Reciprocity matters: Idiosyncratic deals to shape the psychological contract and foster employee engagement in times of austerity

• DOI: http://doi.org/10.1002/hrdq.21327
• Author: Amanda S. Davis,Beatrice I. J. M. Van der Heijden
• Published date: 01 December 2018
• Date: 01 December 2018

QUALITATIVE STUDY

Reciprocity matters: Idiosyncratic deals to shape

the psychological contract and foster employee

engagement in times of austerity

Amanda S. Davis

1

| Beatrice I. J. M. Van der Heijden

2,3,4,5

1

Business School, Manchester Metropolitan

University, Manchester, UK

2

Institute for Management Research,

Department SHRM, Radboud University,

Nijmegen, The Netherlands

3

Open University of the Netherlands, Heerlen,

The Netherlands

4

Kingston Business School, Kingston

University, Kingston-Upon-Thames, UK

5

Hubei University, Wuhan, China

Correspondence

Amanda S. Davis, Business School, Manchester

Metropolitan University, All Saints Campus,

Oxford Road, Manchester M15 6BH, UK.

Email: asd51987@aol.com

Following the 2007/2008 global financial crisis, the UK public

sector has experienced major funding cuts resulting in staffing

reductions and a dilution in the employment deal. Consequently,

the aim of this study is to understand how i-deals, which are

unique conditions of employment negotiated between an individ-

ual and their employer (Rousseau, 2005), may be used to accept

a new psychological contract and foster employee engagement

during austerity. Four qualitative team case studies were con-

ducted comprising senior, middle-line, and first-line managers,

and either professional or nonprofessional employees, within one

English local authority (LA). Methods included 29 ×one-to-one

and three focus group semistructured interviews incorporating

the critical incident technique. By examining i-deals through the

lens of social exchange theory (Blau, 1964), this research demon-

strates the role of reciprocity in the form of i-deals to accept the

new psychological contract and foster engagement. Here, for

some employees, once concrete and universal resources were

available to a certain level (e.g., pay), the difference

(e.g., universal resources such as a pay rise, external training) was

substituted by more particularistic resources (e.g., flexibility and

developmental i-deals) herewith extending Foa and Foa's (1976,

1980, and 2012) resource theory. Furthermore, resultant eco-

nomic or social exchange may be due to the individual attribution

of why the i-deal was agreed, rather than the i-deal content.

Finally, when i-deals are denied, action to lower the risk of psy-

chological contract breach is advised.

KEYWORDS

austerity, career development, employee engagement, I-deals,

idiosyncratic deals, psychological contract, public sector,

reciprocity, work-life balance

DOI: 10.1002/hrdq.21327

Human Resource Development Quarterly. 2018;29:329–355. wileyonlinelibrary.com/journal/hrdq © 2018 Wiley Periodicals, Inc. 329

1|INTRODUCTION

Following the 2007/2008 global financial crisis and subsequent recession, many Western countries are coping

with austerity measures to reduce public spending (Cepiku, Mussari, & Giordano, 2016; Conway, Kiefer, Hartley, &

Briner, 2014; Kickert, 2012). In relation to English local authorities (LAs), which are public sector organizations

that are run by locally elected councillors and provide a diverse range of public services from waste management

and recycling to education, this presents an immense challenge given LAs will have had their Central Government

funding reduced by £16 billion between 2010 and 2020 (Local Government Association, 2017). Consequently,

LAs have been transforming their services to enable them to continue to meet their statutory duties within these

funding cuts (Bach, 2011). Such reorganization has created job insecurity for LA employees due to organizational

restructures, redundancies (although redeployment will normally be considered—Local Government Association,

2013), and reduced pay, benefits, and terms and conditions (CIPD/PPMA, 2012; Francis, Ramdhony, Reddington, &

Staines, 2013). However, these cost reduction methods are insufficient to meet the budget challenge (Bach,

2011). Consequently, both the previous UK Labour and Coalition Governments in power at the time of the data

collection encouraged LAs (and all sectors) to deal with this radical change by leadership and employee engage-

ment (Bach, 2011; Department for Business, Innovation and Skills, 2011) as per the MacLeod and Clarke (2009)

report. Despite austerity reducing the number of levers available to managers to foster engagement, there has

been minimal attention to the impact this has had on the employment relationship (Bach, 2011; Francis et al.,

2013), or on the process of fostering employee engagement (Reissner & Pagan, 2013) and subsequent employee

attitudes and behaviors (Kiefer, Hartley, Conway, & Briner, 2014; Van der Voet & Vermeeren, 2016). That said, a

2-year pay rise has been agreed from April 2018 (Unison, 2018) demonstrating the recent political (pressure) com-

mitment to increase spending (HM Treasury, 2018) following the UK General Election in 2017 where the Govern-

ment lost its majority. However, the unknown challenges of Brexit and increase in service demands from the

aging population suggest that budget pressures will continue (Inman, 2018) making it important to learn from the

past to prepare for the future.

The first aim of this article is to contribute to this timely discussion by examining how idiosyncratic deals, also

known as i-deals, which are unique conditions of employment negotiated between an individual worker and their

employer (Rousseau, 2005), may be used to help employees accept the changing psychological contract (Hiltrop,

1995), in particular the demise of the public sector's notion of a “job for life,”along with the diluted employment deal

in terms of pay freezes and reductions in benefits (including external training), terms and conditions (CIPD/PPMA,

2012). Although this has been examined previously within LAs (e.g., Coyle-Shapiro & Kessler, 2000), the austerity

context makes it relevant again.

Second, we aim to better understand how i-deals may be used to foster employee engagement given their

potential to offer alternative low-cost reciprocations (Hornung, Rousseau, & Glaser, 2008; Rousseau, 2005;

Vidyarthi, Chaudhry, Anand, & Liden, 2014). This is likely to be of interest to HRD practitioners and scholars,

because learning and development tends to reduce during downsizing (Wilkinson, 2005). Withdrawing such

quality-related human resource (HR) practices is likely to have an adverse effect on employee perceptions of

organizational ethics and work attitudes (Valentine, Hollingworth, & Francis, 2013), which may lead to disengage-

ment. Furthermore, by better understanding the meanings of these reciprocations, we build on the extant

research, which recognizes the importance of the line manager's role in fostering employee engagement (Alfes,

Truss, Soane, Rees, & Gatenby, 2010; Lewis, Donaldson-Feilder, & Tharani, 2012). To the best of our knowledge,

up until now i-deals have not been studied in relation to a context of austerity and employee engagement. In

summary, this article examines empirically through the lens of social exchange theory (SET) (Blau, 1964) how i-

deals may be used to encourage the acceptance of a new psychological contract and foster employee

engagement.

330 DAVIS AND VAN DER HEIJDEN