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The Role of Organizational Culture Factors to Psychological Contracts

(Transactional Contracts, Balance Contracts, and Relational Contracts)

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DOI: 10.14505/jarle.v9.8(38).06

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Journal of Advanced Research in Law and Economics

DOI: https://doi.org/10.14505/jarle.v9.8(38).06

The Role of Organizational Culture Factors to Psychological Contracts

(Transactional Contracts, Balance Contracts, and Relational Contracts)
Retno DWIYANTI
Universitas Muhammadiyah Purwokerto, Indonesia
retnodwiyanti@ump.ac.id
SUWARTI
Universitas Muhammadiyah Purwokerto, Indonesia
suwarti@ump.ac.id
Tri NAIMAH
Universitas Muhammadiyah Purwokerto, Indonesia
trinaimah@ump.ac.id

Suggested Citation:
Dwiyanti, Retno; Suwarti; and Naimah, Tri. 2018. The Role of Organizational Culture Factors to Psychological
Contracts (Transactional Contracts, Balance Contracts, and Relational Contracts). Journal of Advanced Research in
Law and Economics, Volume IX, Winter, 8(38): 2570 – 2577. DOI: 10.14505/jarle.v9.8(38).06. Available from:
http://journals.aserspublishing.eu/jarle/index
Article’s History:
Received 15 August, 2018; Received in revised form 18 September, 2018; Accepted 25 October, 2018;
Published 31 December, 2018.
Copyright © 2018, by ASERS® Publishing. All rights reserved.
Abstract
The exchange of relationships between employees and firms is influenced by the beliefs and values that hold the human
resources in carrying out its obligations and its behavior within the organization. This study aims to determine how big the
relationship and the role of organizational culture to psychological contracts. Data were collected using two scales, namely
organizational culture scale, and psychological contract scale. The results showed that there was a very significant relationship
between organizational culture and psychological contracts, with an effective contribution of 5.047 percent. Based on the
analysis of the relationship between organizational culture factors with psychological contracts can be shown the result that
the organizational identity factor has a positive and very significant relationship with the psychological contract, with an effective
contribution of 10.609 percent. The results also show that the organizational identity factor has a positive and very significant
relationship with the transactional psychological contract. The organizational identity factor has a positive and significant
relationship with the balance psychological contract. Collective commitment factor and Stability of social system have a positive
and very significant relationship with balance psychological contract. Collective commitment factors have a positive and highly
significant relationship with the relational psychological contract.
Keywords: psychological contract; organizational culture; transactional; balance; relational.
JEL Classification: B55; L14; D23.
Introduction
Human resources are the most important asset in an organization or company. Potential human resources are
those who are able to adapt with the progress and development of science and technology to create the latest
products and to be the necessity of organizations or companies. Every organization tends to seek and apply an
organizational structure that enables qualified and competitive human resources so that the desired performance
will be achieved. It is difficult to separate the problems of organizational performance with human resources; the
higher the quality of human resources in an organization, the higher the performance of the organization. However,
how to manage and develop qualified human resources is the main problem that is difficult to avoid.

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One of the opportunities to maintain business excellence and endurance in a competitive world is to place
human resources as the mainstay to always be developed. Indeed, development of human resources needs to pay
more attention since workforce is essentially playing a major role in every business of producing goods and services
among the many factors of production. Observed from the standpoint of the employee as the human resource itself,
employees not only expect rewards for the services they provide to the organization, but also expect certain
qualities of treatment in the workplace. Employees seek the dignity of rewards, policies that affect their work and
careers, cooperative colleagues, and fair compensation. Higher employee demands on the organization and what
the organization act will determine on how committed or devoted employees are to the organization.
Employees are required to work in accordance with standards defined by the organization, this can be
interpreted that to achieve the highest performance Employees’ proper behavior is demanded according to
organizational expectations. Therefore there is a formal description of the behavior to be conducted (Intrarole
behavior). The reality is that many formally indescribable behaviors undertaken by employees, for example, helping
co-workers in solving problems, sincerity in following company meetings, less complaining and do more work, etc.
These behaviors are referred to as extra-role behaviors. When director evaluates the performance of his
employees, not only intra-role behavior is evaluated but also extra-role behavior as a part of the evaluation because
extra-role behavior has an equally important contribution to intra-role behavior (Hui et al. 2000).
Robinson et al. (1996) states that psychological contracts and their fulfillment are associated with a
workforce response consisted of in-role and extra-role performance. These conditions clearly require employees
who are considered as good members are able to handle the occupational flow optimally and efficiently. Therefore,
psychological contracts are needed to improve mutual relationship between the directives and the employee for a
reason that if there are employees with high psychological contracts, improvement of their productivity and success
will be a consequence.
Denisi, Cafferly and Meglino (in Hui, et al. 200) state that supervisors will pay more attention to subordinate
actual behavior compared to their unreal behavior. The psychological contract is understood as an actual form of
employee contribution. Employees who exhibit high psychological contracts may receive rewards of high
assessment by supervisors (e.g. promotional opportunities) than those who exhibit lower levels of psychological
contracts.
A psychological contract is defined as the employee's perception of mutual embodiment and obligation to
the company, and mutual benefit. Psychological contracts constitute reciprocal relationships between workers and
employers (Rosseau 1989). The exchange of human resources will vary depending on whether employment is
social-socioemotional or economic (Foa and Foa 1980). Since relational psychological contract form and contract
balance require the promise of such socio-emotional resources, the employees with this contract tend to reward by
supportive behavior toward their employers. The relationship of exchanges between employees and the company
is also influenced by the trust and shared values as the guidance of human resources in carrying out their
obligations and behavior within the organization. A system of shared beliefs and values within the organization and
directs the behavior of its members is referred to as culture organization (Shemerhorn et al. 1994).
According to Kreitner and Kinicki (2001) organizational culture serves as social glue that binds all members
of the organization together. Organizational commitment is one of the functions of a fair organizational culture.
People who love their organizational culture tend to stay with the organization for a long time, because the
commitment is born from the employee's sense of attachment to a company in the first time the employee joins the
company. The relationship between organizational culture with the success and failure of organization’s
performance is believed by scientists of organizational and management behavior that it is closely related.
Organizational culture is a determinant of the success of an organization's performance (Kotter and Hewskett 1992;
Kreitner and Kinicki 2001). Chatman and Barsade (1995) suggest that subjects with strong organizational culture
are rated as the most cooperative, work with many personnel, and have the strongest preference to evaluate
performance that contributes to the group rather than self.
According to O'Neil, et al. (2001), individuals who enter an organization with different motivations,
experiences and values tend to direct their behavior in many ways, but more often in different directions. In addition,
according to Solovey and Mayer, people who have high score in ability to precise accurately, understand and
respect other people's emotions, are more able to respond flexibly to changes in their social environment and build
supportive social networks (Cherniss 2000).
Based on the above description, it can be assumed that to achieve the goals set by the company,
cooperation and mutual relationships between employees and companies, and employees provide all the effort and
hard work to the company, is necessary. On the other hand, the company also provides propriety for the loyalty
given by employees to the company, so as to create a quality company, and is able to improve the performance

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quality of its human resources. Therefore, psychological contracts need to be studied to further improvement by
appraising organizational culture issues as factors that support the quality of company’s performance.
1. Literature Review
Psychological contract illustrates company's expectations to employees and employees' efforts to meet the
company's expectations, and strives to fulfill its demands. In other words, employee-to-company relationships are
interactive, evolving through beneficial influences and profitable offers to build and maintain workable psychological
contracts (Schein 1997).
Psychological contracts underlie the trust in mutual obligations between employees and employers. This
belief is based on the perception that the exchange agreement has been accepted and approved by both parties.
The psychological contract acts as an important regulator in employee and employer relationships that ensures
employee behavior indicates the answer to its psychological contract. Behavior that reflects this psychological
contract creates cooperative attitude and implicitly or explicitly beneficial in affecting organization to grant reward
or compensation (Rousseau and Guillermo 2004).
Psychological contract also refers to an individual-employer's belief system to hold exchange agreements
between them. This belief is shaped by pre-employment factor, working experience, and broader social context.
This psychological contract is then developed into actions that can be predicted by each party, thereby facilitating
effective planning, coordination, and performance. This exchange makes commitment and obliges each party to
provide an appropriate reciprocity one to another (Rousseau et al. 2004).
Robinson et al. (1996) state that psychological contract and its fulfillment are associated with workforce
response, consisted of in-role and extra-role performance, trust, satisfaction, and intention to remain stay within the
organization. Psychological contract is also influenced by the beliefs and values as the guidance of human
resources in carrying out its obligations and its behavior within the organization, which is referred to as
organizational culture. Organizational culture serves as the social glue that binds all members of the organization
together (Kreitner and Kinicki 2001).
The results of research on organizational culture and its effect on the expression of one's cooperative
behavior by differentiating behavior under strong and weak organizational culture conditions found that subjects
with strong organizational culture were rated as the most cooperative; they are reported to work with many people,
and have the strongest preference for evaluating performance that contributes to the team rather than themselves.
Another result also indicates that cooperative people are more responsive to the individual or collective norms that
characterize their organization (Chatman and Barsade 1995).
Methodology
Variables of the Research
1. Psychological Contract.
Psychological contract refers to individual's-employer’s belief system to hold the exchange agreement.
Psychological contract is expressed by using a scale consisting three forms of psychological contracts, namely:
Transactional, Balanced, and Relational. The level of respondents’ psychological contract can be recognized from
the total score of answers obtained by respondents.
2. Organizational Culture
Organizational culture is a form of assumption that is owned, accepted by the group implicitly and determines how
the group senses, thinks, and reacts to its diverse environments. Organizational culture is expressed by using a
four-dimensional scale arranged based on the organizational culture scale developed by Kreitner and Kinicki, i.e.
organizational identity, collective commitment, social system stability, and organizational coaching.
Research Population and Sample
Research population in this research is employees of PT. PLN Service and Network Area in Surakarta, amounting
to 53 employees. Sampling technique used in this research is Purposive sampling, that is sampling method by
choosing a group of research subject based on certain characteristics which have been predetermined. The
characteristics are minimum working period of 2 years, and latest education of high school.

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Research Instrument
1. Psychological Contract Scale
Psychological Contract Scale is arranged based on the concept of psychological contract consists of three forms,
namely transactional, relational and balanced. Psychological contract scale consists of 34 items. The item will be
void if r bt is negative or p> 0,050. Number of valid items are 28 and 6 items are invalid. Result of test of
psychological contract scale reliability in this research employed Cronbach Alpha Reliability Test technique
summarized in table 1.
Table 1. Reliability Test Results of Psychological Contract Scale
No Component Rtt p Status

1 Transactional 0.794 0.000 Reliable

2 Balanced 0.746 0.000 Reliable
3 Relational 0.756 0.000 Reliable

2. Organizational Culture Scale

The scale of organizational culture is modified based on the scale of organizational culture developed by Kreitner
and Kinicki (2001) consisting four dimensions, namely organizational identity, collective commitment, social system
stability, and organizational coaching. The organizational culture scale consists of 30 items, 3 items are invalid so
that the valid items left are 27 items.
The results of the reliability test of organizational culture scale in this research used of Alpha Cronbach
Reliability Test technique summarized in table 2.
Table 2. Reliability Test Results of Organizational Culture Scale
No Component Rtt p Status

1 Organizational identity 0.704 0.000 Reliable

2 Collective commitment 0.683 0.000 Reliable
3 Stability of the social system 0.735 0.000 Reliable
4 Organizational coaching 0.690 0.000 Reliable

Data Analysis Method

Factorial regression analysis by multivariate regression analysis was used as data analysis.
Results
Based on the results of regression analysis, partial correlation coefficient r-partial xy (correlation of organizational
culture with psychological contract) obtained 0.259 and p 0.030 (p <0.05), was significant, with effective contribution
of 5.047 percent. These results suggested that there was significantly positive correlation between organizational
culture and psychological contracts. It meant that the stronger the organizational culture, the higher the
psychological contract employees, and the weaker the organizational culture, the lower the psychological contract
employees. Based on the result of factorial regression analysis, the following results were obtained:
a. Correlation between Organizational Culture Factors and Transactional Psychological Contracts
The correlation of organizational culture factors and transactional psychological contracts can be seen in Table 3.

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Table 3. Correlation of Organizational Culture Factors with Transactional Psychological Contract

Partial Correlation
No Factors Significance SE (%)
r-partial p

1. Organization Identity 0.215 0.009 Very Significant 2.239

2. Collective Commitment -0.021 0.798 Insignificant 0.030
3. Social Stability -0.084 0.674 Insignificant 0.599
4. Coaching -0.119 0.130 Insignificant 1.227
Total 4.095

Based on Table 3, it could be concluded that the factor of organizational identity had positive and very
significant correlation with transactional with effective contribution of 2.239 percent. Collective commitment factors,
Stability of social systems, and coaching by organizations had a non-significant correlation with transactional.
b. Correlation between Organizational Culture Factors with Balanced Psychological Contract
The relationship of organizational culture factors with balanced psychological contract can be seen in Table 4.
Table 4. Correlation of Organizational Culture Factors with Balanced Psychological Contract

Partial Correlation
No Factors Significance SE (%)
r-partial

1. Organization Identity 0.206 0.012 Significant 2.310

2. Collective Commitment 0.256 0.003 Very Significant 15.155
3. Social Stability -0.251 0.004 Very Significant 3.198
4. Coaching -0.044 0.579 Insignificant 0.146
Total 20.809

Based on Table 4, it could be concluded that the organizational identity factor had positive and significant
correlation with contract balance, with effective contribution of 2.310 percent. The collective commitment factor had
positive and highly significant relationship with the contract balance, with effective contribution of 15.155 percent.
Stability factor of the social system had very significant relationship with contract balance, with effective contribution
of 3.198 percent. The coaching by the organization factor had insignificant relationship with the contract balance,
with effective contribution of 0.146 percent.
c. Correlation between Organizational Culture Factors and Relational Psychological Contracts
The correlation of organizational culture factors with relational psychological contracts can be seen in Table 5.
Table 5. Correlation of Organizational Culture Factors with Relational Psychological Contract

Partial Correlation
No Factors Significance SE (%)
r-partial p

1. Organization Identity -0.139 0.087 Insignificant 1.489

2. Collective Commitment 0.249 0.004 Very Significant 1.275
3. Social Stability -0.112 0.187 Insignificant 0.469
4. Coaching 0.070 0.626 Insignificant 0.373
Total 3.606

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Based on table 5, it could be concluded that the factors of organizational identity and social system stability
had no significant correlation with the relational contract. The collective commitment factor had positive and highly
significant correlation with the relational contract, with effective contribution of 1.275 percent. The coaching by the
organization factor had an insignificant correlation with the relational contract.
d. Correlation between Organizational Culture Factors with Overall Psychological Contract
The Correlation of organizational culture factors to the overall psychological contract can be seen in Table 6.
Table 6. Correlation of Organizational Culture Factors with Overall Psychological Contract

Partial Correlation
No Factors Significance SE (%)
r-partial p

1. Organization Identity 0.240 0.004 Very Significant 10.609

2. Collective Commitment 0.151 0.071 Insignificant 2.171
3. Social Stability -0.209 0.015 Significant 1.654
4. Coaching 0.048 0.549 Insignificant 0.137
Total 14.571

Based on Table 6, it could be concluded that the organizational identity factor had positive and very
significant correlation with psychological contract, with effective contribution of 10.609 percent. Collective
commitment factor had no significant correlation with psychological contract. The social system stability factor had
negative but significant correlation with psychological contract. The coaching by the organization factor had
insignificant correlation with psychological contract.
Discussions
The results of this research were in line with the opinion of Rousseau (2004) which stated that psychological
contracts are influenced by the beliefs and values as the guidance of human resources in carrying out its obligations
and behavior in the organization. The shared beliefs and values in the organization which guide the behavior of its
members are referred to as organizational culture (Shemerhorn et al. 1994).
If the psychological contract of the employee is positive, it will cause positive things to the employee such
as increased job satisfaction, commitment, and loyalty. Conversely, if the organization fails to meet the
psychological contract will cause various problems in the company such as job dissatisfaction, negative behavior,
and low levels of well-being, and low organizational commitment (Putri and Handoyo 2014). Furthermore, according
to Stoner et al. (2011), when employees consider their employers to violate psychological contracts, they view their
relationship with their superiors as unbalanced.
Employees who have confidence in the organization and developed the values of the organization in
behaving, the organization will also carry out its obligations as agreed upon the initial joining the organization that
will create cooperative attitude between the organization and employers with employees. Hence, in this case the
employees agree to work hard and loyal to the organization. Nevertheless, they hope that the organization would
also provide job security, development opportunities, and support the fulfillment of expectations. The success and
failure of organizational performance is believed by scientists of organizational and management behavior that it is
closely related to organizational culture. Organizational culture is one of the determinants of the success of an
organization's performance (Luthans 1998).
Organizational culture has a very strategic role to encourage and improve the effectiveness of organizational
performance. The role of organizational culture is as a tool for determining the direction of the organization, directing
what it can and should not do, how to allocate resources and manage organizational resources, as well as a tool
for dealing with the problems and opportunities from the internal and external environment. Organizational culture
serves as a social glue that binds all members of the organization together (Kreitner and Kinicki 2001)
The results of research on organizational culture and its effect on the expression of one's cooperative
behavior by differentiating behavior under strong and weak organizational culture conditions found that subjects
with strong organizational culture were rated as the most cooperative; they are reported to work with many people,
and have the strongest preference for evaluating performance that contributes to the team rather than themselves.

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Journal of Advanced Research in Law and Economics

Other results also indicate that cooperative people are more responsive to the individual or collective norms that
characterize the organization (Chatman and barsade 1995).
The organizational identity factor has influence on the psychological contract. Organizational identity is the
purpose of the existence of an organizational culture that will lead to a commitment to the values adopted by the
organization (Kasali 2005). According to Kreitner and Kinicki (2001) the example in awarding an organization's
identity is to reward by encouraging innovation so that the members feel acknowledged by the organization.
According to Helms, Marilyn and Stern (2001) aconducive organizational culture is able to provide a good
perception of employees to remain a part of the organization.
Based on the results of the study, it was found that organizational culture factors as organizational factors
were able to predict psychological contracts. Therefore other organizational environmental factors are also thought
to influence psychological contracts between leaders and employees. Thus for further research, it is expected to
include other organizational environmental factors, such as the organizational climate. Also, there is a need for new
research on psychological intervention models to build psychological contracts between superiors and
subordinates.
Conclusions
The results of the analysis showed that there was a very significant correlation between organizational culture and
psychological contracts, with effective contribution of 5.047 percent. In addition, the organizational identity factor
had positive and highly significant correlation with the psychological contract, with effective contribution of 10.609
percent. Next, the organizational identity factor also had positive and highly significant correlation with transactional
psychological contract. Collective commitment factor and Stability of social system had positive and very significant
correlation with balanced contract. Then, Collective commitment factors had a positive and highly significant
correlation with the relational contract.
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