MIGO-B

M-IGO-B

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Unit III — Group Dynamics

20. Interpersonal Relations

1Concept

Interpersonal relationships at work are governed by both formal agreements and unspoken psychological contracts about fairness and reciprocity. When a perceived promise is broken, employees reassess trust, perceived organizational support, and the quality of their exchange relationship (LMX) with their manager, often with effects beyond the individual involved.

2Components
  • Trust (cognitive and affective)
  • Psychological contract (transactional and relational)
  • Perceived organizational support (POS)
  • Leader-member exchange (LMX) quality
  • Empathy in managerial response
3Key constructs
Psychological contract breachPerceived organizational supportLMXTrustOrganizational justice (related)
4Observable / measurable indicators
  • Employee engagement survey scores on trust-in-management items
  • LMX quality ratings between manager and direct reports
  • Voluntary attrition rate in the affected team
  • Frequency of informal complaints or grievances raised
  • Discretionary effort/OCB (organizational citizenship behavior) observed post-incident
5Corporate / industrial scenario

At Nirlon Pharma Solutions, a Mumbai-based CRO with 600 employees, senior manager Arvind verbally told Priya, a high-performing associate, that she would be promoted to team lead after completing a critical clinical-data project, contingent on 'strong results.' Priya delivered the project two weeks early with excellent client feedback, but the promotion did not happen because of a sudden org-wide hiring freeze mandated by finance. Priya feels betrayed since no one told her about the freeze before she made personal plans, including declining another job offer. Her engagement scores have dropped sharply in the last pulse survey, and two peers who know her story have also expressed reduced trust in management's promises. Arvind must decide how to handle this without being able to override the freeze.

6Evidence and data

Priya's tenure before this incident

3 years, top-quartile performer

Project delivery

2 weeks early, strong client feedback

Priya's engagement score change

Dropped from 8.2 to 5.1 (out of 10)

Peers affected by secondhand trust erosion

2 direct peers

Alternative job offer declined by Priya

1, due to promotion expectation

Hiring freeze duration (finance mandate)

Indefinite, reviewed quarterly

7Alternatives

ATransparent disclosure and renegotiated psychological contract

Arvind holds an honest conversation with Priya explaining the freeze, formally apologizes for the broken promise, and co-creates a written, time-bound alternative commitment (e.g., promotion upon freeze lift plus interim compensation adjustment).

BOffer non-monetary recognition and expanded scope without title change

Give Priya high-visibility projects, public recognition, and expanded decision authority to demonstrate her value, without promising a title or pay change.

CEscalate to HR for a formal retention and equity review

Arvind escalates Priya's case to HR to review compensation equity and retention risk formally, potentially securing an exception or a retention bonus outside the freeze's scope.

8Analyse the alternatives

ATransparent disclosure and renegotiated psychological contract

Strengths

  • Directly repairs the psychological contract with a concrete, verifiable commitment
  • Signals empathy and honesty, which can rebuild affective trust over time

Risks

  • Written promise still carries execution risk if the freeze extends indefinitely
  • May not fully offset the tangible loss of the declined job offer

BOffer non-monetary recognition and expanded scope without title change

Strengths

  • Immediately actionable without needing finance approval
  • Enhances perceived organizational support through visible investment in her growth

Risks

  • Does not address the core broken promise, which was specifically about title and role
  • Risk of appearing as a substitute rather than a genuine remedy, deepening cynicism

CEscalate to HR for a formal retention and equity review

Strengths

  • Uses organizational-level resources to potentially secure a real remedy
  • Signals the issue is taken seriously beyond the immediate manager

Risks

  • Slower process, during which Priya's trust and engagement may continue to decline
  • Exceptions could create equity concerns among other employees under the same freeze
9Learner decision

Which response should Arvind pursue to rebuild Priya's trust and limit the wider erosion of perceived organizational support among her peers, given he cannot lift the freeze himself?

A
Transparent disclosure and renegotiated psychological contract

Arvind holds an honest conversation with Priya explaining the freeze, formally apologizes for the broken promise, and co-creates a written, time-bound alternative commitment (e.g., promotion upon freeze lift plus interim compensation adjustment).

Strengths: Directly repairs the psychological contract with a concrete, verifiable commitment; Signals empathy and honesty, which can rebuild affective trust over time. Risks: Written promise still carries execution risk if the freeze extends indefinitely; May not fully offset the tangible loss of the declined job offer.

B
Offer non-monetary recognition and expanded scope without title change

Give Priya high-visibility projects, public recognition, and expanded decision authority to demonstrate her value, without promising a title or pay change.

Strengths: Immediately actionable without needing finance approval; Enhances perceived organizational support through visible investment in her growth. Risks: Does not address the core broken promise, which was specifically about title and role; Risk of appearing as a substitute rather than a genuine remedy, deepening cynicism.

C
Escalate to HR for a formal retention and equity review

Arvind escalates Priya's case to HR to review compensation equity and retention risk formally, potentially securing an exception or a retention bonus outside the freeze's scope.

Strengths: Uses organizational-level resources to potentially secure a real remedy; Signals the issue is taken seriously beyond the immediate manager. Risks: Slower process, during which Priya's trust and engagement may continue to decline; Exceptions could create equity concerns among other employees under the same freeze.

Score the alternatives

Set the weight of each criterion (1–5), then score every alternative (1–5). The matrix is a thinking aid, not a verdict.

CriterionWeightABC
Behavioural impact
Employee acceptance
Feasibility
Cost (higher = more affordable)
Risk containment
Long-term sustainability
A
54
B
54
C
54

With your current weights, alternative A scores highest. A matrix only reflects the weights you chose. Evidence, ethics, feasibility and the people affected still belong in your judgement — you decide.

Your decision and rationale
Select an alternative first.
10Justification using OB theory

Ground the answer in psychological contract theory (distinguishing an unmet relational promise from a mere transactional miss), perceived organizational support (how the organization's response, not just the manager's, shapes future discretionary effort), and LMX (whether Arvind's individual relationship with Priya can still function as high-quality despite the org-level constraint).

11Expected consequences
  • Short-term: an honest conversation may cause short-term frustration but can prevent silent disengagement
  • Short-term: delay in remedy (e.g., HR escalation) risks further engagement decline before resolution
  • Long-term: how this is handled affects whether Priya and her two peers stay or seek external offers
  • Long-term: unresolved breaches accumulate into a broader culture of low trust in managerial commitments
  • Long-term: a credible remedy process can become a model for handling future freeze-related broken promises
12Reflection
  • What is the difference between a transactional and a relational psychological contract, and which was broken here?
  • Why did the trust erosion spread to Priya's peers even though they were not directly affected?
  • Could Arvind have prevented this breach earlier, and how?
  • How does perceived organizational support differ from trust in one's immediate manager in this case?
Knowledge check — Know / Analyse / Decide
Know

A psychological contract in organizational behavior refers to:

Analyse

Why did trust erode among Priya's peers even though the broken promise was made only to her?

Decide

Given Arvind cannot lift the freeze, which action best addresses both the immediate relational breach and the broader trust risk?

Answer all three levels to submit.