By Steve Kelman

Blog archive

The devil, the details and contract terms

I promised in my blog earlier this week, the one about research on cooperation among colleagues, to write about another interesting presentation we heard from a candidate for an assistant professor job in management: Eileen Chou of Kellogg Business School at Northwestern.

Chou's presentation -- with the cutesy title "The devil is in the details" -- presents some experiments challenging the common view that contracts with more specific contract terms are better than those with less specific ones. Some of the experiments were done in the lab, and others involved recruiting people for a job on the website mTurk. (The site is usually used to recruit real people for jobs they do at home, and has become an increasingly popular tool for academics who wish to study psychological phenomena.)
 
Chou looks at the effect the specificity of contract terms has on the performance of the person who has signed the contract. The contracts she considers are employment contracts, and she looks at them from the perspective of the employee. In the experiments, she manipulates some of the terms of the contracts to make them more or less specific.

So, for example, in one experiment the two versions are "we will check the responses of 25 percent of the employees" vs. "we might check some employee responses." In another, the alternatives are a group that meets “two days a week (on weekdays)" vs. "a bi-weekly focus group." In a third, participants will speak "for two to three minutes" vs. "for a couple of minutes."
 
What she found is that the less specific contracts increased employee persistence, creativity and organizational commitment compared with the more specific ones. Chou argues that this occurred because the less specific contracts increased employee intrinsic motivation, which research has shown is related to a person's feelings of competence and autonomy. She suggests that lack of detail may be interpreted as a vote of confidence in the employee's competence, and that fewer constraints, and incentives that may not be well specified, promotes a feeling of autonomy.
 
These experiments touch on age-old issues in government contracting and in how to promote good contractor performance. In some sense, these results are more consistent with the "trust/cooperation" view of how to organize contracting than with the "adversarial/monitoring" view.

Of course, it's a real stretch to go from these results to definite conclusions about government contracting. First, it should be noted that all the specific terms involved either inputs or monitoring -- the experiments did not include performance demands ("do your best" vs. "keep the system up and running 99.5 percent of the time"). Second, the experiments looked at effects of specificity on the behavior of individual employees in one-on-one contracts, and it is unclear whether or to what extent these findings would apply to employees if the contract is between a government agency and a service provider.
 
Nonetheless, it is an interesting contribution to debates on government contracting from an unlikely source.

Posted on Jan 20, 2012 at 12:09 PM


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