Case Study 5.2: Motivating Staff when the money is tight
Question 2
If Claire Pignataro and some other recruits earn less pay than people in other industries, to what extent would the attraction and retention initiatives described in this case study reduce feelings of inequity?
Raising motivation levels and ensuring commitment are two of the key success factors when managing people at work. Increasingly managers, whether consciously or not, are turning to the psychological contract as a way to retain and motivate key staff. It was a useful tool when managing and recruiting staff. It is basically the unspoken contract between the organization and the job holder. It encapsulates the expectations of both sides as to what each expects the employment contract to deliver.

Although informal and often unspoken of directly, the matching of expectations at this level will often lead to an increased sense of happiness among employees as well as delivering real results. A psychological contract is defined as the `mutual beliefs, perceptions and informal obligations between an employer and employee' It can be distinguished from the legal employment contract in that it is the perception of both parties, the employee and employer, of what their mutual obligations are towards each others. It can be more influential than the formal written contract in affecting how employees behave from day to day, their motivations and their commitment to the organization.
The psychological contract tells employees what they are required to do in order to meet their side of the bargain and what they can expect from their job. It offers a valid and helpful framework of thinking about the employment relationship, especially against a background of a changing labor market and low unemployment where employers are being encouraged to do what they can to retain employees.

As it is considered