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to develop more systematic ways of managing it. In such cases, managers often
recognize that the process of developing and using measures may be valuable in
itself regardless of the measures developed because it provides vital insights into
key areas of employee skill and motivation (Elias and Scarbrough, 2004).
Where measures have been developed, they can help to guide managers’ decision-
making by highlighting the impact which different decisions are having, or are likely
to have, on the human capital of the organization. This risk can be mitigated to some
extent by reducing dependence on a few individuals and emphasizing team-based
skills. Equally, the organization may seek to turn knowledge workers’ expertise into
a corporate resource by developing routines and systems based on the codification of
knowledge. However, for organizations in fast-moving industries, the role of human
capital is so great that such measures can do little to mitigate the risks.

Psychological contract

The approaches outlined above tend to adopt a top-down view by taking the orga-
nization’s strategy as their starting point. This can make a lot of sense where man-
agers find it difficult to see the links between knowledge workers’ contribution and
overall corporate goals. What these approaches lack, however, is the knowledge
worker’s perspective on that contribution. This is important because, as discussed,
the motivation and commitment of this group comes not from management but
from the knowledge workers’ own perceptions of their role and rewards.
One promising approach for gaining the knowledge workers’ perspective has
been developed by scholars working on the so-called ‘psychological contract’
between employer and employee. This term is used to distinguish it from the
formal contract of employment. It describes the unspoken but psychologically
significant agreement which employees feel they have with their employing orga-
nization. This framework is valuable in developing a more integrated approach
because it presents the employment relationship in the way that knowledge
workers themselves see it. Thus, knowledge workers do not respond to their pay
packet in isolation from the kind of work which they get to do, or the career
opportunities which their employer provides for them. They look at the employ-
ment relationship as a whole – the complete package – and respond to it accord-
ingly. If their employer succeeds in meeting the full range of their expectations,
they are much more likely to be motivated and committed in their job.
The concept of the psychological contract is useful here because it draws
managers’ attention to the implicit nature of this exchange. Knowledge workers
become committed and motivated in return for the employer’s ability to meet
their expectations. Commitment and motivation are not a given, and even good
salaries do not always secure them. Recent studies have underlined the impor-
tance of this implicit contract and the kind of things which employers need to
deliver if knowledge workers are to see it as a fair exchange. Thus, a study by
Flood et al. (2001) found that knowledge workers were more likely to leave
employers who were seen as breaking the psychological contract. Particularly
important here was the employer’s ability to meet the worker’s expectation of
interesting and challenging work:

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