July 17, 2017

Ask Less, Get More: Research Shows Simpler Contracts Fuel Employee Motivation

Turning on a phone, opening an app, and buying something all tie a consumer to least three contracts, restricting what buyers can do.

But contracts can also motivate people, especially in the workplace. Bosses can rewrite rules to encourage workers to go beyond the minimum, to excel rather than simply settle for average performance.

“Contracts are part of our existence,” says Eileen Chou, Assistant Professor of Public Policy. “How can we draft contracts that are more effective in fueling employees’ motivation and engagement?”

Chou’s search for that “just right” agreement led her and three colleagues at other colleges to research and publish The Goldilocks Contract: They Synergistic Benefits of Combining Structure and Autonomy for Persistence, Creativity, and Cooperation. The paper appeared recently in the Journal of Personality and Social Psychology.

Their work extends research that links psychology with economics. And it’s extremely topical; last year’s Nobel Prize in Economics honored research in contract theory by Oliver Hart and Bengt Holmstrom. (The announcement of their Nobel prize is here.)

The Goldilocks Contact concluded that general contracts — those that “identify broad roles and rules and satisfy basic legal and logistic requirements, without greater detail about the concrete behaviors associated with these roles and rules” — led people to work longer than others under specific contracts.

In fact, relying on “highly specific contracts can undermine people’s motivation and discourage effort.”

But with general contracts, employees persisted longer, even longer than those without any contract at all. “General contracts not only promote task persistence, but also positively influence the quality of the work individuals produce,” the authors concluded.

Creativity likewise showed gains with general contracts, which “foster creative idea generation (creative fluency) — leading individuals to generate multiple ideas that are also higher in originality — than specific contracts do.”

Finally, Chou and her colleagues saw improvements in cooperation and trust — key reasons for better relationships. Removing “strong constraints designed to control behavior encourages trust, cooperation and other positive behaviors.”

If you limit your control over people, you encourage “trust, cooperation and other positive behaviors.”

And you might make more money from a more satisfied workforce; a better, general  contract “can help promote mutually beneficial cooperation in a situation where individuals are often tempted to compete for short-term profit…leaders and managers can use general contracts to promote cooperation among their followers and subordinates.”

And it’s about more than money. The Goldilocks Contract cites the value of “intangible rewards” that fulfill people’s needs, causing “them to become more intrinsically motivated, persistent, creative, and cooperative.”

This is not to say that contracts should be left as vague as possible. Chou and her colleagues identified a key boundary condition. Namely, “to increase intrinsic motivation, the contract needs to give your employees autonomy, but at the same time provide them enough structure so they know what they have to do,” Chou said.

Chou and her colleagues call their system the CAMPS model, for Contract-Autonomy-Motivation-Performance-Structure.

Their highly detailed study included focusing on contract subtleties and nuances, testing the effects caused by certain words and the way those words were interpreted.

“These effects depend less on the particular wording of contract clauses and more on the extent to which contract language is perceived to be highly specific versus general,” the research revealed.

Chou hopes the study will lead to better contracts, and to a better understanding of the effects of contracts.

“We are trying to say that you want to think about (these things): What is the context, what kind of work are (the employees) doing, what kind of employees are you pulling in, do they need structure, or is it a more of a creative, free-form type of task?”

“Then that should drive the type of contract that you draft, as an employer or as an organization.”

 

An abstract of The Goldilocks Contract: They Synergistic Benefits of Combining Structure and Autonomy for Persistence, Creativity, and Cooperation appears here. The entire article can be purchased from the April 27, 2017 issue of the Journal of Personality and Social Psychology. In addition to lead author Dr. Chou, the other authors are Nir Halevy of Stanford University, Adam D. Galinsky of Columbia University, and the late J. Keith Murnighan of Northwestern University.

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