Contact centres are the vital link in the value chain between the organisation and its customers because they offer essential front line sales and services of products. Evaluation of their success can be assessed in terms of customer retention, up selling and the promotion of the brand. This is brought into sharp focus if the centre is outsourced because of the impact of the strategic behaviour of the principal and its relation with its agents. The association of employees with the brand in outsourced operation is not as effective as in captive operations partly because communications from principal to agent are attenuated. Emotional connectivity, diagnostic skill set, requirement gathering, and knowledge are some of the most sensitive qualities required in agents working in the contact centres. These characteristics are found to differ according to whether this is in-house or outsourced operation and affect the psychological contract between the service provider and its employees. In addition, the employees are unlikely to achieve any rewards and are unable to offer any commitments to the customer in an outsourced operation; hence the “psychological contract” is breached. One of the consequences of this breach is on knowledge management. The knowledge of an employee regarding the products and services is lost with that employee’s attrition. Also employees’ then have little interest towards customer service and organizational welfare, which impacts on the customer centric goals of the principal. We argue that the psychological contract between employer and an employee and has positive influence on Knowledge Diffusion, mediated by cultural dynamics, which further contributes to the overall organizational effectiveness. This paper aims to investigate, as a pilot study, the elements of organisational culture and secondly its role in the diffusion of knowledge in contact centres, in-house and outsourced. We demonstrate how by deploying a blend of qualitative methods, it is possible to perceive the effect of each element of the cultural web on diffusion. Finally we propose a hypothesis of the role that Power Distance (Hofstede, 1980) can play, as a proxy for the Psychological Contract to leverage knowledge diffusion
