An organization is a “nexus of contracts”.
Every employee has an employment contract. Then there are contracts with suppliers, partners, and customers.
Many of the clients I work with tell me that they need to develop better contracts and that they would like to manage contract relationships in more effective ways.
There’s a framework called “transaction cost theory” that can be useful here.
But not everybody has heard about it, and even those who have heard about it may not realize how it can help them.
So I contacted one of the leading experts in the field – professor Nicholas Argyres, and asked him whether he could explain it to us! He agreed, and you can hear our conversation in the podcast recording below.
Professor Argyres believes that you shouldn’t leave contracts to the lawyers alone. Managers, engineers and other employees all need to be involved if the firm is to develop better “contracting capabilities”.
The podcast lasts for about 13 minutes. This is the first part of our conversation, the second part – where we discuss another topic – centralization versus decentralization – follows in the next blog post.
You can find more information about Nicholas Argyres’ research on this web page.
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