HUMAN RESOURCE MANAGEMENT

PRACTICES AND ORGANIZATIONAL

COMMITMENT AND INTENTION TO
LEAVE: THE MEDIATING ROLE OF
PERCEIVED ORGANIZATIONAL SUPPORT
AND PSYCHOLOGICAL CONTRACTS

Employee turnover represents a critical problem to an organization in terms of loss of talent,

additional recruitment and training costs (Loi, et al., 2006). According to the latest Bureau of Labor
Statistics employee turnover rates for the year ending August 2006, overall U.S. voluntary turnover
increased slightly to 23.4% annually, up from 22.7% the previous year. The highest turnover by far is
still in the accommodation and food services sector (56.4%) and the leisure and hospitality sector at
(52.2%). The two sectors also experienced the highest turnover increase from 2005 to 2006, 7% in
accommodation and food services sector and 5.4% in leisure and hospitality industry
(http://www.nobscot.com/survey/index.cfm). The cost of turnover adds hundreds of thousands of
dollars to a company's expenses, including hiring and training costs and productivity loss. Industry
experts often quote 25% of the average employee salary as a conservative estimate of the turnover
costs (http://www.nobscot.com/library/retention.cfm).
Prior research suggests that employees’ organizational commitment (OC) and intention to
leave are two important antecedents of turnover (Griffeth & Hom, 1995). Maertz and Campion
(1998) argued that an effective way to decrease actual turnover rate is to identify factors that
influence turnover intentions. Researchers studying conceptual and empirical models of turnover
have provided strong support for behavioral intentions (intention to leave) affecting actual behavior
(turnover) (Igharia & Greenhaus, 1992). Organizational commitment has been considered as one of
the most important predictors of turnover and intention to leave. It was found that employees who
were more committed to their organizations had lower intention to leave than those with lower
organizational commitment (Griffeth & Hom, 1995; Igharia & Greenhaus, 1992). Wong, et al.,
(1995) studied about a relationship between three attitudinal antecedents to turnover, OC, job
satisfaction and turnover intention. Upon examination of their full model to determine the
relationship between the attitudinal antecedents, they found that OC significantly predicted turnover
intention whereas job satisfaction had no effect on turnover intention. The finding suggests that
employees who are committed to an organization are less intended to leave their employers. In a
study to determine a relationship of organizational commitment and job satisfaction with intention to
leave among government doctors, Samad (2006) found that OC contributed the highest variance in
intention to leave.
Scholars have extensively studied OC because of its significant impact on employees’
intention to leave which consequently lower turnover (Meyer & Allen, 1984; 1987; Meyer et al.,
1993; Udo, et al., 1997; Samad, 2006). This important effect of OC on turnover has drawn attention
of organizational behavior and human resource scholars to possible antecedents of OC. The
antecedents of OC have been investigated in the light of social exchange theory (Blau, 1964;
Gouldner, 1960; Rousseau, 1990). Social exchange is defined as cooperation between two or more
parties for mutual benefit (Robinson, et al., 1994). Researchers have increasingly adopted social
exchange as a theoretical foundation for understanding employee-employer relationships (Coyle-
Shapiro & Conway, 2005). According to Blau (1964), social exchanges involve unspecified
obligations, in which an individual does another a favor for an expectation of some future return,
although the time of occurrence of return and the form of return is often unclear. A social exchange is
based on undeclared obligations and trust (Tansky & Cohen, 2001). Social exchanges may also
involve reciprocity (Blau, 1964). Gouldner (1960) defined reciprocity as the norm which obligates
the recipient of benefit to repay the donor in some way. Therefore, employee-employer relationship
might be viewed as social exchange. An employer may acknowledge an employee’s efforts by
offering opportunities and benefits, and in return for these opportunities and benefits, employees may
feel obligated to reciprocate and may become more committed to the organization (Tansky & Cohen,
2001). Eisenberger et al. (1986) used a social exchange framework to argue that employees who
perceive high level of support from their organizations tend to feel obligated to the organization
which in turn makes them more committed to their organizations.
According to organizational support theory employees form general beliefs about the extent
to which the organization values their contributions and cares about their well-being (Eisenberger et
al., 1986). Based on the norm of reciprocity, such perceived organizational support make employees
feel obligated to care about the organization’s welfare and to help the organization reach its
objectives. One way that employees may approach to satisfy this indebtedness is through greater
affective commitment to the organization and greater efforts to help the organization (Eisenberger et
al., 1986).
To study the employee-employer exchange, two important frameworks have been
increasingly, but not exclusively, adopted by scholars, namely perceived organizational support
(POS) and psychological contracts (PCs). Both factors were found to have a significant relationship
with employees’ commitment to organizations (Coyle-Shapiro & Kessler, 2000; Eisenberger et al.,
1990). PC is defined as an employee’s belief regarding terms and conditions of an exchange
relationship with their organization (Rousseau, 1989) such as (1) wages based on time on job, rank or
performance (Coyle-Shapiro & Conway, 2005), or (2) compensation, training etc in exchange for
loyalty, performance etc. (Rousseau & Wade-Benzoni, 1994). Psychological contract constitutes of
employment obligations, embedded in the context of social exchange (Rousseau, 1989). Obligations
are the basic components of social exchange relationships and are defined as beliefs, held by an
employee or employer, that each is bound by promise to an action in relation to the other party
(Robinson, et al., 1994). According to the authors, PCs consist of sets of individual beliefs or
perceptions regarding reciprocal obligations. The individual nature of psychological contracts is their
defining attribute which makes them conceptually different from both a formal and implied contract,
as it considers an individual’s beliefs of the terms and conditions of an agreement between the
individual and his/her employer (Lester & Kickul, 2001). Unlike formal employee-employer
contracts, PC is inherently perceptual and therefore an individual’s interpretations of the terms and
conditions of the obligations within the contract may not be similar to the other individual (Kickul, et
al., 2004). Employees’ PCs specify contributions that they believe they owe to their employer and the
inducements that they believe are owed in return (Robinson, et al., 1994). PCs are developed and
executed through interactions between an employee and organizational agents such as recruiters,
human resource personnel and direct superiors but in the employee’s mind, the contract exists
between him or her and the organization. In addition they tend to hold beliefs concerning what the
organization is obliged to provide and how well the organization actually fulfilled those obligations
(Robinson & Morrison, 1995). Thus, the content of PCs may include any item that might be
exchanged between the organization and the employee (e.g., compensation, training, support, in
exchange for loyalty, performance) (Coyle-Shapiro & Conway, 2005). PC research has explored the
employer-employee exchange relationship by investigating consequences of perceived contract
fulfilment or breach (the extent to which an employee believes that their employer has fulfilled or
failed to fulfil one or more of its promised obligations) on employee attitudes and behavior (Coyle-
Shapiro & Conway, 2005). Prior studies have reported a positive relationship between perceived
contract fulfilment and employees’ organizational commitment (Coyle-Shapiro, & Kessler, 2000;
Pathak, et al., 2005) whereas a perceived contract breach resulted in reduced organizational
commitment (Guzzo & Noonan, 1994).
Perceived organizational support (POS) refers to an individual’s perception concerning the
degree to which an organization values their contributions and cares about their well-being (i.e. the
degree to which the organization is committed to its employees) (Eisenberger et al., 1986).
Eisenberger et al. (1986) used a social exchange framework to argue that employees who perceive
high level of support from their organizations tend to feel obligated to the organizations which in turn
makes them more committed to their organization.
Based on the literature, POS and PC share some similarities. First, both concepts use social
exchange (Blau, 1964) and norm of reciprocity (Gouldner, 1960) to explain their consequences on
employee attitudes and behaviour. Second, both are the key means by which employees evaluate
their employment relationships with their organization (Coyle-Shapiro & Conway, 2005). Third, both
have been reported to have a positive relationship with employees’ organizational commitment.
Coyle-Shapiro and Kessler (2000) reported a positive relationship between perceived contract
fulfilment and commitment, and Eisenberger et al. (1990) reported a positive relationship between
POS and OC. However, three distinctive differences have also been reported between the two
concepts. First, POS refers to employees’ beliefs about whether an organization is committed to them
(Wayne, et al., 1997), whereas PC is about employees’ perceived mutual obligations and the extent to
which they believe that their organizations have fulfilled the promised obligations (Robinson, et al.,
1994). Second, POS is about an individual’s perception of an organizational treatment irrespective of
the fact that the treatment was promised or not, whereas for PC employees reciprocate when there is
a difference between what was promised and what is fulfilled (Coyle-Shapiro & Conway, 2005).
Third, relates to the interdependence of an employer and an employee to the exchange. POS focuses
only on the employer’s side of the exchange as perceived by the employees, whereas PC includes an
employee and employer perspectives, as PC is about an employee’s perception of the reciprocal
obligations between that individual and the employer (Coyle-Shapiro & Conway, 2005).
Human resource management (HRM) practices have been considered as one of the critical
factors affecting PC (Guzzo & Noonan, 1994; Rousseau & Greller, 1994; Rousseau & Wade-
Benzoni, 1994; Sims, 1994) and POS (Chang, 2005; Kinicki, et al., 1992; Wayne, et al., 1997).
Kinicki, et al. (1992) proposed that an organization’s actual HRM programs affect employee
perceptions of an organization’s commitment to human resource efforts, which in turn affect
employees’ work attitude. According to Levinson (1965), employees view behavior and actions of
organizational agents as actions of the organization itself. According to Eisenberger et al. (1990),
when employees believed that an organization was committed to its HRM programs, they believed
that the organization was committed to them. Therefore, employees developed positive attitudes
towards the company. Thus HRM practices can be one of the critical factors to influence POS which
in turn will contribute to the development of employee commitment to the organization.
An employee’s relationship with an organization is shaped by HRM actions such as recruiting,
appraising performance, training, and benefits administration through which employees come to
understand the terms of their employment (Rousseau & Greller, 1994). How jobs are advertised
(“great advancement potential,” “opportunity for salary growth,”), the way an organization is
portrayed during the recruitment interviews (“this organization provides plenty of training ”),
comments made in performance appraisal reviews (“keep up the good work and we will move you
up”), compensation systems (wages based on time on the job, rank or performance), all send strong
messages to individuals regarding what an organization expects of them and what they can expect
in return. Hence HRM practices are seen to play an important role as message senders, shaping
terms of the psychological contracts (Rousseau & Wade-Benzoni, 1994). Coyle-Shapiro and Kessler
(2000) confirmed the positive effect of PC fulfilment on an employee’s organizational commitment.
A major function of HRM practices is to foster an appropriate PC (Rousseau & Greller, 1994), and
employees’ interpretation of their employer’s HRM practices will affect their PC, and ultimately
their perception of contract fulfillment or breach will affect their commitment to the organization.

1.2 Purpose of Study

The purpose of the study was to examine whether HRM practices influence employees’
organizational commitment, perceived organizational support, and psychological contracts; whether
perceived organizational support and psychological contracts have relationship with organizational
commitment; and whether organizational commitment influence to lower intention to leave.
1. Describe subjects’ sex, age, current job position, number of jobs quit in the last five years,
tenure in current company, and education.
2. Describe human resource management (HRM) practices, organizational commitment (OC),
perceived organizational support (POS), psychological contracts (PCs) and intention to leave of
subjects.
3. Describe the relationship between HRM practices and OC.
4. Describe the relationship between POS and OC.
5. Describe the relationship between HRM practices and POS.
6. Describe the mediating effect of POS on the relationship between HRM practices and OC.
7. Describe the relationship between PCs and OC.
8. Describe the relationship between HRM practices and PCs.
9. Describe the mediating effect of PCs on the relationship between HRM practices and OC.
10. Describe the relationship between OC and employee’s intention to leave.

1.4 Significance of the Research

 The uniqueness of this research is to study the influence of HRM practices as a critical tool to
make the employees more committed to their organization, which in turn would affect employee
intention to stay or leave the organization.
Firstly, mediating effects of POS on the relationship between HRM practices and OC would
suggest that when employees believe that their organization intends to support them and expresses its
commitment to its employees, through its HRM practices (training, rewards, equal employment
opportunity, etc.), it makes the employees more committed to the organization. There has been very
little empirical research examining this relationship. Most of the previous research has been
conceptual. Few researchers studied the influence of HRM practices on POS, and the studies either
used HRM practices as a whole to study the influence of HRM practices on POS or used only some
of HRM practices (promotion and training and development). The uniqueness of our research is to
study the influence of each HRM practice on POS. Eight HRM practices were included in this study
to examine the relationship of each HRM practice with POS. This study will provide critical
information about those HRM practices which influence employee perceptions that the organization
supports them and cares about them and which in turn affects their commitment level, which in turn
will affect their intention to leave the organization.
Although there has been numerous research studies on the relationship between (1) OC and
intention to leave, (2) POS and OC, and there has also been little research on (3) HRM practices and
POS, but none of these studies tried to study the influence of one relationship on the other, neither
did any research try to study the mediating effect of POS on the relationship between HRM practices
and OC. This study intends to examine the influence of HRM practices on POS, followed by the
influence of POS on OC, and finally the influence of OC on intention to leave. Therefore, this study
was designed to investigate (1) whether employees consider HRM practices as a support from the
organization, (2) whether these employee beliefs, that the organization is committed to them through
their HRM practices, influence their commitment level, and (3) whether commitment of employees
influence their intention to leave.
Secondly, despite the importance of the HRM practices, little research has been conducted on
HRM practices and POS. All previous studies either used employees’ overall perception of the
organization’s HRM practices (Chang, 2005), to study the influence of HRM practices on POS or
studied the influence of certain HRM practices (promotion and training and development) on POS
(Wayne, et al., 1997). Eight HRM practices were included in this study. This study examines the
influence of each HRM practice on POS and the influence of a bundle of HRM practices on POS.
The findings would be more important for academicians and practitioners because an organization
practices several diverse HRM practices and not some specific HRM practice. The findings would
give an opportunity to decide which practices work for a particular organization and which do not.
Thirdly, there has been little empirical research on the relationship between HRM practices
and PCs, though HRM practices have been considered as one of the critical factors affecting PC
(Guzzo & Noonan, 1994; Rousseau & Greller, 1994; Rousseau & Wade-Benzoni, 1994; Sims, 1994),
but this research area lacks empirical work. The study will examine whether employees consider
HRM practices as an important tool while developing psychological contracts.
Lastly, the study intends to examine the influence of HRM practices on PC fulfilment,
followed by the influence of PC fulfilment on OC, and finally the influence of OC on intention to
leave. Therefore, this study was designed to investigate (1) whether HRM practices will be a
significant predictor of PC fulfilment, (2) whether PC fulfilment will make the employees more
committed to their organization, and (3) whether higher commitment of employees result in lower
intention to leave. Research in this area can 13
help practitioners and academicians to find which HRM practices influence PC fulfilment more. All
HRM practices do not work for all organizations, therefore, it is important for human resource
managers to figure what HRM practices are working and what are not. Overall, this study provides
scope for academicians and practitioners to find the best HRM practices that would work for a
particular organization in lowering employees’ intention to leave.