Obstacles to Creating Capable Organizations – The Faustian Employment Contract

What are the problems a modern workforce faces?

One simple answer is that in the modern professional world, many believe that to survive, they must keep obeying orders from an impersonal bureaucratic machine based on the employment contract, regardless of the consequences. Thus, many people will bend their principles, values, and behavior to obey doubtful orders. Cynics will say that this is part of the human condition. The more academic of them will quote the classic Milgram experiment on ‘yielding’ to back their claims – the vast majority of people, when faced with an authority figure giving illegal orders in a tough and threatening manner, will yield to those orders, regardless of the personal stress that puts the individual through.

This is damaging for society. People will question doubtful orders if the emotional climate of the organization encourages constructive critical review by humans of humans, but this is less likely to happen if they have only one bureaucratic and impersonal model in their vocabulary of organizational structure and capability. This ‘one club’ approach to organizing is patently ineffective in a rapidly changing world, yet it has developed an apparent legal backing over the last two centuries through the creation and widespread use of the contract of personal employment. The vast majority of us offer ourselves to an organization that will pay us for supplying our labor, skills, and knowledge for a specified amount of time each week.

There is nothing wrong with the process of contracting our labor. Indeed, our society is built on it and, despite the present trends towards redefining employment contracts into smaller, more diffuse, and lower-cost units, the full-time employment contract is still predominant throughout the world. However, it is worth noting that in the UK in 1998, full-time paid employment dropped to just thirty-nine percent of the working population and continues to fall to this day.

In the context of the planning process, goals are the targets or ends the manager wants to reach, and the employee must comply.

As the careers become less predictable, people can easily be pushed by directors and managers to abandon their aspirations to achieve higher levels of status and self-esteem in organizations and to slide into fear, depression, and the need for protection at any price. They believe, wrongly, that doing anything an organization asks of them will guarantee its continuing protection of themselves and their families. This is the ‘I was only obeying orders’ defense.

In the short term, this can be made by managers to appear entirely rational. In the medium to long term, it is cancerous to healthy organizational thinking, learning, and behavior. If people do not critically review what is happening, speak their minds, and share their experiences, then problems will grow. These are the very conditions that will inevitably lead to decline.

man using MacBook inside dark room

The moral issue with employees following orders blindly

There are shadow sides to any organization, where real behaviors bear no relationship to the espoused values. People are rarely asked to adopt truly inhumane values and actions, as the erosion of personal and group values is usually more subtle in the faustian contract. This forms a classic dilemma for an individual in an organization – how do you keep your personal integrity when the organization’s demands run counter to it? How do you strike a balance between the two horns of this age-old dilemma? On one side, the organization’s demands are weighted with the rewards of obeying unquestioningly and the consequences of disobeying. On the other side is the question of what your conscience will allow you to do.

People have beliefs, values, and behaviors which keep them sane, healthy, and able to live with themselves. Increasingly impersonal organizational demands for only ‘hard’ task achievement through less and less effective ‘soft’ social-emotional processes cause stress and tension within individuals and between workgroups. This is often rationalized by the individual saying, ‘Well, I don’t agree with this, but I will do it just this once to protect myself,’ until the action becomes such a corrosive habit that they reach a crisis point where they lose their social intelligence and working humanity.

When the social process is absent effective task achievement will not occur, eventually leading to the collapse of the organization. A good example is demonstrated through the well-known ‘Abilene Paradox,’ where a group takes a decision which if you question them later, each individual member feels or knows, is wrong, but where the lack of sufficient social process within the group discouraged critical review or debate.

The current employment contract is a Faustian bargain that is at the heart of an organization’s success

It needs to be recognized that the contract of employment has both an economic/legal and an emotional element to it. Yes, we want the job, the rewards, and the guarantee of employment, but there is more to it than that – the organization is also buying me and all I stand for. The latter element is rarely discussed, let alone emotionally contracted, during the selection or induction processes of a job or checked during regular appraisal. Yet, it is the very basis of the effective induction and inclusion of an employee into a workgroup and, especially, of the building of a healthy working relationship. It is every line manager’s job to do this. Unless induction and inclusion are handled by each line manager in this way, it is very difficult for an individual to become truly competent in their specific job.

Some forward-thinking organizations are beginning to recognize that the old employment contract is a Faustian deal, whereby people effectively offer their soul in return for the guarantee of life-long employment. These organizations know that they can no longer offer that. Gone are the days when a global bank would select its international staff at the age of twenty-one and retire them at fifty-two, rich and mentally and physically exhausted. In the years between, they were on twenty-four hours’ notice to work full-time anywhere in the world the bank chose to send them. Their families would follow, unquestioningly, as soon as possible after the transfer.

What is beginning to be on offer, especially in ‘knowledge worker’ companies, like multi-media design, corporate counseling, investment banking, and now even retail banking, is the idea of the employment contract ‘ensuring employability9. The contract still spells out the ‘hard’ side of tasks to be achieved, basic pay, hours, conditions, etc., but it is honest enough to also include the ‘soft’ side, guaranteeing that, while the length of employment is for a short term, typically two to four years during which time all the usual benefits apply, the emotional side of the contract is to aspire to keep them longer and to promise to give sufficient training and personal development within the duration of the contract via agreed time and money budgets so that the individual has a high chance of retaining their employability on the wider labor market. This is ascertained through careful and regular appraisal between the individual and their boss. Early signs are that this is proving a highly cost-effective way of recruiting, developing, and retaining well-qualified staff and of ensuring their commitment until the moment they have to leave.

The Widespread failure to understand the social-emotional aspects of employment contracts generates two key blockages to Organizational Capability. First, large amounts of human energy, experience, creativity, and potential are lost to an organization when the emotional balance of an employment contract is disturbed – when the employee’s ‘perception of equity is lost. People become demotivated, prone to making mistakes or to not following instructions, tempted into ‘malicious obedience,’ and, at worst, to organizational sabotage. Second, the implied assumption that the employment contract is merely economic indicates that in the normal process of being contracted, employees must lose the majority of their unique human characteristics and play down their feelings and their learning. They are forced to become an impersonal part of an impersonal whole.

Both are dangerous mindsets for organizations and individuals. They allow the people in power, without critical review, to focus solely on the ‘hard’ achievement of task by any means they deem fit, at the expense of the ‘soft’ social process and, therefore, the cohesion of the whole. This blocks organizational learning and turns the focus away from cooperative learning and towards individual learning, blaming others, and personal survival.

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