The Social Contract at Work

Most employers understand their relationship with their employees as being based on a simple employment contract.  The employee is provided with a compensation package including a living wage and a certain amount of benefits and in return they are expected to fulfill certain functions of the job, usually outlined in an employee handbook and/or a “standard operating procedures” (SOP) manual.

This relationship is usually fraught with a certain amount of frustration.  The employer will sometimes feel that the job is not being done in the way that he or she would like.  And the employee may respond by claiming, “Well no one ever explained that to me” or “It doesn’t say that in the manual.” 

The employee will also feel frustrated sometimes with the way they are treated.  But if they express their grievances, the employer is likely to wring his hands with frustration saying, “That is what you are being paid for!”  As if the compensation should cover everything.

The reality is both sides expect more than what is outlined in the employment contract.  The employer doesn’t only want what is outlined in the SOP manual.  They want a worker that will come to work with a cheerful disposition, be a pleasure to work with, think creatively to respond to the changing needs of the business, and occasionally rise above and beyond the call of duty when the situation calls for it.

And the employee doesn’t only want compensation and benefits.  They want to be treated fairly and with respect.  They want to be involved and engaged.  They want an opportunity to learn and grow.  They want to enjoy the work that they do and the people they do it with.

I propose that both the employer and the employee would be better off by establishing a relationship that goes beyond what is outlined in the employment contract.  They should consider the “social contract” of their work.

The idea of the social contract (borrowed from political philosophy) is that everyone in an organization is there for the collective benefit of all.  Both the boss and the worker have agreed to contribute to the business (with time, energy, ideas, effort, etc.) and both the boss and the worker are expecting to get something back out of their contribution (money, status, growth, security, pride, etc.)

An employment contract is hierarchical:  the boss is paying for services and the employee is obligated to render those services.  In the social contract, both boss and worker recognize each other as parts of a greater whole that they have both decided to be a part of.  In an employment contract, only the goals of the business are taken into account.  In the social contract, the boss and worker can both recognize the individual, personal goals of the other, and can strive to create or use the organization for mutual benefit.

Lawrence Kohlberg, a psychologist whose theories changed the way we think about morality, identified the social contract as a type of higher level (stage 5) moral reasoning.  (As an aside, he also identified an even higher level, stage 6, based on “universal ethical principles,” but it is rare to find examples of this in the real world—especially in business!)

Kohlberg’s stage 4 is based on an orientation around “law and order,” where the hierarchical structure of the organization is paramount, and authority and rules (employee handbooks and SOP manuals) must be respected. Business leaders that only think of their workforce in the context of an employment contract may be operating at a lower stage of moral development. 

But I think business is evolving.  More business leaders are recognizing the value of creating a strong workplace culture based on aligned values that are created not by chief executives of the organization, but by all of its constituents.  In today’s competitive marketplace, businesses that flourish by experimenting with new strategies to align workers through a strong social contract will create a new benchmark.  Could we be at the horizon of the next industrial revolution?

5 Responses to The Social Contract at Work

  1. Sara Firman October 19, 2011 at 3:37 pm #

    Recently, I visited the REI shop in St Louis for camping gear and was totally impressed with the energy of the staff there who all behaved not only as if they were passionate owners but also it was obvious that they were as interested in what they have and its best use as we were. No sales pitches at all.

    After reading your post, I was inspired to visit their website and see what it had to say relating to staff contracts. This link says it all: The last items – respect, integrity and balance – have descriptions that speak to some of your suggestions above too. Good model I think.

    Interestingly enough Patagonia – a company that makes outdoor clothing – is also taking leaps to put values before profits, and finding that they still make a good profit. It would be interesting to collect examples like this in all arenas. (The jobs website provides company reviews based on staff feedback.)

  2. Dan Bowling October 21, 2011 at 10:52 am #

    Jeremy, this is more of a historical, social, legal, and philosophical essay than a mere blog post. You always set the bar for us bloggers very high. Very well done. I cannot agree more than the successful employer of the future (or present) realizes that engagement comes from a place beyond the traditional employment contract (did you know the common law in this area is still called master-servant law?). The social contract is a viable and useful construct and you have made that argument beautifully.

  3. Jeremy McCarthy (@jeremymcc) October 24, 2011 at 10:32 am #

    Thanks Sara, One of the first assignments in my course on Positive Leadership starting in January will be to ask students to write a paper about a positive leader that they have either worked with personally, or come to know through popular media. I am looking forward to seeing who they come up with and why!

    I wrote a prior post called “Psychology Lessons from the CEOs” where I described some of the leaders that I looked up to. Interestingly, Steve Jobs was not on my list but was referenced in the comments by some of the readers.

    Another example I use in my course (and in my webinar this November) is Jeffrey Swartz, the CEO of Timberland (probably in direct competition with Pagagonia!) You’re right, it is good to collect examples like this. Epecially if they inspire and educate others to follow in their footsteps.

  4. Jeremy McCarthy October 24, 2011 at 10:49 am #

    Thanks Dan! I hope my readers will check out your blog as well at Dan is a provocative blogger on issues of psychology in the workplace.


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    […] their goals and how the other person can help those goals be met.  (See my prior article on “The Social Contract at Work.”)2.  Create a deliberate positive component.  Consultant Lisa Sansom suggests consciously […]

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