribute to the ongoing discussion on working with virtual
project teams and gives new insights on how the psychological contract is
related to team effectiveness. It involves reciprocal obligations and inferred
promises, and links these subjects to team effectiveness. This is done by giving
an in-depth practical example of a virtual project team and their experiences
with the topic and placing these experiences in the theoretical framework.

1.3 Aims & Objectives
Studying the psychological contract in a virtual environment is relevant to
organizational studies today. The increasing use of virtual working in a new
virtual environment opposes virtual project teams to entirely different
challenges, than they were used to in traditional project teams. Academic
research has covered the topic of virtual teams broadly. However, the
relationship between virtual work and psychological contracts is limited. The

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psychological contract has been the subject of research for the past decades
and its implications have been broadly discussed. This study aims to close the
gaps in the published academic research on virtual team effectiveness and the
psychological contract. Existing literature does confirm that some of the unique
characteristics of the psychological contract can be found within virtual project
teams. Besides that, there is enough reason to believe that virtual team
members, as they are regular employees of an organization as well, hold their
own individual psychological contract. What we do not know, is how it is
influenced by virtual working and the effects it will have on the team’s
effectiveness.

For that reason, the principal aim of this thesis project is to learn more about the
psychological contract within a virtual environment. The objective is to define
this relationship and provide recommendations to those organizations that work
with virtual teams. Another aim is to define the relationship between the
psychological contract and virtual team effectiveness. The objective here is to
provide more insight on what variables have an either positive or negative effect
on the virtual team’s performance. The results of this research might be of
practical use for organizations working with virtual teams and those working in
the field of organizational behaviour. It might be of particular interest to the field
HR and project management, as these departments are most concerned with
the design and execution of virtual projects.

1.4 Theoretical relevance
This thesis project will contrast classical theories on the psychological contract
with current theories on its implication in working in project teams. As different
variables of the psychological contract, like trust and commitment, will be
researched within a virtual environment, literature on these variables will be
included. Subsequently, this research will include team dynamics and the
differences between virtual and face-to-face team processes. It will identify gaps
in the existing literature, related to the research question. Interview questions
will focus on filling the gaps identified.

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1.5 Thesis project structure
In order to explore the concept of the psychological contract within the virtual
environment, a theory will be built to explain the relationship between both
variables. To accomplish the main research objectives, a theoretical as well as
an empirical study was conducted, which is structured into seven chapters.

The first three chapters are designed to introduce the reader to this thesis
project and the subject of study. This first chapter is the introduction to the
research. The second chapter is an overview of the aims and objectives
regarding the research. In this chapter, the connections between the
psychological contract and virtual team effectiveness are made. The literature
review, chapter three, is concerned with a thorough analysis of the available
literature. First, the psychological contract is explored, and then the virtual team
environment is analyzed. In both cases a definition is given first, after which the
main themes are elaborated on. The psychological contract literature will focus
on the definition of this variable and its unique characteristics. The virtual team
literature will focus more on the environmental context in which virtual teams
operate. At the end of the literature potential gaps will be explored, as both
psychological contract and virtual team literature are combined. Then the
research question is drawn up, that will enable us to close these gaps.

The fourth chapter includes the research methodology. Here the research
design is discussed. It consists of the research approach, the research
philosophy, the research strategy, methods of data collection and a detailed
research procedure. This chapter describes how the secondary data is
processed and in what way the data of the primary research will be gathered.
Final part of this research includes the last three chapters. These are concerned
with a presentation of the findings, reflections on the research and the
discussion of the results. The fifth chapter elaborates on the most important
findings. The sixth chapter includes the lessons learnt during the research
project and the seventh and final chapter will lead to the conclusions and
recommendations.

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Chapter 2
LITERATURE REVIEW

2.1 Introduction
This chapter reports the secondary data collection to map and assess the
existing intellectual scope of the relationship between the two variables at the
foundation of this research. The current academic background of the
psychological contract and the virtual team environment will be explored, in
order to develop a thorough understanding of previous research topics, related
to the subject of this thesis.

The literature review will first of all give a thorough theoretical background of the
psychological contract literature, in order to create a basic understanding of the
holistic research topic. Then, the environment in which virtual teams operate will
be outlined, listing its challenges and benefits. The final paragraph of this
literature review will discuss current literature on the relationship between both
variables in order to identify the knowledge gaps. These will then be
summarized, leading to the research question of this thesis project.

2.2 The psychological contract

2.2.1 Evolution of the psychological contract
During its history, the psychological contract has evolved from “an implicit
understanding between a group of employees and their foreman” (Argyris 1960)
to “an individual’s beliefs regarding the terms of conditions of a reciprocal
exchange agreement between the focal person and another party” (Rousseau
1989). It is an exchange concept providing a broad explanatory framework for
understanding employee-organization linkages (Anderson and Schalk 1998).

The first definition of an implicit understanding has been further developed by
several academics. This development presents the evolution this topic has gone
through, while it has been criticized and refined throughout its academic history.

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This paragraph is designed to explore this evolution and provide the reader of
this thesis of a basic understanding of this research topic. Its complexity will
become clear by discussing the definitions that academics have used in the
past.

It is about fifty years ago, that the first definition of the psychological contract
can be found in academic literature. Argyris (1960), an academic in the field of
organizational behaviour, is considered to be one of the founders of this subject.
He (1960) defined the psychological work contract as:

“employee and employer expectations of the employment relationship, in
terms of mutual obligations, values, expectations and aspirations that
operate over and above the formal contract of employment.” (Argyris
1960)

He used this concept of the psychological work contract to describe the
relationship between employees and their leaders. During his research Argyris
found that relationships could evolve between employees and their foremen.
These obligations would not be written in the formal contract. Argyris found that
the foremen realized that the employees were most likely to produce optimally
under passive leadership. They reacted accordingly and in exchange for
passive leadership, the employee would maintain high production and good
work ethic (Argyris 1960).

As Argyris (1960) did not explicitly mention the concept of the psychological
contract, Levinson et al (1962) could, two years later, claim to be its designer.
They changed the concept fundamentally by focussing on implicit and unspoken
expectations prior to the employee-employer relationship, regarding
expectations of salary or promotion prospects (Levinson, Price et al. 1962).
Levinson et al. (1962) used the following definition:

“a series of mutual expectations of which the parties to the relationship
may not themselves be dimly aware, but which nonetheless govern their
relationship to each other.” (Levinson, Price et al. 1962)

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The difference between Argyris’ definition and the one of Levinson et al. is to be
found in the perception of both parties to the relationship. Levinson et al. argue
that both parties might not be aware of each other’s expectations, though they
do hold each other responsible for them. This suggests that these expectations
arise in the perception of one party, based in the individual experiences and
feelings of this party.

Kotter (1973) has done research on the role of the psychological contract in the
process of assimilating new employees into an organization. During his
research, he created lists of expectations between the employee and the
employer and matched them to study job satisfaction, productivity and reduced
turnover. The approach of Kotter is criticized of being oversimplified, as it is
virtually impossible to list the amount of expectations involved (Anderson and
Schalk 1998). When Kotter mentions the psychological contract, he defines it
as:

“An implicit contract between an individual and his organization which
specifies what each expect to give and receive from each other in their
relationship.” (Kotter 1973).

Kotter puts more emphasis on the individual and agrees that parties might not
be aware of the other’s expectations. Although Kotter is criticized for
oversimplifying things, he acknowledges the individual perception on an
exchange agreement. Furthermore he argues the perception of the individual
includes expectations from the organization as well. Kotter’s approach might
have been oversimplified, but his definition is very specific.

Another contributor to the development of the psychological contract construct
is Schein. According to Schein (1978) the psychological contract exists on two
different levels: the individual and the organizational. Another determinant of the
psychological contract, first mentioned by Schein, is the term ‘reciprocity’
(Schein 1978). Both parties to the relationship believe that their expectations
towards the other are reciprocal, making the psychological contract an
important determinant of behaviour in organizations. Schein (1978) defines the
psychological contract as:

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“... a set of unwritten reciprocal expectations between an individual
employee and the organization.” (Schein 1978)

Schein does not mention the perception of the individual in which the
psychological contract resides. Instead he argues that the organization has a
contract with the employee and vice versa. In academic literature this is referred
to as a bilateral approach. Another element mentioned by Schein is, that the
expectations are reciprocal. Hereby he agrees with the previous definitions, that
at least one party to the contract holds the other accountable for its contents.

The most commonly accepted definition of the psychological contract is the one
of Rousseau. Rousseau sets the basics of the modern understanding of the
psychological contract, breaking with two of the earlier arguments: a focus on
the individual level, instead of the level of a relationship and a shift from
expectations to obligations (Roehling 1997).

“An individual's belief regarding the terms and conditions of a reciprocal
exchange agreement between the focal person and another party. A
psychological contract emerges when one party believes that a promise
of future returns has been made, a contribution has been given and thus,
an obligation has been created to provide future benefits.”
(Rousseau 1989)

In comparison to the other definitions, Rousseau argues that in the perception
of one party a promise of future return has been made by the other. The first
party inferred this promise from the relationship with the other party and the
experiences that have come forth from this relationship. In return this party is
obliged to fulfil the expectations that are connected to this promise and thus
feels obliged to deliver.

The most recent view on defining the psychological contract is the one of
Herriot and Pemberton (1995). This view is again bilateral, as it includes the
perceptions of both parties, instead of the individual.

“The perceptions of both parties to the employment relationship,
organization and individual, of the obligations implied in the relationship.

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Psychological contracting is the process whereby these perceptions are
arrived at.” (Herriot and Pemberton 1995)

Harriet and Pemberton (1995) are the first to include the process of
psychological contracting. This process entails that the perception is arrived at,
meaning that one or both parties to the contract become aware of its existence.

One understanding shared by all of the approaches above, is that the
psychological contact concerns an exchange agreement between both parties
of the employment relationship. It resides in the perception of each individual
party and includes inferred promises or assumptions of a future return. As it is
unwritten and as it merely exists within the perception of an individual, the
parties might not be aware of the contents. Not of their own, neither of the other
party.

This thesis project takes a unilateral approach, meaning it will focus on the
perception of one individual, instead of the perception of both parties to the
exchange relationship. This choice has been made due to the difficulties in
defining the role of the organization as a uniform set of expectations (Anderson
and Schalk 1998). As different agents of the organization are more likely to hold
different sets of expectations, a unilateral approach would increase
measurability. A more narrow definition is preferred for this project. It is
therefore Rousseau’s (1990) definition that will be used in this thesis.

2.2.2 Formation of the contract
As discussed earlier, the psychological contract resides in the perception of the
individual. The previous paragraph highlighted the definitions that have set the
scene of academic literature during the past decades. This paragraph will
provide an explanation on how the psychological contract is formed and what
the determinants are for its contents. The model below visualizes the process of
psychological contract formation and will be used as the bases of this
paragraph.

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Figure I: “The psychological contract” (Crossman 2004).

The psychological contract is founded upon three principal constructs: the
exchange relationship, trust and commitment. The psychological contract exists
in the virtue of these three constructs and each of them interacts.

The exchange relationship includes the needs, motives and expectations of the
parties that hold the contract. The employee needs pay, or a social platform,
while the organization needs labour, or knowledge. The drivers of both parties
to engage in the relationship are included in the motives. The expectations of
both parties are a product of their motives and needs.

The amount of commitment to and trust in this relationship, by the party that
holds the contract, are determinants of how tight the exchange relationship is
and thus how strong the psychological contract will be held. When, at a certain
moment in time, the employee experiences that the contract is misaligned, for
example by not getting promotion during an evaluation of his work, as a
consequence, in the perception of the employee, the psychological contract is
either broken, or enhanced. After experiencing breach, the employee will review
the contents of the contract and decide whether or not to terminate it. If not, the

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contract will again be shaped by the degree of trust and commitment and the
process will start all over again. This dynamic element suggests that items can
be discarded or added over time, as perceptions of the employer’s trust and
commitment evolve (Daniels, Lamond et al. 2000). In the model, the
environmental and the organizational context are included as moderating
internal and external factors contributing to how the psychological contract is
formed.

2.2.3 Reciprocal obligations & Inferred promises
According to Robinson and Rousseau (1994), the psychological contract
emerges when one party believes that a promise of future return has been
made, and therefore a contribution has been given, and thus an obligation has
been created to provide future benefits (Robinson and Rousseau 1994). This
exchange relationship of promises and obligations can be inferred from “any
communication of future intent” (Rousseau 1989; Montes and Zweig 2009).
Reciprocal obligations, or reciprocal agreements, together with inferred
promises, are the basis of the psychological contract, as beliefs in reciprocal
and promised obligations between employee and employer, when violated,
generate distrust, dissatisfaction, and possibly the dissolution of the relationship
itself (Argyris 1960; Rousseau 1989).

An important understanding of a psychological contract is that the beliefs
comprising the contract result from promises (Rousseau and Tijoriwala 1998).
By believing in a promise, the individual beliefs in a future return, in turn for a
contribution. The other party is, in his perception, obliged to reward him. This
reward might be an incentive bonus for a certain performance and the
contribution can be an employee’s input on a project. For example, when a
project manager, tells one of his employees, that after a successful ending of
the project, the project member will be rewarded for his input, the project
member might infer this as a promise for a financial reward. Although the
project manager does not explicitly state what the reward will be and what the
terms are in order to make the project successful, in the perception of the
employee the psychological contract has been formed and he or she will react

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accordingly. It is a promise for which the project manager will be held
accountable and is therefore reciprocal in the mind of the employee. A basic
premise of the psychological contract framework is the notion of reciprocity
whereby employees reciprocate their employer on how well they have been
treated. Consequently, employees will target their reciprocation toward the
source of the fulfilled or unfulfilled obligations, being their perceived employer
(Coyle-Shapiro and Kessler 2000).

Rousseau (1998) found that fulfilment of psychological contract obligations
contributed independently and more substantially to the prediction of trust,
commitment, and satisfaction when compared with broader expectations
(Rousseau and Tijoriwala 1998).

2.2.4 Transactional vs. Relational
Differences in the content of the psychological contract tend to cluster around
the extent to which they are transactional, based on transactions, or relational,
based on the relationship with another party. Differences between both types of
contracts will be outlined in the next paragraphs.

Transactional contracts are characterized by limited involvement of the parties
taking part in the contract, and emphasize specific, short-term, often monetary
obligations. They involve an exchange of economic currency wherein the
organization provides adequate compensation, a safe working environment,
and reasonable short-term guarantees of employment in exchange for the
employee’s fulfilment of narrow, specified role responsibilities (Thompson and
Bunderson 2003). In their research, Rousseau and McLean Parks state that
“because employees are concerned about themselves as the primary
beneficiaries of the exchange, transactional contract imply an egoistic or
instrumental model of human nature”.

In contrast, relational contracts emphasize broad, long term, socio-emotional
obligations, such as commitment and loyalty, consistent with collective interest,
and have a pervasive effect on personal as well as work life (Thomas, Au et al.

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2003; Thompson and Bunderson 2003). Relational contracts entail the
exchange of socio-emotional currency, involving the organization’s provision of
training and professional development, as well as long-term job security, in
exchange for the employee’s fulfilment of generalized role obligations.
Employees with such contracts, contribute their commitment and involvement to
the organization often in the form of organizational citizenship behaviours
(Robinson and Morrison 1995).

In the figure below, Rousseau has summarized the contractual continuum, in
which the differences between the transactional and the relational contract are
described (Rousseau 1990).

Figure II: “Transactional vs. Relational contracts” (Rousseau 1990).

2.2.5 Psychological contract violation
The misalignment between the individual’s expectations of how things should
be, compared to how they really are is called psychological contract violation
(Crossman and Lee-Kelley 2004). It is the perception of employees that their
organization has failed to adequately live up to its promises (Rousseau 1989;

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Morrison and Robinson 1997). In other words, a gap between the desired and
the actual state has been identified in the perception of the employee.

According to Robinson and Rousseau, the impact of psychological contract
violation can have serious individual and organizational implications, as it
decreases the level of trust between the employee and the employer and the
level of satisfaction with the job and the organization. Contract violation can
negatively impact the perceived obligation to the organization and the intention
to remain within the current job (Robinson and Rousseau 1994). It is considered
to have a more intense effect than not living up to an expectation, as “broken
promises produce anger and erode trust in the relationship” (Robinson and
Rousseau 1994).

Whenever the employee perceives the employment situation as not consistent
with the standard, control theory suggests that an individual will respond to
reduce the discrepancy (Shore and Tetrick 1994). As a result, the employee
might not live to his part of the obligation to adequately fulfil the assigned task.

2.2.6 The psychological contract in its current state
The psychological contract becomes increasingly important, as recent trends of
restructuring, downsizing, demographic diversity and foreign competition
threaten the traditional assurance of job security and steady rewards in return
for hard work and loyalty (Sims 1994; Hiltrop 1995; Guest 1998). Guest
proposes another issue, being the state of turbulence and uncertainty, which
makes it difficult for organizations to fulfil the obligations that it has made to its
employees. The result of both issues is a perception on the part of many
employees that the terms of their psychological contracts have not been
adequately fulfilled.

In his research, Hiltrop suggests that a shift is taken place within the
psychological contract construct. The psychological contract is moving from a
long-term and stable contract to “one which is more situational and short-term”
(Hiltrop 1995). This shift implies that commitment to corporate goals is

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decreasing and job security and company loyalty might well be at their lowest
levels. Hiltrop has identified this shift in 1995, which means that by now, the
year 2010, this shift must already have taken place. In the figure below, which is
an extension from Hiltrop’s original figure made by Anderson and Schalk, sets
out the changing factors of the psychological contract as they would develop in
the future.

Figure III: “Psychological Contract - Past vs. Emergent Form” (Anderson and Schalk 1998).

Taking this new situation into account, Hiltrop expects implications for Human
Resource Management (HRM), as it is bound to have consequences for
attracting, retaining and motivating talent, management style and the way to
gain commitment (Hiltrop 1995).

2.3 Virtual Teams & The Virtual Team Environment

2.3.1 The virtual team environment
The virtual team is currently considered to be one of the building blocks of a
successful organization. Increasingly, these successful organizations are
organised in a dynamic network form that can more quickly adapt to ever-
changing competitive landscapes and customer requirements. Enabled by the
use of Information Technology (IT), virtual teams can operate across
organizational boundaries in a geographically, organizationally and/or time

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dispersed environment (Jarvenpaa and Leidner 1999; Powell, Piccoli et al.
2004; Lin, Standing et al. 2008). In general, virtual teams are defined as “groups
of geographically, organizationally and/or time dispersed workers brought
together by information and telecommunication technologies to accomplish one
or more organizational tasks” (Jarvenpaa and Leidner 1999; Powell, Piccoli et
al. 2004; Fiol and O'Connor 2005). Virtual teams differ from the traditional team,
by the limited amount of face-to-face interaction, which in its turn will have
profound effects on the development of interpersonal relationships,
communication, task processes and performance (Warkentin, Sayeed et al.
1997; Jarvenpaa and Leidner 1999; Coppola, Hiltz et al. 2004; Fiol and
O'Connor 2005; Bjørn and Ngwenyama 2009).

In his work on virtual positions, Mackenzie describes the virtual team as a
virtual position, involving three or more persons from different parts of an
organization working together on a recurring task process (Mackenzie 1986).

Due to the considerable amount of literature available, virtual team literature
can best be categorized in four sections, being inputs, socio-emotional
processes, task processes and outputs (Powell, Piccoli et al. 2004). Each
section will be elaborated on in the following paragraphs.

2.3.2 Inputs
Virtual team inputs represent the design and composition of the virtual team and
the donation of resources, skills and abilities with which the team begins its
work (Powell, Piccoli et al. 2004). They can be grouped under design, culture,
technical expertise and training.

The design of the team and the structuring of its interactions have been found to
impact the development of a shared language and shared understanding by
team members. Designs vary by the level of face-to-face interaction, planning of
activities and the use of communication media, and the articulation of goals,
structures, norms and values (Powell, Piccoli et al. 2004). In general, traditional
teams have been found to outperform virtual teams, regarding their ability to

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exchange information in an orderly and effective manner and their effective
planning (Galegher and Kraut 1994). Research on limiting these threats has
found that team-building exercises, establishing shared norms, and the
specification of a clear team structure contribute to the team’s success (Kaiser,
Tullar et al. 2000; Sarker, Lau et al. 2001). Another crucial factor, contributing to
the virtual team’s success, is the amount and rhythm of face-to-face meetings
during project planning (Maznevski and Chudoba 2000). The more often the
virtual team meets in person, and the more these meetings are focussed on
team-building, the higher the team’s effectiveness.

As virtual teams are generally geographically dispersed, they will most likely
contain different cultures. Inevitably, virtual team members will experience this
as a challenge, hence cultural differences often lead to coordination difficulties
(Maznevski and Chudoba 2000). Besides that, they can create obstacles to
effective communication (Kayworth and Leidner 2002). Cultural differences can
negatively impact the team’s effectiveness. Even in virtual teams, that are
dispersed by subtler differences than globally, like regionally or by function,
culture can have a negative impact on the team’s effectiveness (Robey, Khoo et
al. 2000).

The need of technical expertise among team members has an effect on the
overall team performance and a team member’s individual satisfaction (Powell,
Piccoli et al. 2004). Modern technological communication solutions come with
possible technological challenges. A range of challenges can be found, from
software errors to connecting the right hardware. Especially the lack of technical
expertise and the inability to cope with technical problems can have a negative
effect on the individual satisfaction with the team experience and performance
(Kayworth and Leidner 2002). When team members are able to deal with
technical uncertainty and technology related challenges, high trust develops.
Overcoming these challenges together can result in a more cohesive team
(Jarvenpaa and Leidner 1999).

As virtual teams are opposed to a significant amount of challenges, sufficient
training will be a critical factor to the success of a virtual project (Duarte and

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Snyder 2000). Early research results suggest that consistent training among all
team members improves the team’s performance, while virtual teams
characterized by diverse technology skills may experience conflict when
members are unable to resolve differences (Warkentin and Beranek 1999).
Early and uniform training has also been found to foster team cohesiveness,
trust, teamwork, commitment to team goals, individual satisfaction and a higher
perceived decision quality (Kaiser, Tullar et al. 2000; Van Ryssen and Godar
2000). The most effective way of training at the start of the project, is concerned
with team-building. In their research on training to improve virtual team
communication Warkentin & Beranek (1999) found that in most cases, virtual
team members receive little or no training to improve the virtual team’s
effectiveness. When training is used, it often consists on skills to improve
software utilization. Interpersonal dynamics are rarely the subject.

2.3.3 Socio-emotional processes
Virtual team researchers define relationship building, cohesion, and trust as
“fundamental processes that foster team effectiveness, while suggesting that
virtual teams face significant difficulty in achieving them” (Powell, Piccoli et al.
2004). Although these socio-emotional processes are hardly measurable, they
are at the heart of an effectively functioning virtual team.

Compared to traditional teams, virtual teams develop weaker relational links
between teammates (McDonough, Kahn et al. 2001), due to their reliance on
electronic communication and the difficulties associated with it (Powell, Piccoli
et al. 2004). In order to provide an answer to this problem, face-to-face
communication among virtual team members early in the project has been
found to foster the ability to form closer interpersonal relationships (Maznevski
and Chudoba 2000). Improved performance and enhanced learning, leading to
an increase in team effectiveness, can be stimulated by early face-to-face
meetings, focussed on relationship building (Kaiser, Tullar et al. 2000).

Cohesion is an important aspect of the virtual team. It has been associated with
better performance (Maznevski and Chudoba 2000) and greater satisfaction

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(Chidambaram 1996). Compared to traditional teams, team cohesiveness in
virtual teams is considered to be lower, due to collaborative technologies that
hinder the development of cohesion (Warkentin, Sayeed et al. 1997). However,
strong cohesion in virtual teams has been found in a later stage of the project,
as virtual team members exchange enough social information over time
(Chidambaram 1996).

As the development of trust is difficult to assess between virtual team members,
because they hardly meet in person, it forms another challenge in virtual teams
(McDonough, Kahn et al. 2001). Yet, trust development is crucial for the
successful completion of virtual team projects (Sarker, Lau et al. 2001). Virtual
teams, especially those assigned to a short-term project, do seem to develop a
form a swift trust, enabling the team to achieve high levels of trust (Meyerson,
Weick et al. 1996; Jarvenpaa and Leidner 1999). Swift trust can be described
as the process of assuming that team members are trustworthy at the start of
the project and seeking conformation throughout the duration of the project they
are in (Meyerson, Weick et al. 1996). Trust combines both feelings and beliefs
regarding the extent of confidence to be placed in another’s words and actions
and is derived from reliable acts and communications.

2.3.4 Task processes
Task processes consist of the categories communication, coordination and
task-technology-structure fit and contain every team process, contributing to
accomplish the given task (Powell, Piccoli et al. 2004).

At the core of any team process is communication. In fact, the level of
interaction largely determines team performance, as it facilitates information
exchange among group members (Potter and Balthazard 2002). The virtual
environment presents considerable challenges to effective communication
including time delays in sending feedback, lack of a common frame of reference
for all members, differences in salience and interpretation of written text, and
assurance of participation from remote team members (Cramton 2001). In
addition, nonverbal communication, which is just as important, is usually

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missing as well. Therefore traditional teams tend to communicate more
effectively, than virtual teams. Technology tends to restrict the communication
process because electronic media are intrinsically leaner than face-to-face
communication and convey a limited set of communication cues (Sproull and
Kiesler 1992).

Coordination represents the degree of functional articulation and unity of effort
between different organizational parts and the extent to which the work activities
of team members are logically consistent and coherent (Cheng 1983).
Coordination is linked to team performance and comes with several challenges
to the virtual team, as it attempts to coordinate across time zones, cultural
differences and divergent mental models (Warkentin, Sayeed et al. 1997). The
traditional social cues and mechanisms that facilitate human interaction and
decision-making are absent or altered by technology and creates problems in
finding reference points for coordinating the work flow (Massey, Montoya-Weiss
et al. 2003). A distinction can be made between synchronous and
asynchronous coordination. Asynchronous coordination refers to virtual work
that is carried out at different times, while synchronous coordination takes place
in the same space and time. As virtual teams cannot necessarily rely on
traditional social cues and mechanisms, it opposes a threat to handling
problems of team functioning (Montoya-Weiss, Massey et al. 2001).

The fit between the various technologies available to the virtual team and the
task the team has to accomplish, along with the role of face-to-face meetings,
are crucial to the team’s functioning (Powell, Piccoli et al. 2004). The choice of
technology is often subject to the team’s own preference, though in all
situations, the team will first have to successfully develop a shared language to
communicate effectively. The proper fit between technology and communication
goals will lead to increased performance. When media capabilities are aligned
with communication processes, performance will be enhanced (Massey, Hung
et al. 2001).

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2.3.5 Outputs
Virtual team outputs are described their effectiveness. This variable
encompasses all virtual team characteristics mentioned before and evaluates
each aspect on its impact on how well the team is performing as a whole.
Measures of these can be in decision quality, number of ideas generated, and
time it took team members to reach a decision (Powell, Piccoli et al. 2004).

Maznevski and Chudoba (2000) propose that “effective global virtual team
outcomes are a function of appropriate interaction incidents and the structuring
of those incidents into a temporal rhythm”. In their research they found that an
effective team is characterized by effective interaction incidents, within the
structure of available technology. The interaction incidents have to take place
by intense face-to-face meetings at regular moments in time, followed by less
intensive, shorter interaction incidents, using various media (Maznevski and
Chudoba 2000). Depending on the level of interdependence required by the
task, the degree of a common perspective and the strength of interpersonal
relationships among team members, the team will, or will not, meet more
frequent.

The majority of research that has been done on virtual team performance, has
detected no difference between the traditional and the virtual team (Powell,
Piccoli et al. 2004). Examples of factors contributing to successful performance
of a virtual team include training, strategy/goal setting team building (Kaiser,
Tullar et al. 2000), team cohesiveness, coordination and commitment to the
team (Maznevski and Chudoba 2000) and communication (Kayworth and
Leidner 2002).

2.4 Virtual Teams and the Psychological Contract - Potential
implications

2.4.1 Team dynamics in a virtual environment
As discussed in the previous chapter, socio-emotional and task processes can
strongly impact the effective functioning of a virtual team. They are related in a
way that socio-emotional factors, like trust and cohesion, can have
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consequences for task-related processes, like coordination and communication
(Powell, Piccoli et al. 2004). Several researchers have studied the effects of
team dynamics and their influence on team effectiveness (Meyerson, Weick et
al. 1996; Robinson 1996; Jarvenpaa and Leidner 1999; Coppola, Hiltz et al.
2004; Crossman and Lee-Kelley 2004; Robert, Denis et al. 2009). These
researchers point out that virtual project teams face unique difficulties in
meeting the socio-emotional needs of virtual team members. Even though these
researches incorporate trust, cohesion and interpersonal relationships, none
have explicitly studied the effects of the psychological contract and related this
element to the virtual team’s effectiveness.

In their study, Maznevski and Choduba (2000) defined virtual team dynamics by
using a series of interaction incidents, each incorporating a set of decision
processes via a particular medium and shaped by a limited set of structural
characteristics. Their research shows that the amount of face-to-face
interactions correlate with the degree of trust and socialization between team
members (Maznevski and Chudoba 2000). Early face-to-face communication
fosters closer interpersonal relationships within a team, leading to a higher
degree of effectiveness. The same relationship exists with team cohesion.
Warkentin et al. (1997) found that collaborative technologies had a negative
effect on the development of team cohesion in comparison to higher levels of
cohesiveness in traditional teams (Warkentin, Sayeed et al. 1997).

In a virtual environment, team dynamics oppose a completely new set of
challenges for the virtual team. Still, little is known to what extent they will
influence the contents of the psychological contract of team members and what
effect that will have on the team’s effectiveness. In order to effectively study this
phenomenon, the following model of Dr. A. Crossman (2004) will be adopted
(figure 4).

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Figure IV: “Virtual Team Dynamics and the Psychological Contract” (Crossman 2004).

This model visualizes the virtual project team and the relationships between
team members, their psychological contract and the agent of the organization,
being a project manager or virtual team leader. It shows that each team
member holds a psychological contract, in which the agent of the organization
will be held accountable for the contents of the contract. Next to this direct
relation, team members influence each other, and each other’s contract,
indirectly. How strong these indirect relations are, is determined by the level of
team cohesiveness, described earlier.

2.4.2 Trust & Commitment
According to Piccoli and Ives (2003), psychological and behavioural aspects of
virtual team working can not at all be compared to those of traditional teams
(Piccoli and Ives 2003). Their research on behaviour control mechanisms
shows that situations can be found where individuals perceive team members to
have failed to live up to their obligations. This perception arises when other
members of the organization ‘knowingly fail to follow through on their obligation’,
or when the perception of obligations differs between team members and the
individual responsible held accountable for them (Morrison and Robinson 1997).

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Without trust a certain form of exchange is impossible to uphold, as it requires
one party to accept vulnerability, based on the positive expectations of the
intentions of behaviour of another. The notion of a trustworthy relationship is
reciprocal (Crossman and Lee-Kelley 2004).

The concept of trust and commitment are at the foundation of the psychological
contract. Commitment is central to the psychological understanding between
the organization, the manager and the individuals (Crossman and Lee-Kelley
2004). It reflects the trustworthy relationship between the employee and the
employer. As virtual teams require high mutual commitment between team
members, as well as high trust levels, the psychological contracts of team
members become increasingly important.

As discussed in the previous chapter, communication in virtual teams is
hindered by the absence of regular face-to-face meetings. It is therefore
acceptable to argue that communication about mutual responsibilities and
obligations is hindered as well, developing incongruent perceptions of each
party’s commitment to its obligations, again creating the potential for trust
decline (Piccoli and Ives 2003).

2.4.3 Research assumptions
Based on earlier research, it is expected that lower levels of trust and
commitment will be found within the virtual environment. The difficulty of
establishing well-founded interpersonal relationships in the virtual environment,
along with lower levels of trust and commitment is expected to negatively
impact the psychological contract of team members. The interviews will most
likely indicate lower levels of trust and commitment. Furthermore they will
demonstrate the difficulties in establishing interpersonal relationships and the
effects this will have on virtual team effectiveness.

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2.5 Chapter Summary

2.5.1 Psychological Contract Literature
As the first pillar this literature consists of, the psychological contract literature
has been fully elaborated on in this first chapter. During the last fifty years it has
been researched intensively, eventually leading to the generally accepted
definition of “An individual's belief regarding the terms and conditions of a
reciprocal exchange agreement between the focal person and another party.”
(Rousseau 1989).

Reviewing the psychological contract shows that it consists of inferred promises
and reciprocal obligations, forming an exchange agreement in the perception of
the employee. The strength of this exchange agreement is determined by the
amount of trust and commitment the employee has towards it. Next to that, the
contract is influenced by internal and external factors, which to some extent
moderate the contents of the psychological contract.

The contract’s content can either be transactional or relational. Transactional
contracts refer to an economic focus, while relational contracts focus on
economic and socio-emotional conditions. When being violated, the
psychological contract can have profound consequences to the employment
relationship, as it affects the amount of trust and commitment the employee
instils in the relationship.

The psychological contract is becoming increasingly important, as current
trends of downsizing, restructuring and foreign competition threaten the extent
to which factors like job security and steady rewards can be assured by the
employer.

2.5.2 Virtual Team Literature
In accordance with the work of Powell, Piccoli et al. (2004), virtual team
literature can be dissected in four categories, being inputs, socio-emotional
processes, task processes and outputs.

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Virtual team inputs represent the design and composition of the virtual team and
the donation of resources, skills and abilities with which the team begins its
work (Powell, Piccoli et al. 2004). They can be grouped under design, culture,
technical expertise and training.

Socio-emotional processes consist of the fundamental processes of relationship
building, cohesion, and trust. These socio-emotional processes are hardly
measurable, but they are at the heart of an effectively functioning virtual team.

Task processes consist of the categories communication, coordination and
task-technology-structure fit. They contain every team process, contributing to
accomplish the given task.

Virtual team outputs are described their effectiveness. This variable
encompasses all virtual team characteristics mentioned before and evaluates
each aspect on its impact on how well the team is performing as a whole.

2.5.3 Potential implications
As the previous two chapters have given us more insight in the foundations of
the psychological contract and the virtual team environment, this last chapter of
the literature review has combined both subjects and discussed available
literature on aspects of the psychological contract and the way in which they
relate to the virtual environment.

The psychological contract has not yet been studied within the virtual team
environment. Tough, elements contributing to the existence of the psychological
contract have. Team dynamics is a subject broadly researched in virtual teams.
Most of these studies recognize the challenges a virtual team faces, in
comparison to traditional teams. These challenges consist of task-related
challenges as well as socio-emotional challenges. In order to visualize the role
of the psychological contract within a virtual team, a model has been drawn up,
in which these interpersonal relationships become visible.

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Trust and commitment, representing the core of the psychological contract,
have been thoroughly researched within a virtual team environment. As
communication is hindered by being tied within virtual media, it becomes difficult
to establish a high amount of trust and commitment.

Altogether, the virtual environment opposes considerable challenges to
establishing trust and commitment within a virtual team. As a consequence, the
parties involved in the exchange agreement will invest less to uphold their
obligations.

2.6 Research Question
In order to achieve the aims and objectives discussed in chapter one and after
critical evaluation of the academic background of both variables, it is
hypothesized that there is a relationship between the psychological contract and
virtual team effectiveness. As this research is inductive, its goal is not to look in
any specific direction in order to avoid biased answers. Therefore a choice has
been made to keep the research question as general as possible.

“What is the relationship between the psychological contract and team
effectiveness of virtual teams?”

As this research question suggests, it evolves around two main variables. The
independent variable is the psychological contract. When changed, it is argued
to affect the dependent variable: virtual team effectiveness. In order to measure
this causal relationship, both variables are measured within the virtual
environment in which they are present. The figure below visualizes the
relationship just described.

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Figure V: “The research variables” (source: author).

The way in which the information is gathered, that will later on provide more
insight in the relationship described above, is discussed in the next chapter.
This chapter entails the research methodology. It explains the way in which this
research is designed in order to provide an answer on the research question.

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Chapter 3
METHODOLOGY

3.1 Introduction
During the previous chapters the research problem has been introduced and
the foundation of available literature on the subject has been given. In this
chapter, the research methodology will be described. In the following
paragraphs, first the research philosophy will be outlined in order to provide an
understanding of the researcher’s view of the process by which knowledge is
developed. Second, the research approach will be discussed by explaining the
most suitable approach for conducting research on the psychological contract
within a virtual environment. Finally, this chapter finishes with the research
strategy, providing detailed information on how the research question is going to
be answered. The last two paragraphs of this chapter describe the way in which
data is collected and by which procedure this is done.

The purpose of this chapter is to provide an answer to the research question:
“What is the relationship between the psychological contract and team
effectiveness of virtual teams?” Eventually its aim is to close the gaps in the
published academic research on virtual team effectiveness and the
psychological contract. The objective is to define this relationship and provide
recommendations to those organizations that work with virtual teams.

3.2 Research philosophy
The research philosophy includes the researcher’s philosophical assumptions
about the way in which he interprets the world around him. These assumptions
will underpin the research strategy and the data collection methods. It is the
way in which knowledge is developed.

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3.2.1 The research paradigm
Saunders et al. (2007) describe the research paradigm as “a way of examining
social phenomena from which particular understandings of these phenomena
can be gained and explanations attempted” (Saunders, Lewis et al. 2007). In
other words, it is the way in which the research is done. A way that leads to
understanding and explaining a phenomenon. Describing the research
paradigm can be helpful in clarifying the epistemology and ontology. Four
paradigms can be distinguished: functionalist, interpretive, radical humanist
and radical structuralist (Burrell and Morgan 1979). These paradigms
correspond to four conceptual dimensions, being radical change and regulation,
and, subjectivist and objectivist. The radical change dimension approaches
organizational problems from the viewpoint of overturning the existing state of
affairs, while the regulatory dimension seeks to work within the existing state of
affairs (Saunders, Lewis et al. 2007). The latter two terms will be discussed in
the ontology.

The functionalist paradigm is a combination of the objectivist and regulatory
dimensions. Objectivism is the ontological position a researcher is most likely to
adopt, when operating within this paradigm. The regulatory dimension suggests
that a rational explanation is sought to explain the subject. The interpretive
paradigm refers to the researcher’s aim to understand the fundamental
meanings of a subject. The principal concern is to discover irrationalities and to
understand and explain what is actually going on. A radical humanist paradigm
is a combination of the subjectivist and radical change dimensions. Working
within this paradigm, a researcher would be concerned with changing the status
quo. The ontological perspective attached to this paradigm would be the
subjectivist. Finally, the radical structuralist paradigm is involved with structural
patterns with work organizations and the extent to which these may produce
dysfunctionalities. It adopts an objectivist perspective because it is concerned
with objective variables, unlike the radical humanist paradigm which attempts to
understand the meanings of social phenomena.

Research on the psychological contract requests an understanding of the
fundamental meanings of the subject. Within a virtual environment, the aim is to

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identify irrationalities and explain what the impact on team output. The proper fit
between the type of research and the research paradigm, in this case, is taking
an interpretivist perspective.

3.2.2 Epistemology
The epistemology is concerned with what is accepted as reality within the
paradigm of the researcher. For one researcher reality represents facts. The
data collected is argued to be less open to bias, or more objective. Other
researchers perceive reality as the feelings and attitudes that play a role in the
research environment. Of course, these feelings can be quantified, but they can
also be expressed in narrative form.

The researcher that strives for objectivity by looking for quantitative data
embraces a so called positivist epistemology; a positivist position to the
development of knowledge. On the opposite side is the interpretivist
perspective, taken by the researcher that perceives reality in terms of feelings
and attitudes.

As the psychological contract is held in the perception individuals who develop
subjective meanings of their experiences, a narrow approach, where these
experiences are reduced to just a few categories, will risk the consequence of
losing valuable data. An interpretivist perspective, where data is not quantified,
is therefore taken towards the subject of this thesis.

3.2.3 Ontology
Where epistemology is concerned with the meaning of reality in a field of study,
ontology is concerned with the nature of that reality. It is about assumptions of
the researcher about the way the world operates. Two aspects of ontology can
be described, objectivism and subjectivism, both of which are widely accepted
as producing valid knowledge by many researchers.

The ontology is aligned to the epistemology, following the chosen interpretivist
paradigm. As the word says, objectivism follows the perception of the scientific

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approach, whereas the subjectivist view is concerned with the social
phenomena. Taking an interpretivist perspective towards the subject
automatically means that a subjectivist view is followed.

3.3 Research Approach - Deductive vs. Inductive
Defining a research approach means looking for a fit between the research
paradigm and research subject. During the previous paragraphs, the
interpretivist perspective has been elaborated on. In this paragraph the way in
this perspective approaches the research is discussed.

The specific approach for this study is qualitative research, in which the
researcher identifies human experiences about the phenomenon of the
psychological contract. The purpose is to clearly identify the phenomenon and
how it is perceived by people that are in the specific situation in which it is
researched. Because research is done on the experience of people, which are
difficult to be gathered by surveys, information will be gathered through
inductive, qualitative methods, such as interviews that represent data from the
perspective of the people involved.

The research approach can be defined in terms of deductive or inductive
research. A deductive approach works from a general assumption to a more
specific research question. This type of research begins with a theory and then
narrows down to more specific hypotheses that can be tested. Ultimately, the
hypotheses are, or are not, confirmed. Inductive reasoning works the other way.
It moves from specific observations to broader generalizations and theories
(Saunders, Lewis et al. 2007). This type of research begins with observations
and detecting patterns and regularities, then some tentative hypotheses are
formulated which can be explored, and finally, this research ends with
developing some general conclusions or theories (Saunders, Lewis et al. 2007).

When comparing both research approaches, the inductive reasoning is more
open-ended and exploratory, when deductive reasoning is narrower in nature.
As most social studies do, this thesis will follow an inductive approach. A

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deductive approach relates more to the positivist research philosophy, whereas
an inductive approach better relates to the interpretivist philosophy.

3.4 Research Strategy
This section of the thesis, different research strategies will be discussed, after
which the most suitable strategy for this thesis will be outlined. Saunders et al
(2007) distinguish seven different ways to gather data. Some of them fit the
deductive approach, other would belong better to the inductive approach. What
is most important in choosing a suitable strategy is whether it will enable the
researcher to answer the research question. The seven strategies are the
experiment, the survey, the case study, action research, grounded theory,
ethnography and archival research (Saunders, Lewis et al. 2007).

The strategy used in this dissertation process is based on grounded theory.
This means that the theory of this thesis is built on a combination of the
inductive and the deductive approach. It is particularly helpful to predict and
explain behaviour. Data is collected without the formation of an initial theoretical
framework. A series of observations form the foundation on which the theory will
be developed. Then predictions are made and tested with continual reference to
the collected data. The predictions that are made in this thesis are to be found
at the end of the literature review. After that, these predictions are tested
through interviews, as the source of qualitative data. The interviews are
conducted within a virtual organization, based on a specific case study. Their
main objective is to explain behaviour, developing a theory on the bases of
experienced professionals in the virtual environment.

3.5 Data collection
After having analyzed the secondary data, on which is reported in the literature
review, primary data will be collected through the use of interviews. This kind of
data collection is chosen because it fits the chosen research paradigm. With
exploratory research, the key challenge is finding out what is really happening.
The researcher needs to be open to all possible perspectives that concern the
researched variable. In-depth interviews are a helpful method to identify and
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analyse these perspectives and infer causal relationships between these
variables (Saunders, Lewis et al. 2007).

Interviews can be highly structured, using standardised questions, or they can
be informal and unstructured conversations. Three types of interviews can be
categorised: structured, semi-structured and unstructured, or in-depth,
interviews (Healey and Rawlinson 1994). Because this study aims to explore
the area of the psychological contract in-depth, the unstructured interview will
be used as a primary data collection instrument. The unstructured interview,
also called the in-depth interview, allows the interviewee to talk freely about
events, behaviour and beliefs. The interviewee’s perceptions guide the conduct
of the interview. It is up to the researcher to later categorize and dissect the
generated data.

3.5.1 The pilot interview
Prior to conducting the actual interviews a pilot interview has been scheduled.
Pilot studies are used to pre-test a particular research instrument, like the
interview schedule of this thesis (Teijlingen and Hundley 2001). It is a crucial
element that increases the likelihood of success.

The pilot interview of this thesis project involved an in-depth interview with the
project manager. The objective during the interview was to identify potential
problems in following the research procedure. During the interview several
points received special attention. The functioning of the recording device was
more like a practical issue, as well as reducing the amount of noise in the area,
the distance between the researcher and the participant, timing and a glass of
water on the table.

In order to assure the validity of the interview, the participant of the pilot
interview has been asked for feedback. An important finding here was the need
to clarify the psychological contract construct to participants, prior to the
interview. It turned out, that without proper definition of the subject, the
interviewee would try and give meaning to the subject. This caused attribution

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errors that needed clarification before proceeding with the interview. To improve
this, the concept of the psychological contract has been put in the introduction
and continual reference is made to it during the interview, using the case study
as an example.

3.5.2 Primary data collection - research process
As mentioned, the primary method of data collection will be the use of in-depth
interviews. Several stakeholders to a virtual project will be interviewed, some of
which are members of the same virtual team. The group of participants are
mainly situated in the Netherlands, however one participant is located in
Germany. The project team consists of members from a similar functional
background, IT, and work within one large multinational organisation. By limiting
the variables of location, culture, language and functional background, the
variables relevant to this thesis project are isolated. This contributes to the
validity of the project.

The setting in which the interviews take place, is located in the HR department,
situated in a different area than the one the participants work in. Participants are
scheduled for an hour and are offered a drink at the start of the interview. As the
interview’s aim is to identify behavioural, emotional and social patterns, the
interviewer needs to succeed in gaining the maximum amount of trust of the
interviewees in order to have them talk freely about the subject. During the
drink, the interviewer will introduce himself and the subject, state the anonymity
of the participant, and explain the purpose of the interviews. In order to prepare
the participant for interview, a cased is provided a week in advance, which the
participant is required to read (Case: “The Confidence Trick” - Appendix III). The
case involves a virtual team undergoing the challenges of working in a virtual
environment. By reading the case, the interviewee will be able to relate to the
subject. During the interview both the interviewer and the interviewee can
switch back and forth to case, in order to support their arguments. For the
interviewee it might provide a safe haven as well, when it feels uncomfortable to
talk directly about the work environment.

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The interviews are recorded and transcribed afterwards. The transcriptions will
then be coded and categorized in order to find causal relationships.

3.5.3 Profiling information
In order to assure the richness of the gathered data, the interviews have been
held with different stakeholders to the virtual project. All of them are contributing
to a very large and comprehensive IT project, involving a new workflow system
for the complete organization. The group of thirteen interviewees consists of two
virtual teams, project management, the Executive Vice President IT, one
business analyst and an external stakeholder. This paragraph provides
background details of each participant, though due to confidentiality restrictions,
the participants’ names are left out.

Manager Development Team (external partner)
From the beginning of the project, the organization chose to include an
external partner to guide the virtual project. First a partner from the
Philippines was attracted, based on costs. Due to difficulties in
communication and the capabilities of this partner, a Russian partner was
attracted. The relationship with this partner did not work either, so the
organization chose to approach a native partner in the Netherlands. The
project manager of this partner has been interviewed as he was concerned
with the implementation of the project. The external project manager took
the project in 2009 and is still involved with the process.

IT Manager Application Support
The IT Manager provides support for the online systems of the organization.
This employee reports directly to the IT Vice President and is involved in the
functional design. Next to that, he or she describes the functionalities of the
interface and has direct communication with the end user to gather
information.

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IT Consultant
Two IT consultants have been interviewed, that belong to a team of German
and Dutch employees. One of them has been with the organization for over
15 years and started as a developer. During the period he has work for the
organization, several mergers have taken place. Collecting the requirements
for the project and implementing them is the main objective of this
employee. The other IT consultant is concerned with the development and
design of the software and again implementing it. Both IT consultants report
to the head of software engineering.

Business Analyst
Amongst the group of participants there was one business analyst. This
employee entered the project in a later phase. His main objective was to
create contracts and analyze the contract process. Next to that he was
responsible for writing the requirements.

Team Leader
Two virtual team leaders have been interviewed. The first was responsible
for executing the acceptation test and developing test cases. His team
compared the test results with the requirements and was responsible for
writing system documents. The other virtual team leader was promoted
recently and his team of application managers was responsible for
increasing the technical quality of the project.

Head of Software Engineering
The head of software engineering leads a team of software engineers that
consists of employees from Germany, the US and the Netherlands. This
employee has got years of experience with virtual work within the
organization.

Application Manager
Two application managers have participated in the research. Both of them
have got several years of experience with IT projects. They are responsible

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for the execution of the software and customization of the end users’ needs.
Another responsibility of them is to design user interfaces and execute
programs and updates. In order to achieve this, a lot of communication is
necessary between them and the development team.

Software Engineer
In this particular project, the software engineers were responsible for
identifying problems in the new system. The software engineer that has
been interviewed has got a long history within the organization. She has
worked in support, design, databases, training and engineering. Due to her
background, the software engineer will be able to provide additional
information on different disciplines.

Project and Project Support Manager
The project and project support manager has got 10 years of experience
within the organization. By the time he joined the organization, the company
had just started working with virtual projects. Currently his team gathers
requirements and passes these requirements through to the software
development team. Another duty is to plan the IT-projects. His virtual team
consists of members from the Netherlands, the US and Germany.

3.6 Chapter summary
This chapter of the thesis project described the research methodology being
used to gather and analyse data, which will later on enable the researcher to
answer the research question. The purpose is to provide a solid plan to
effectively gather all necessary data on the relationship between the
psychological contract of virtual team members and the team’s effectiveness.

As with most social studies, an inductive research approach will be taken, due
to its exploratory nature. Qualitative data will be gathered by using in-depth
interviews. This type of research serves the purpose of understanding people’s
interpretation on a holistic subject.

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The research philosophy underlying this thesis is described by the research
paradigm. An interpretivist ontology is chosen to approach the subject, which
allows for in-depth research on the virtual project team members and correct
assessment of their interpretations on the subject. Accordingly a
phenomenological epistemology is applied through the collection and analysis
of qualitative rather than quantitative data.

The research strategy used in this dissertation process is based on grounded
theory. Though, a specific organization is used as a case study in order to
conduct the necessary interviews. The main objective here is to explain
behaviour, developing a theory as we go along. The researched phenomenon
can only be studied in an organizational context.

As a method of data collection, conducting interviews seems to realize the best
fit with the research paradigm. As we want to explain behaviour, emotions and
feelings, in-depth interviews will provide the richest amount of data. However, a
strict procedure has to be in place to ensure the project’s success. Different
perspectives of different stakeholders need to be obtained, to provide a
complete picture of the situation. The variables that are researched are isolated
as much as possible, to avoid the research being contaminated with irrelevant
variables. Finally, by conducting a pilot interview, a first impression can be
taken, after which possible flaws can be corrected.

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Chapter 4
RESEARCH RESULTS

4.1 Introduction
In the second chapter of this dissertation project, the theoretical framework was
developed, based on the literature review on the psychological contract in the
virtual team environment. As this research revealed some aspects of the
psychological contract playing a role in the virtual environment, the possible
effects on team effectiveness could be discussed. In this section, the theoretical
framework is refined, based on the results of the empirical study.

The first section contains some general considerations derived from the
interviews. These descriptions also hold an understanding and analysis of the
records. Quotes from the interviews are intended in the text, and written in
cursive. The explanation of the empirical results, and the insights gained from
the interviews, will form the foundation for the concluding chapter, in which the
conclusions will be formulated.

4.2 Repeating themes around the two main variables
The coding of the interviews has resulted in a number of statements that can be
related to our research question. Many statements have been expressed
several times by the same and by different participants and evolved around the
key themes, or categories, below:

I. Psychological contract - limitations and implications of the virtual
environment on the psychological contract.
a. Exchange relationship; incorporating trust and commitment as the
main factors influencing the exchange relationship.
b. Context; elaborates on the internal and external environment of
the case, in which the virtual team operates.

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c. Contract variation; describes the enhancement and breach of the
contract within the virtual environment.
II. Virtual Team Environment - includes an analysis on the virtual team
characteristics found during the case.
a. Inputs
b. Socio-emotional processes
c. Task processes
d. Team effectiveness

The tables presented in the next paragraphs are derived from the results of the
interviews, summarizing the key issues that emerged from them. Each table
represents a category with its own codes. Then, the codes are derived in
relevant dimensions, which represent the range of issues found in this research.
The aim of each table is to summarize the results and highlight important
aspects that enable a structured analysis and discussion.

4.3 The Psychological Contract

Category Code Key issues found
Trust Trust, as a main element of the exchange relationship, enforces
the strength by which each party is held to the contents of the
contract.
Trust can be expressed by the degree to which the employee
expects the organization to fulfil its promises, related to the
virtual project. Confidence and faith in the project outcome is one
main determinant.
External partners are perceived as more difficult to trust.
Unclear/unrealistic planning decreases trust levels.
Psychological contract

Trust levels decline due to geographical distance.
Lower trust levels due to unclear task division.
Lack of trust in management capabilities leads to reduced
Foundation
motivation.
Exchange Employees participated especially to secure their job within the
relationship organization.
Employees were given the opportunity to participate in a
challenging and prominent project.
The project was said to increase efficiency of the workflow
process, leading to a more effective way of working.
As a result, employees expected increased job satisfaction and a
fair reward for their participation.
Commitment Geographical distance reduces commitment to the project.
As project members need to split their responsibilities between
their day-to-day work and the project, commitment exists on

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project- as well as organizational level.
In general employees were committed to the organization, but
exceptions were found in commitment to the project and -team.
Due to virtual interaction a certain degree of intimacy is lost,
negatively impacting commitment to the project.
Internal factors Less job security was experienced due to the organization’s
history of outsourcing and merging.
The internal communication structure increased confusion on the
assigned tasks, negatively affecting work pleasure.
Incremental project planning negatively affected task clarity,
Context
resulting in reduced commitment and trust.
External factors The current labour market shows negative prospects for senior IT
personnel, creating ‘lock in’
Trends of downsizing, outsourcing and reorganizing negatively
affects job security
Breach Reduced commitment and lack of trust creates an environment in
which the psychological contract becomes fragile, chances of
contract breach increase.
Promises in terms of efficiency, building knowledge and
increasing work pleasure have not been delivered on.
The psychological contract can be negatively affected by internal
environment, like the lack of clarity and the lack resources
available.
Contract variation
Resistance has been found in terms of reluctance to share
information, not willing to communicate with certain stakeholders,
and reduced effort.
Employees perceive outsourcing as unfair.
Enhancement Reward systems were linked to project outcome, in terms of
volume.
Leadership providing a common vision and clear goals was
lacking

Table I: “Research Results - Psychological Contract” (source: author).

The table above visualizes the psychological contract as it is measured in the
virtual environment. A categorization has been made between the foundation of
the psychological contract, its context and variation. The foundation of the
psychological contract consists of its three pillars trust, commitment and the
exchange relationship. The category context consists of the internal and
external contextual factors that influence psychological contract formation.
Contract variation, the third category, entails the output of an employee
evaluating the psychological contract. This results in either contract breach,
after which the employee will most likely leave the organization or has to
reconstruct the psychological contract, or contract enhancement. Contract
enhancement entails the positive experience after evaluation.

The overall picture that emerges corresponds with the assumptions made in
chapter two. The foundations of the psychological contract seem more fragile

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Psychological contracts in the virtual environment

Psychological contracts in the virtual environment

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