I was reading an article by Dan Ariely who is a Professor of Behavioral Economics at Duke University and author of the book called ‘Predictably Irrational: The Hidden Forces that Shape our Decisions’. He was writing a column in the Harvard Business Review entitled ‘In Praise of the Handshake’ where he paints the scenario for us. He says, “Imagine that you and I meet at a party and I tell you about my research on behavioral economics. You see opportunities to use the principles to improve your business and think we could work together. You have 2 options: you can ask me to collaborate with a handshake promise that if things work out, you’ll make it worth my while. Or you can prepare a contract that details my obligations and compensation, specifying who will own the resulting intellectual property and so on.”
“For most of you the decision is obvious. The second approach, the complete contract, is the way to go. But should it be? The idea of making a deal with a handshake – what we generally call an incomplete contract – makes most of us uncomfortable. A handshake is fine between friends, but when it comes to vendors, partners, advisors, employees, or customers, we believe that incomplete contracts are a reckless way to do business.”
When you look at the two – a contract and a handshake – on the one hand, one is nebulous, undefined, based on trust and the proper understanding of shared values which is a handshake. On the other hand, a contract is specific, clearly defined, there’s no room for doubt or need for a shared value system; the company culture is all that’s necessary.
But looking at these 2 areas throws up certain limitations especially when you look at, say a contract. Many years ago there was a picture that made its way across the internet. It was a picture of a highway in Litchfield Park, Arizona. It showed the 2 dividing lines that had been painted down the center of the road. In the middle of the road was lying a dead possum and the person had painted the 2 lines over the possum. I wish you could see that picture. It is such a descriptive picture and the photographer captioned it – ‘Winner of the Not-My-Job Award’.
And sometimes that’s the fallout of a contract; that it so clearly defines what’s in and what’s out that it doesn’t leave too much room. In a way, it could be good to know what’s in and what’s out. That principle might be in the vision statement of a company and companies then know what’s in and what’s out.
For e.g. Sony, completely electronics, if somebody walked in and told them that they had a great deal to get into pharma, they would look at their vision statement and say “That’s not a part of who we are”. Or if they were asked to get into the steel or the shipping industry, they are defined by their particular vision statement which comes from a written out contract of who they are. And yet there’s rigidity to them that may not help them or allow them to see the larger picture.
And that’s what I’m trying to get at, when you look at a contract. A contract is so defining that anytime we can get out of a contract, then anything goes.
Dan Ariely says the same thing: “If something is left out or if circumstances change, there’s no default to good will. It’s happy hunting season for all. When we use complete contracts as a basis for working together, we take away flexibility, reasonableness and understanding and replace them with a narrow definition of expectations that can be quite costly.”
I know that more companies today are trying to work in a little bit more flexibility with their employees. And you can see this in the flexi-hours that are sometimes allowed. “Give me your best 40 hours. Come in early if you have to, stay late if you have to, but give me your most productive 40 hours.”
And yet as we look at these two, it kind of begs the question: Is there something that is a little more that can be expected from either the contract or a handshake? Is there room for a little bit of maneuverability?
The Bible gives a little conversation with Peter who was one of Jesus’ disciples (Matthew 18:21-22). Peter asks, “How many times should I forgive my brother? Seven times?” And Jesus replies, “No Peter, not seven times, but seventy times seven.” In other words, forgive till you can’t remember the number.
Or the story of the Good Samaritan (Luke 10:25-37) and a lawyer asking the question, “Who is my neighbor? Whom should I help?” Basically inherent in that question is that if you tell me who my neighbor is, then I know who is not my neighbor. Therefore I know who I need to help and those who I don’t need to help.
That’s the limiting factor of contracts, that we can draw a line and say – “This is my responsibility and that is not my responsibility.” Contracts narrow down responsibility. It brings up this whole area of the letter of the law versus the spirit of the law. The letter of the law clearly defines and yet there’s the spirit of the law which may be captured in a handshake that will allow us to go the extra mile.
I think, that as we look at these 2 areas, the contract or the handshake, that it is not an either/or situation, but a both/and situation. It’s both a contract and a handshake that will allow us to optimize who we are. A contract determines behavior and a handshake determines character. Behavior plus good character is a powerful combination.
Food for thought? I hope so. I hope that you will spend some time thinking about the contract and the handshake; either/or or both/and.
God Bless You All.
“For most of you the decision is obvious. The second approach, the complete contract, is the way to go. But should it be? The idea of making a deal with a handshake – what we generally call an incomplete contract – makes most of us uncomfortable. A handshake is fine between friends, but when it comes to vendors, partners, advisors, employees, or customers, we believe that incomplete contracts are a reckless way to do business.”
When you look at the two – a contract and a handshake – on the one hand, one is nebulous, undefined, based on trust and the proper understanding of shared values which is a handshake. On the other hand, a contract is specific, clearly defined, there’s no room for doubt or need for a shared value system; the company culture is all that’s necessary.
But looking at these 2 areas throws up certain limitations especially when you look at, say a contract. Many years ago there was a picture that made its way across the internet. It was a picture of a highway in Litchfield Park, Arizona. It showed the 2 dividing lines that had been painted down the center of the road. In the middle of the road was lying a dead possum and the person had painted the 2 lines over the possum. I wish you could see that picture. It is such a descriptive picture and the photographer captioned it – ‘Winner of the Not-My-Job Award’.
And sometimes that’s the fallout of a contract; that it so clearly defines what’s in and what’s out that it doesn’t leave too much room. In a way, it could be good to know what’s in and what’s out. That principle might be in the vision statement of a company and companies then know what’s in and what’s out.
For e.g. Sony, completely electronics, if somebody walked in and told them that they had a great deal to get into pharma, they would look at their vision statement and say “That’s not a part of who we are”. Or if they were asked to get into the steel or the shipping industry, they are defined by their particular vision statement which comes from a written out contract of who they are. And yet there’s rigidity to them that may not help them or allow them to see the larger picture.
And that’s what I’m trying to get at, when you look at a contract. A contract is so defining that anytime we can get out of a contract, then anything goes.
Dan Ariely says the same thing: “If something is left out or if circumstances change, there’s no default to good will. It’s happy hunting season for all. When we use complete contracts as a basis for working together, we take away flexibility, reasonableness and understanding and replace them with a narrow definition of expectations that can be quite costly.”
I know that more companies today are trying to work in a little bit more flexibility with their employees. And you can see this in the flexi-hours that are sometimes allowed. “Give me your best 40 hours. Come in early if you have to, stay late if you have to, but give me your most productive 40 hours.”
And yet as we look at these two, it kind of begs the question: Is there something that is a little more that can be expected from either the contract or a handshake? Is there room for a little bit of maneuverability?
The Bible gives a little conversation with Peter who was one of Jesus’ disciples (Matthew 18:21-22). Peter asks, “How many times should I forgive my brother? Seven times?” And Jesus replies, “No Peter, not seven times, but seventy times seven.” In other words, forgive till you can’t remember the number.
Or the story of the Good Samaritan (Luke 10:25-37) and a lawyer asking the question, “Who is my neighbor? Whom should I help?” Basically inherent in that question is that if you tell me who my neighbor is, then I know who is not my neighbor. Therefore I know who I need to help and those who I don’t need to help.
That’s the limiting factor of contracts, that we can draw a line and say – “This is my responsibility and that is not my responsibility.” Contracts narrow down responsibility. It brings up this whole area of the letter of the law versus the spirit of the law. The letter of the law clearly defines and yet there’s the spirit of the law which may be captured in a handshake that will allow us to go the extra mile.
I think, that as we look at these 2 areas, the contract or the handshake, that it is not an either/or situation, but a both/and situation. It’s both a contract and a handshake that will allow us to optimize who we are. A contract determines behavior and a handshake determines character. Behavior plus good character is a powerful combination.
Food for thought? I hope so. I hope that you will spend some time thinking about the contract and the handshake; either/or or both/and.
God Bless You All.
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