The MIT research (1991) highlighted flexible human resource practices as one of the essential requirements of organisations wishing to succeed in business transformation. This chapter examines the ways in which organisations are changing and developing new strategies to motivate their employees. It outlines the views of respondents and focus group members on the changing nature of the psychological contract. It looks at the effects on motivation, and the need for alternative career paths and opportunities for self-development to support continuing employability and rebuild loyalty and trust in corporate governance. It examines retail financial services firms’ efforts to introduce new forms of remuneration and performance management systems.
The ‘psychological contract’, a concept first defined by the organisational psychologist, Chris Argyris in 1960, describes the outcome of the ongoing but partially hidden process of negotiation and renegotiation between employee and employer concerning performance and rewards. It is to do with forming a relationship where exchanges between those involved are characterised by some degree of trust and loyalty. Most of the terms negotiated are implicit, resting on the value of assumptions about the future as well as on what actually happens as the career develops. Although this leaves the situation ambiguous, the psychological contract is real in the sense that both parties expect tangible results after the potential of the relationship has been explored and confirmed in the early phases of employment.
With the trend towards flexible labour, the idea of a lifetime career in a single organisation and even in a single occupation becomes unrealistic, and the reality of short-term contracts with explicit terms of commitment must be faced by both parties. It is argued that in today’s modern workplace there are only three basic rules, and these reflect the change from guaranteed