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Posted on March 2, 2020
Updated on October 13, 2021

Contracting for Effective Outcomes

Contracts specify:

  • Who is involved
  • What they are going to do
  • How long it will take
  • What the goal is
  • How they will know they have completed the process or task
  • How this will be beneficial to those concerned


Steiner outlined four requirements for contract making:

  • Mutual consent
  • Valid consideration
  • Competency
  • Lawful Object

Organisational contracts need to be clearly stated and be measurable, manageable and motivational. The difficulty is that one person’s motivation may be another’s demotivation. Therefore, clarity about who is the commissioning agent, who negotiates the day to day contracting process and who is the client are all parts of the complexity when working with groups and organisations.

Types of Contract

At the basic level there are three types of contract: 

Administrative: deals with all the practical arrangements such as time, place, duration, fees, agreements between departments and agencies, confidentiality and its limits. It includes aspects of policy and legal administration, as well as monitoring and evaluation.

Professionaldeals with the focus and how the consultation/work being undertaken, will proceed. This is about competency and responsibility, goals and purpose as well as benefits and limitations.

When clients are not clear what they want then a preparatory contract to explore this will need to come first. The professional contract includes dealing with goals and tasks.

Berne defined treatment contracts as 'hard' or 'soft'. 

In a hard contract, the goals are clearly defined in behavioural termsFor example, 'I will find myself a new job within six months'.  

Soft contracts are more subjective: 'We want to become the best company making widgets'. This does not state in which way they will be the “best”. Soft contracts can be useful at the early stage of the relationship between perhaps the coach and student. The area of relationship cannot be forgotten whether working one to one or with the organisation.

Psychological: deals with the unspoken aspects of the contract.  This is the unwritten set of expectations and obligations that are held between all employees of the organisation.  In these terms, 'obligations' are stronger than 'expectations' and if broken have deeper, more emotional reactions. Broken expectations can lead to disappointment, whilst broken obligations lead to anger and resentment. The psychological contract is more about process, and has a powerful influence on behaviour in organisations.

This is the same as the psychological level of communication, where the outcomes of the transactions are determined at the psychological level. When it appears as though the social level of communication is determining the outcome is may be because the social level is congruent with the psychological level (Lankton, Lankton & Brown 1981).

Levels of Contract

Some organisations may have a contract for “care”, whilst others may have one for “social control”. Berne (1961, p160) talked about symptomatic control, symptomatic relief; transference cure; and script cure. How would this transfer to work with organisations?

More recently, Tudor (1997: p169) develops English’s (1975) work on the multi-handed contract. As the number of parties to the contract increases it becomes increasingly difficult to hold the complexity of the interrelationships.  

For example, a team leader might have a manager, a coach, a project group, be involved in training programmes and therefore have a relationship with a Consultant trainer and so on. 

These contracts are further complicated when the organisation is a local authority or a voluntary organisation. In this case, there might also be relationships with Councillors, steering groups, etc.

Tudor likens this complexity to the computing language of hypertext. He diagrams the layers as hypertext boxes and places these boxes at different distances to represent the different levels or relationship between contractual parties.

Three Handed Relationships in GP Practice (Tudor (1997) 

Multihanded Relationships in GP Practice (Tudor (1997)

Psychological Distance

Nelly Micholt highlights the need to be aware of the varying levels of closeness and distance between the different contractual parties.  

She builds on English’s work on the three-handed contract and diagrammatically outlines the different relationships between the parties to the contract.  

Micholt’s work is seminal in the organisational field as it ensures clarity of role and relationship enabling the development of awareness required before, during and after setting up the contract. This awareness leads to the greater engagement of the Mindful mode, and therefore fewer games.

Psychological Contract

There can be a healthy psychological contract that is based on mutual respect and trust. This level of the contract is based on interactions rather than on clear goals. 

Stewart notes that 'If the covert goals of the psychological contract are different from those of the overt administrative or professional contracts, then the result will always be that the parties to the contract enter into a game' (1992: p.87).

There are different reactions to the administrative and professional and psychological aspects to the contract. When the psychological contract is broken it can lead to a more heightened emotional response than if the other two aspects of the contract are broken.

Complexity & Problem Definition

When contracting with organisations we need to consider who the client is, if there is a problem, what that problem is, who defines it, what are the desired outcomes and what the interventions will be to achieve these.  

Each part of the structure is likely to have a different perspective on what the problem actually is.  

For example, top management may see the problem as too much decentralisation as it is difficult to co-ordinate, whilst middle managers may experience the problem as too little decentralisation. Therefore, working out what the focus will be, and ensuring that the contract is outcome focused is part of the complexity of working in organisations.

Contracting processes are influenced by our script issues.  Identifying how our particular script may affect our contracting process can help us identify the strengths and weaknesses in those contracts and therefore improve them.

Coaching & Mentoring

This complexity is very apparent when undertaking coaching and mentoring.  The traditional intra-organisational mentoring schemes, where the more experienced employees acted as mentors and role-models for newer recruits highlights a range of different aspects of contracting.

The more traditional mentoring role involved the psychological contract or obligation on the mentor. The mentor would be expected to “groom” the new recruit in the ways of the organisation. This was, and sometimes still is, a hampering process for the organisation, and the mentors may not be challenging of organisational processes and systems. 

In contrast, the use of external coaches who are clear of any affiliations to the organisation can assist the student in their professional development, from which the organisation will inevitably benefit. They are also more likely to think “outside the box”, enabling greater flexibility and creativity.

One of the greatest difficulties for those working as consultants in organisations is the tension between being an outsider working within a system and the need for a secure base. Poelje, (1994), discusses the consultant’s need for affiliation and autonomy as well as the need for distance and objectivity. The ability to manage this process being the development of a secure base within oneself.

As a final word on contracting, it is worth considering how different cultures respond to the contracting process. 

We also need to remember that we have all experienced a psychological contract in our family of origin and that is often over looked when working with those within our own culture, and we may be in danger of making assumptions that we may not make when working with those from another country. 

References and Further Reading

Berne, E. (1961). Transactional Analysis in Psychotherapy, New York.

Berne, E. (1966). Principles of Group Treatment, Grove Press.

Makin, P., Cooper, C. and Cox, C. (1996). Organisations and the Psychological Contract, BPS Books.

English, F. (1975). The Three-Cornered Contract, TAJ, 5:4.

James, M. and Jongeward, D. (1985). Born to Win, Addison Wesley.

Lankton, S.R., Lankton, C.H. and Brown, M. (1981). Psychological Level Communication in Transactional Analysis, TAJ 11:4

Micholt, N. (1992). Psychological Distance and Group Interventions, TAJ 22:4.

Mountain, A. & Davidson, C. (2011) Working Together - Organizational Transactional Analysis and Business Performance Gower Publishing

Poelje, V. S. (1994). 'Contracting for Organisational Change', in Transactional Analysis in Organizations, First Vol of selected articles 1974–1994, eds. Poelje and Steinert, ITAA.

Steiner, C. (1974). Scripts People Live, Bantam Books.

Stewart, I. (1992). Eric Berne, Sage.

Tudor, K. (1997). Contracts in Counselling, ed. Sills C, Sage.