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Lesson#14
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Entering and Contracting
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Entering and Contracting
The planned change process generally starts when one or more key
managers or administrators somehow
sense that their organization, department, or group could be
improved or has problems that could be
alleviated through organization development. The organization
might be successful yet have the room for
improvement. It might be facing impending environmental
conditions that necessitate a change in how it
operates. The organization could be experiencing particular
problems, such as poor product quality, high
rates of absenteeism or dysfunctional conflicts among
departments. Conversely, the problems might appear
more diffuse and consist simply of feelings that the
organization
should be “more innovative,” “more
competitive,” or “more effective.”
Entering and contracting are the initial steps in the OD
process. They involve defining in a preliminary
manner the organization’s problems or opportunities for
development and establishing a collaborative
relationship between the OD practitioner and members of the
client system about how to work on those
issues. Entering and contracting set the initial parameters for
carrying out the subsequent phases of OD:
diagnosing the organization, planning and implementing changes,
and evaluating and institutionalizing
them. They help to define what issues will be addressed by those
activities, which will carry them out, and
how they will be accomplished.
Entering and contracting can vary in complexity and formality
depending on the situation. In those cases
where the manager of a work group or department serves as his or
her own OD practitioner, entering and
contracting typically involve the manager and group members
meeting to discuss what issues to work on
and how they will jointly accomplish that. Here, entering and
contracting are relatively simple and informal.
They involve all relevant members directly in the process
without a great number of formal procedures. In
situations where manager and administrators are considering the
use of professional OD practitioners,
either from inside or from outside the organization, entering
and contracting tend to be more complex and
formal. OD practitioners may need to collect preliminary
information to help define the problematic or
development issues. They may need to meet with representatives
of the client organization rather than with
the total membership; they may need to formalize their
respective roles and how the change process will
unfold.
Let’s first discuss the activities and content-oriented issues
involved in entering into and contracting for an
OD initiative. Major attention here will be directed at complex
processes involving OD professionals and
client organizations. Similar entering and contracting issues,
however, need to be addressed in even the
simplest OD efforts where managers serve as OD practitioners for
their own work units. Unless there is
clarity and agreement about what issues to work on, who will
address them, and how that will be
accomplished, subsequent stages of the OD process are likely to
be confusing and ineffective.
Entering into an OD Relationship:
An OD process generally starts when a member of an organization
or unit contacts an OD practitioner
about potential help in addressing an organizational issue. The
organization member may be a manager,
staff specialist, or some other key participant, and the
practitioner may be an OD professional from inside
or outside of the organization. Determining whether the two
parties should enter into an OD relationship
typically involves clarifying the nature of the organization’s
current functioning and the issue(s) to be
addressed, the relevant client system for that issue, and the
appropriateness of the particular OD
practitioner. In helping assess these issues, the OD
practitioner may need to collect preliminary data about
the organization. Similarly, the organization may need to gather
information about the practitioner’s
competence and experience. This knowledge will help both parties
determine whether they should proceed
to develop a contract for working together.
The activities involved in entering an OD relationship are:
clarifying the organizational issue, determining
the representatives of the client organization, and selecting
the appropriate OD practitioner.
Clarifying the Organizational Issue:
When seeking help from OD practitioners, organizations typically
start with a presenting problem—the
issue that has caused them to consider an OD process. It may be
specific (decreased market share,
increased absenteeism) or general (“we’re growing too fast,” “we
need to prepare for rapid changes”). The
presenting problem often has an implied or stated solution. For
example, managers may believe that
because members of their teams are in conflict, team building is
the obvious answer. They may even state
the presenting problem in the form of a solution: “We need some
team building.”
In many cases, however, the presenting problem is only a symptom
of an underlying problem. For example,
conflict among members of a team may result from several deeper
causes, including ineffective reward
systems, personality differences, inappropriate structure, and
poor leadership. The issue facing the
organization or department must be clarified early in the OD
process so that subsequent diagnostic and
intervention activities are focused correctly.
Gaining a clearer perspective on the organizational issue may
require collecting preliminary data. OD
practitioners often examine company records and interview a few
key members to gain an introductory
understanding of the organization, its context, and the nature
of the presenting problem. Those data are
gathered in a relatively short period of time, typically over a
few hours to one or two days. They are
intended to provide enough rudimentary knowledge of the
organizational issue to enable the two parties to
make informed choices about proceeding with the contracting
process.
The diagnostic phase of OD involves a far more extensive
assessment of the problematic or development
issue that occurs during the entering and contracting stage. The
diagnosis also might discover other issues
that need to be addressed, or it might lead to redefining the
initial issue that was identified during the
entering and contracting stage. This is a prime example of the
emergent nature of the OD process, where
things may change as new information is gathered and new events
occur.
Determining the OD Team Members:
A second activity in entering an OD relationship is to define
who are the team members involved in
addressing the organizational issue. Generally such organization
members are involved who can directly
impact the change issue, whether it is solving a particular
problem or improving an already successful
organization or department. Unless these members are identified
and included in the entering and
contracting process, they may withhold their support for and
commitment to the OD process. In trying to
improve the productivity of a unionized manufacturing plant, for
example, it will be necessary to include
union official as well as managers and staff personnel. It is
not unusual for an OD project to fail because
the team members were inappropriately defined.
Determining the team members can vary in complexity depending on
the situation. In those cases where
the organizational issue can be addressed in a specific
organization unit, members of that unit must be
included in the entering and contracting process. For example,
if a manager asked for help improving the
decision-making process of his or her team, the manager and team
members would be the part of the OD
process. Unless they are actively involved in choosing an OD
practitioner and defining the subsequent
change process, there is little likelihood that OD will improve
team decision making.
Determining the team members is more complex when the
organizational issue cannot readily be addressed
in a single unit. Here, it may be necessary to include members
from multiple units, from different
hierarchical levels, and even from outside of the organization.
For example, the manager of a production
department may seek help in resolving conflict between his or
her unit and other departments in the
organization. The requirement of team members would extend
beyond the boundaries of the production
department because that department alone cannot resolve the
issue. The team might include members from
all departments involved in the conflict as well as the
executive to whom all of the departments report. If
that interdepartmental conflict also involved key suppliers and
customers from outside of the firm, the
team might include members of those groups.
In such complex situations, OD practitioners need to gather
additional information about the organization
to determine the relevant team members, generally as part of the
preliminary data collection that typically
occurs when clarifying the issue to be addressed. When examining
company records or interviewing
personnel, practitioners can seek to identify the key members
and organizational units that need to be
involved. For example, they can ask organization members such
question as who can directly impact the
organizational issue. Who has a vested interest in it? Who has
the power to approve or reject the OD
effort? Answers to those questions can help determine who is the
relevant team for the entering and
contracting stage, although the members may change during the
later stages of the OD process as new data
are gathered and changes occur. If so, participants may have to
return to and modify this initial stage of the
OD effort.
Selecting an OD Practitioner:
The last activity involved in entering an OD relationship is
selecting an OD practitioner who has the
expertise and experience to work with members on the
organizational issue. Unfortunately, little systematic
advice is available on how to choose a competent OD
professional, whether from inside or outside of the
organization.
Perhaps the best criteria for selecting, evaluating, and
developing OD practitioners are those suggested by
the late Gordon Lippitt, a pioneering practitioner in the field.
Lippitt listed areas that managers should
consider before selecting a practitioner, including the ability
of the consultant to form sound interpersonal
relationships, the degree of focus on the problem, the skills of
the practitioner relative to the problem, the
extent that the consultant clearly informs the client as to his
or her role and contribution, and whether the
practitioner belongs to a professional association. References
from other clients are highly important. A
client may not like the consultant’s work, but it is critical to
know the reasons for both pleasure and
displeasure. One important consideration is whether the
consultant approaches the organization with
openness and an insistence on diagnosis or whether the
practitioner appears to have a fixed program that is
applicable to almost any organization.
Certainly, OD consulting is as much a person specialization as
it is a task specialization. The OD
professional needs not only a repertoire of technical skills but
also the personality and interpersonal
competence to use himself or herself as an instrument of change.
Regardless of technical training, the
consultant must be able to maintain a boundary position,
coordinating among various units and
departments and mixing disciplines, theories, technology, and
research findings in an organic rather than a
mechanical way. The practitioner is potentially the most
important OD technology available.
Thus, in selecting an OD practitioner, perhaps the most
important issue is the fundamental question, how
effective has the person been in the past, with what kinds of
organizations, using what kinds of techniques?
In other words, references must be checked. Interpersonal
relationships are tremendously important, but
even con artists have excellent interpersonal relationships and
skills.
The burden of choosing an effective OD practitioner should not
rest entirely with the client organization.
Consultants also bear a heavy responsibility for seeking an
appropriate match between their skills and
knowledge and what the organization or department needs. Few
managers are sophisticated enough to
detect or to understand subtle differences in expertise among OD
professionals, and they often do not
understand the difference between intervention specialties.
Thus, practitioners should help educate
potential clients, being explicit about their strengths and
weaknesses and about their range of competence.
If OD professionals realize that a good match does not exist,
they should inform managers and help them
find more suitable help.
Developing a Contract:
The activities of entering an OD relationship are a necessary
prelude to developing an OD contract. They
define the major focus for contracting, including the relevant
parties. Contracting is a natural extension of
the entering process and clarifies how the OD process will
proceed. It typically establishes the expectations
of the parties, the time and resources that will be expended,
and the ground rules under which the parties
will operate.
The goal of contracting is to make a good decision about how to
carry out the OD process. It can be
relatively informal and involve only a verbal agreement between
the client and OD practitioner. A team
leader with OD skills, for example, may voice his or her
concerns to members about how the team is
functioning.
After some discussion, they might agree to devote one hour of
future meeting time to diagnosing the team
with the help of the leader. Here, entering and contracting are
done together informally. In other cases,
contracting can be more protracted and result in a formal
document. That typically occurs when
organizations employ outside OD practitioners. Government
agencies, for example, generally have
procurement regulations that apply to contracting with outside
consultants.
Regardless of the level of formality, all OD processes require
some form of explicit contracting that result
in either a verbal or a written agreement. Such contracting
clarifies the client’s and the practitioner’s
expectations about how the OD process will take place. Unless
there is mutual understanding and
agreement about the process, there is considerable risk that
someone’s expectations will be unfilled. That
can lead to reduced commitment and support, to misplaced action,
or to premature termination of the
process.
The contracting step in OD generally addresses three key areas:
what each party expects to gain from the
OD process, the time and resources that will be devoted to it,
and the ground rules for working together.
Mutual Expectations:
This part of the contracting process focuses on the expectations
of the client and the OD practitioner. The
client states the services and outcomes to be provided by the OD
practitioner and describes what the
organization expects from the process and the consultant.
Clients usually can describe the desired
outcomes, such as decreased turnover or higher job satisfaction.
Encouraging them to state their wants in
the form of outcomes, working relationships, and personal
accomplishments can facilitate the development
of a good contract.
The OD practitioner also should state what he or she expects to
gain from the OD process. This can
include opportunities to try new interventions, report the
results to other potential clients, and receive
appropriate compensation or recognition.
Time and Resources:
To accomplish change, the organization and the OD practitioner
must commit time and resources to the
effort. Each must be clear about how much energy and how many
resources will be dedicated to the
change process. Failure to make explicit the necessary
requirements of a change process can quickly ruin an
OD effort. For example, a client may clearly state that the
assignment involves diagnosing the causes of
poor productivity in a work group. However, the client may
expect the practitioner to complete the
assignment without talking to the workers. Typically, clients
want to know how much time will be
necessary to complete the assignment, which needs to be
involved, how much it will cost, and so on.
Resources can be divided into two parts. Essential requirements
are things that are absolutely necessary if
the change process is to be successful. From the practitioner’s
perspective, they can include access to key
people or information, enough time to do the job, and commitment
from certain people. The
organization’s essential requirements might include a speedy
diagnosis or assurances that the project will be
conducted at the lowest price. Being clear about the constraints
on carrying out the assignment will
facilitate the contracting process and improve the chances for
success. Desirable requirements are those
things that would be nice to have but are not absolutely
necessary, such as access to special resources and
written rather than verbal reports.
Ground Rules:
The final part of the contracting process involves specifying
how the client and the OD practitioner will
work together. The parameters established may include such
issues as confidentiality, if and how the OD
practitioner will become involved in personal or interpersonal
issues, how to terminate the relationship, and
whether the practitioner is supposed to make expert
recommendations or help the manager make decisions.
For internal consultants, organizational politics make it
especially important to clarify issues of how to
handle sensitive information and how to deliver bad news.” Such
process issues are as important as the
needed substantive changes. Failure to address the concerns may
mean that the client or the practitioner
has inappropriate assumptions about how the process will unfold.
Application 1: Contracting at Charity Medical Center
Charity Medical Center (CMC), a five hundred-bed acute-care
hospital, was part of the Jefferson Hospital
Corporation (JHC). JHC, which operated several long-term and
acute-care facilities and was sponsored by a
large religious organization, had recently been formed and was
trying to establish accounting and finance,
materials management, and human resources systems to manage and
coordinate the different facilities. Of
particular concern to CMC, however, was a market share that had
been declining steadily for six months.
Senior management recognized that other hospitals in the area
were newer, had better facilities, were more
“user friendly,” and had captured the interest of referring
physicians. In the context of JHC’s changes,
CMC invited several consultants, including an external OD
practitioner named John Murray, to make
presentations on how a total quality management process might be
implemented in the hospital.
John conducted an initial interview with CMC’s vice president of
patient-care services, Joan Grace. Joan
noted that the hospital’s primary advantage was its designation
as a level-one trauma center. CMC offered
people needing emergency care for major trauma their best chance
for survival. “Unfortunately,” Joan said,
“the reputation of the hospital is that once we save a patient’s
life, we tend to forget they are here.”
Perceptions of patient-care quality were low and influenced by
the age and decor of the physical plant.
CMC had been one of the original facilities in the metropolitan
area. Finally, Joan suggested that the
hospital had lost a substantial amount of money last year and
considerable pressure was coming from JHC
to turn things around.
John thanked Joan for her time and asked for additional
materials that might help him better understand
the hospital. Joan provided a corporate mission statement, a
recent strategic planning document, an
organization chart, and an analysis of recent performance. John
also sought permission to interview other
members of the hospital and the corporate office to get as much
information as possible for his
presentation to the hospital’s senior management. He interviewed
the hospital president, observed one of
the nursing units, and spoke with the human resources vice
president from the corporate office.
The interviews and documents provided important information.
First, the documents revealed that CMC
was not one hospital but two. A small, 150-bed hospital located
in the suburbs also reported to the
president of CMC, and several members of the hospital’s staff
held managerial positions at both hospitals.
Second, last year’s strategic plan included a budget for
initiating a patient-care quality improvement process.
Budget responsibility for the project was assigned to Joan
Grace’s department. Third, the mission statement
was a standard expression of values and was heavily influenced
by the religious group’s beliefs. Fourth, the
performance reports confirmed both poor financial results and
decreasing market share.
John’s interviews and observations pointed out several
additional pieces of information. First, the corporate
organization, JHC, truly was in a state of flux. There were
clear goals and objectives for each of the
hospitals, but patient, physician, and employee satisfaction
measures, human resources policies, financial
practices, and material logistics were still being established.
Second, the management and nursing staff
heads at CMC were extremely busy—usually attending meetings for
most of the day. In fact, Joan’s
secretary kept a notebook dedicated to tracking who was meeting
where and when. Third, a large
consulting firm had just been awarded a contract to do “job
redesign” work in two departments of the
hospital. And fourth, most of the nursing units operated under
traditional and somewhat outdated nursing
management principles.
In developing his presentation, John thought about several
issues. For example, the relevant client would
be difficult to identify. Joan Grace was clearly responsible for
the project and its success, but the president,
referring physicians, the suburban hospital, and the corporate
office were important stakeholders in a TQM
process and needed a voice if it was to succeed. In addition,
the presenting problem was a decline in market
share. The job redesign contract awarded to the other consulting
firm seemed disconnected from the TQM
effort, and both efforts seemed disconnected from the market
share problem. John wondered how the
hospital viewed the relationships among total quality
management, job design, and market share. He also
questioned whether he was the appropriate consultant for CMC.
The firm doing the job redesign used a
packaged approach to change that conflicted with John’s OD-based
philosophy.
Using the information gathered and his reflections on the
project, John gave his presentation to senior
management about implementing a total quality management process
at CMC. His presentation included a
history of the quality movement and how it had been applied to
other health-care organizations. Several
examples of the gains made in patient satisfaction, clinical
outcomes (such as decreased infection rates), and
physician satisfaction were incorporated. He noted that
implementing a quality process was a major
organizational change, requiring a thorough diagnosis of the
hospital, a considerable commitment of
resources, and a high level of involvement by senior management.
Without such involvement, it was not
reasonable to expect the kinds of results he had described, John
also suggested that total quality
management was capable of addressing certain problems but was
not designed to address directly such
broader performance issues as market share.
Finally, John described his track record at implementing quality
improvement process in health-care
organizations. He shared several references with the group
members and encouraged them to talk with
former clients regarding his style and impact. John also noted
that he had been referred to CMC by the
religious organization that sponsored the hospital system and
that it was aware of his work in another
medical facility.
John Murray’s presentation to the senior management team at CMC,
based on the information outlined in
Application 4.1, was well received, and patient-care vice
president Joan Grace asked John to meet with her
to discuss how the change process might go forward. At the
meeting, John thanked Joan for the
opportunity to work with CMC and suggested that the next year or
two represented a challenging time for
the hospital’s management. He identified several knotty issues
that needed to be discussed before work
could begin. Most important the hospital’s rush to implement a
total quality management process was
admirable, but he was worried that it lacked an appropriate base
of knowledge. Although performance and
market share were the big issues facing the hospital, the
relationship between those problems and a quality
program was not clear. In addition, even if a TQM process made
sense, managers and nursing heads were
frustrated by their inability to influence change because of
their busy meeting schedules. A quality
improvement process might solve some of those problems but
certainly not all of them.
Joan acknowledged that both performance and frustration with
change were problems that needed to be
addressed. She explained that the hospital wanted help to
improve the quality of patient care and to
increase patient, employee, and physician satisfaction with the
hospital. Improvements in those areas were
expected to produce important gains in hospital performance.
Joan asked John if he could generate a
proposal that addressed those issues as well as managerial
frustration with the inability to make necessary
changes.
John agreed to put a proposal in writing but suggested that it
would be helpful to discuss first what should
be included in it. John thought that discussing several issues
now would improve the chances of getting
started quickly. He outlined several issues that the proposal
would cover. First, the hospital should
thoroughly diagnose the reasons for market-share decline, the
current level of patient-care quality, and
managerial frustration with making changes. That diagnosis would
require access to the corporate officer’s
at JHC to discuss their relationships with CMC. In addition,
several managers and employees of the
hospital, as well as some physicians needed to be interviewed.
Second, the proposed job redesign effort
being conducted by the other consulting firm should be
postponed. Finally, CMC management should
meet for two days to examine the information generated by the
diagnosis and to make a joint decision
about whether a total quality management process made sense.
Joan looked uncomfortable. John’s requirement seemed
unreasonable given that the hospital simply wanted
to improve patient-care quality and stakeholder satisfaction.
For example, getting the senior administrators
to commit to two days away from the hospital would be difficult.
Everyone was busy, and finding a time
when they could all meet for that long was nearly impossible. In
addition, there was a sense of urgency in
the hospital to begin the process right away. Collecting
information seemed like a waste of time. Finally,
and perhaps most important postponing the job redesign effort
was a sensitive issue. The project had
strong political support, and the other consultants had provided
a clear ten-step process and timetable for
the work design changes.
John told Joan that he appreciated her concerns and her
willingness to confront these issues. He explained
that his requests were necessary if the prospect was to be
successful and that he had thought carefully about
them. Collecting the diagnostic information was, in fact, the
first step in any quality management process.
The very basis of a TQM effort was data-based decision making.
To begin a quality process without valid
information violated fundamental principles of the approach.
More important to proceed without that
information could very well mean that the wrong change would be
implemented. John suggested, for
instance, that the market share problem could result from the
way CMC was treating the physicians. If that
were true, a quality program would be inappropriate and costly.
Instead, a program to improve the
relationships with physicians might provide a better return on
CMC’s investment.
The two-day meeting was therefore very important. Once
appropriate data were collected, the senior
managers could decide, based on fact, what exactly should be
done to address hospital performance;
employee, patient and physician satisfaction; and managerial
frustration. John explained that a quality
management process, if necessary, required attention to CMC’s
structure, measurement, and reward
systems as well as its culture. The two-day meeting of the
senior management team would permit a full
explanation of the TQM process a description of the necessary
resources, and a discussion of the
commitment necessary to implement it. Following that meeting, he
could provide a more explicit outline of
the change process.
Finally, John acknowledged that the politically sensitive nature
of the job redesign program made resolving
this issue more difficult. He explained his belief that any
redesign effort that did not take into account a
potential TQM process likely would have to be redone. He argued
that to proceed blindly with a job
redesign effort might result in money spent for nothing.
Joan believed that John could have access to the consulting firm
doing job redesign but that there was little
chance of postponing the program for very long. Again
acknowledging the political support for the
program, John offered to coordinate with the other consultants
but strongly urged Joan to postpone
initiating the project until after the two-day management
meeting. Joan said she understood his concerns
but stated that she could not make that decision without talking
with the senior management team.
John accepted that and asked if his other requests now made
better sense. Joan replied that a two-day
meeting did seem important and worth the effort. In addition,
access to the corporate officers, employees,
managers, and physicians was a reasonable request and could be
arranged. Responding to John’s example
of a physician relations program, Joan informed him that
although CMC had such a program, it was not
very effective because managers had become too busy to pay
attention to it.
At this point, Joan had to go to another meeting. They adjourned
with the understanding that Joan would
speak with the other managers and get back to John. A week
later, Joan called and agreed to John’s
requests. She asked him to submit a written proposal covering
the issues discussed as soon as possible.
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