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Entering and Contracting

learning objectives

Describe the issues associated with entering into an OD process.

Describe the issues associated with contracting for an OD process.

T he planned change process described in Chapter 2 generally starts when one or more managers or administrators sense an

opportunity for their organization, department, or group, believe that new capabilities need to be developed, or decide that performance could be improved through organization development (OD). The organization might be successful yet have room for improvement. It might be facing impending environmental conditions that necessi- tate 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. Con- versely, the problems might appear more diffuse and consist simply of feelings that the organization should be “more innovative,” “more competi- tive,” 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, planning and implementing changes, and evaluating and institutionalizing them. They help to define

what issues will be addressed by those activities, who 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 meet the goals they set. Here, entering and contracting are relatively simple and informal. They involve all relevant members directly in the process—with a minimum of formal procedures. In situations where managers 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.1 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. In cases where the anticipated changes are strategic and large in scale, formal proposals from multiple consulting firms may be requested and legal contracts drawn up.

75

This chapter first discusses the activities and content-oriented issues involved in entering into and contracting for an OD initiative. We will focus our attention on 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, how that will be accomplished, and what timetable will be followed, subsequent stages of the OD process are likely to be confusing and ineffective. The chapter concludes with a discussion of the interpersonal process issues involved in entering and contracting for OD work.

4-1 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.2 The organi- zation member may be a manager, staff specialist, or some other key participant; 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.3 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.4 This knowl- edge will help both parties determine whether they should proceed to develop a contract for working together.

This section describes the activities involved in entering an OD relationship: clarifying the organizational issue, determining the relevant client, and selecting the appropriate OD practitioner.

4-1a 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 costs are high, laying off members of their department is the obvious answer. They may even state the present- ing problem in the form of a solution: “We need to downsize our organization.”

In many cases, however, the presenting problem is only a symptom of an underlying problem. For example, high costs may result from several deeper causes, including inef- fective new-product development or manufacturing processes, inappropriate customer- service policies and procedures, or conflict between two interdependent groups. 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.5

Gaining a clearer perspective on the organizational issue may require collecting pre- liminary data.6 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 pro- vide enough rudimentary knowledge of the organizational issue to enable the two parties to make informed choices about proceeding with the contracting process.

76 PART 2 THE PROCESS OF ORGANIZATION DEVELOPMENT

The diagnostic phase of OD involves a far more extensive assessment of the prob- lematic or development issue than 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: Things may change as new information is gathered and new events occur.

4-1b Determining the Relevant Client A second activity in entering an OD relationship is defining the relevant client for addressing the organizational issue.7 Generally, the relevant client includes those organi- zation members who can directly impact the change issue, whether it is solving a partic- ular 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, the relevant client may need to include union officials as well as managers and staff personnel. It is not unusual for an OD project to fail because the relevant client was inappropriately defined.

Determining the relevant client can vary in complexity depending on the situation. In those cases where the organizational issue can be addressed in a specific organization unit, client definition is relatively straightforward. Members of that unit constitute the relevant client. They or their representatives must be included in the entering and contracting process. For example, if a manager asked for help in improving the decision-making process of his or her team, the manager and team members would be the relevant client. 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 relevant client is more complex when the organizational issue can- not readily be addressed in a single unit. Here, it may be necessary to expand the defini- tion of the client to include members from multiple units, from different hierarchical levels, and even from outside of the organization. For example, the manager of a produc- tion department may seek help in resolving conflicts between his or her unit and other departments in the organization. The relevant client would extend beyond the bound- aries of the production department because that department alone cannot resolve the issue. The client 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 relevant client might include members of those groups.

In such complex situations, OD practitioners need to gather additional information about the organization to determine the relevant client, generally as part of the prelimi- nary 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 questions such as these: Who can directly influence 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 client for the entering and contracting stage. However, the client may change during the later stages of the OD process as new data are gathered and changes occur. If so, parti- cipants may have to return to and modify this initial stage of the OD effort.

CHAPTER 4 ENTERING AND CONTRACTING 77

4-1c 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.8 To help lower the uncertainty of choosing from among external OD practitioners, organizations may request that formal proposals be submitted. In these cases, the OD practitioner must take all of the information gathered in the prior steps and create an outline of how the process might unfold. Table 4.1 provides one view of the key elements of such a pro- posal. It suggests that a written proposal include project objectives, outlines of proposed processes, a list of roles and responsibilities, recommended interventions, and proposed fees and expenses.

For less formal and structured selection processes, the late Gordon Lippitt, a pio- neering practitioner in the field, suggested several criteria for selecting, evaluating, and developing OD practitioners.9 Lippitt listed areas that managers should consider before selecting a practitioner—including their ability 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 contri- bution, 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 problem or organization.

TABLE 4.1

Essentials of an Effective OD Proposal

Elements Description

Objectives of proposed project

A statement of the goals in clear and concise terms, including measurable results, if any.

Proposed process or action plan

Provide an overview of the process to be used. Usually includes a diagnosis (including how the data will be collected), feedback process, and action-planning or implementation process.

Roles and responsibilities

A list of key stakeholders in the process, including the OD practitioner, and the specific responsibilities for which they will be held accountable.

Recommended interventions

A description of the proposed change strategies, including training, off-site meetings, systems or pro- cesses to be redesigned, and other activities.

Fees, terms, and conditions

Provide an outline of the fees and expenses associated with project.

SOURCE: Adapted from A. Freedman and R. Zackrison, Finding Your Way in the Consulting Jungle, 141–47. San Francisco: Jossey-Bass/Pfeiffer. © 2001.

78 PART 2 THE PROCESS OF ORGANIZATION DEVELOPMENT

Certainly, OD consulting is as much a person specialization as it is a task specializa- tion. The OD professional needs not only a repertoire of technical skills but also the per- sonality 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 dis- ciplines, theories, technology, and research findings in an organic rather than in 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 fun- damental 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.10 As described in the Ethical Dilemmas section of Chapter 3, consultants also bear a heavy responsibility in finding whether there is a match between their skills and knowledge and what the organization or department needs. Few man- agers are sophisticated enough to detect or to understand subtle differences in expertise among OD professionals, and they often do not understand the difference between inter- vention specialties. Thus, practitioners should help educate potential clients, being explicit about their strengths and weaknesses and their range of competence. If OD pro- fessionals realize that a good match does not exist, they should inform the client and help them find more suitable help.

Application 4.1 describes the entering process at Alegent Health, a large health care system in Nebraska and western Iowa. The entry process was largely “virtual” in that the researchers worked through two consultants who were conducting OD interventions on a regular basis. The case highlights how OD work can come in different forms and through different channels. It also reflects how quickly the “entry” process can occur. This is the first in a series of applications based on the Alegent project that will be used throughout the text.

4-2 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 pro- cess 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.11 It can be relatively informal and involve only a verbal agreement between the client and the 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 agen- cies, for example, generally have procurement regulations that apply to contracting with outside consultants.12

CHAPTER 4 ENTERING AND CONTRACTING 79

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ENTERING ALEGENT HEALTH

A legent Health (AH) is a five-hospital sys- tem that serves the greater Omaha, Nebraska, and western Iowa region. Alegent was formed when two religious-

sponsored health care systems merged to leverage health care industry changes and to bargain more powerfully with physicians and insurance providers. The system had its own managed care insurance program, was imple- menting a consumer-directed health care pro- gram for its employees, and had about 100 employed physicians in addition to the physi- cians with privileges at its hospitals.

Two well-known OD consultants had been working with AH for about two years, doing a variety of OD work. By far, the largest project was the design and delivery of large group interventions known as decision accelerators (DAs) to create strategies for the major clinical service areas, such as orthopedics, cardiology, and women’s and children’s services. [Note: Large group interventions are multistakeholder meetings of over 50 people—see Chapter 11 for more information.]

At an organization design conference in April, one of the consultants was talking with researchers from the Center for Effective Orga- nizations at USC. The conversation turned to a discussion of the work at AH and the possibil- ity of evaluating the change effort. The researchers were excited about the organiza- tion development and large group intervention work in the health care context. The consultant agreed to pitch the idea to AH’s Chief Innova- tion Officer (CIO).

Following some additional background conversations with the researchers and the CIO, the consultant sent the following email in June:

Dear CIO, I would like to introduce you to the Center for Effective Organization researchers. As we discussed, the researchers are very interested in the work being done at AH and will be calling you early next week to discuss the possibility of doing a research project on the Decision Accelerator effort.

The form of research is typically action research, meaning the data will be valuable for Alegent in not only assessing the impact and effectiveness of the DA intervention but learning how to position this capability for improved Alegent organizational effective- ness. This can be quite valuable as Alegent moves into the next round of change and transformation.

Thanks all.

The researchers spent the next few days talking to the two consultants about AH, its history, strategy, structure, and culture, as well as the motivation for the large-group, deci- sion accelerator process. They also collected data on AH through the Internet. Alegent was indeed a unique organization. It was highly successful from a financial point of view, had a new CEO who had been brought in from Florida, and had a strong faith-based mission.

In the first phone call with the CIO, the researchers introduced themselves, described the mission of the research center, and their interest in doing a case study of change at Alegent. The CIO talked about the history of change at AH and asked questions about the value the project would have for them. He saw several benefits, including the opportunity to generate a history of the change, to learn about the impacts of the change process on the organization’s culture and members, and to build a database that could be used to advance AH’s objective of “changing the face of health care.” The call ended with the agree- ment that the CIO would talk with others in the organization, including the CEO, and that the researchers should begin to put together a project purpose, cost estimate, and schedule.

In the second call, the researchers presented their understanding of the project as a case study assessment of how innovation was created and implemented at Alegent. They described a way of working with organizations—the establish- ment of a “study team” composed of several key stakeholders in the organization. The study team would meet, before the project officially began, to review the objectives of the study

80 PART 2 THE PROCESS OF ORGANIZATION DEVELOPMENT

Regardless of the level of formality, all OD processes require some form of explicit contracting that results in either a verbal or a written agreement. Such contracting clari- fies 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 unfulfilled.13 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:14 setting mutual expectations or 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.

4-2a 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 prac- titioner and describes what the organization expects from the process and the consultant. Clients usually can describe the desired outcomes, such as lower costs or higher job sat- isfaction. Encouraging them to state their wants in the form of outcomes, working rela- tionships, and personal accomplishments can facilitate the development of a good contract.15

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.

4-2b 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 assign- ment without talking to the workers. Typically, clients want to know how much time will be necessary to complete the assignment, who needs to be involved, how much it will cost, and so on.

Peter Block has suggested that resources can be divided into two parts.16 Essential requirements are things that are absolutely necessary if the change process is to be suc- cessful. From the practitioner’s perspective, they can include access to key people or

and ensure that the work was relevant to the organi- zation. There was some conversation about who might be on that team, including the CEO, CFO, the hospital presidents, and the VPs of the clinical service areas.

Subsequent email exchanges among the con- sultants, the CIO, and the researchers led to a

verbal agreement that the project should begin in October. The CIO believed there was much to gain from the project, and asked the Director of the Right Track office (this was the internal name AH had given to the decision accelerator) to lead the contracting process and to help the researchers schedule meetings and interviews.

CHAPTER 4 ENTERING AND CONTRACTING 81

information, enough time to do the job, and commitment from certain stakeholder groups. 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 or writ- ten rather than verbal reports.

4-2c 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.”17 Such process issues are as important as the needed substantive changes. Failure to address the con- cerns may mean that the client or the practitioner has inappropriate assumptions about how the process will unfold.

Application 4.2 describes the contracting process for the evaluation project at Alegent Health. In this case, the contracting process was much more complicated than the entry process. What would you list as the strengths and weaknesses of this example?

4-3 Interpersonal Process Issues in Entering and Contracting The previous sections on entering and contracting addressed the activities and content- oriented issues associated with beginning an OD project. In this final section, we discuss the interpersonal issues an OD practitioner must be aware of to produce a successful agreement. In most cases, the client’s expectations, resources, and working relationship requirements will not fit perfectly with the OD practitioner’s essential and desirable requirements. Negotiating the differences to improve the likelihood of success can be personally and interpersonally challenging.18

Entering and contracting are the first exchanges between a client and an OD practi- tioner. Establishing a healthy relationship at the outset makes it more likely that the cli- ent’s desired outcomes will be achieved and that the OD practitioner will be able to improve the organization’s capacity to manage change in the future. As shown in Figure 4.1, this initial stage is full of uncertainty and ambiguity. On the one hand, the client is likely to feel exposed, inadequate, or vulnerable. The organization’s current effectiveness and the request for help may seem to the client like an admission that the organization is incapable of solving the problem or providing the leadership necessary to achieve a set of results. Moreover, clients are entering into a relationship where they may feel unable to control the activities of the OD practitioner. As a result, they feel vulnera- ble because of their dependency on the practitioner to provide assistance. Consciously or unconsciously, feelings of exposure, inadequacy, or vulnerability may lead clients to r

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