Why It’s Important to Define the Social Contracts for Your Workplace Culture

The following is adapted from The Rack We Built.

When you’re hired at a company, you knowingly sign a contract. But unknowingly, you’re signing another, invisible agreement: a social contact. 

The Urban Dictionary gives one of the clearest definitions of a social contract: “The unwritten, unspoken rules of polite society.” Similar to prison life, there are the official rules of the prison, and then there are the unofficial rules of the prison yard. “Don’t go there. Don’t talk to so-and-so.” The social contract represents the unspoken rules of your team, department, and company.

Great leaders intuitively understand how having a clear social contract is a powerful tool to help them achieve their inspiring mission. When employees know what is expected of them and how the company culture functions, it’s much easier for them to reach goals and achieve success. 

On the flip side, though, when you don’t define the social contracts for your workplace culture, it can be very easy for employees to feel disappointed, confused, or frustrated. That’s why I recommend defining your social contracts, taking the following advice under consideration.

How to Define Your Social Contracts

According to Dan Ariely’s book Predictably Irrational, we live in two worlds. One is the world of market contracts where I pay you for something, and I get something in exchange. The other world makes exchanges based on social contracts. We always volunteer more than what the market rate would have been. 

Ariely explains the concept with this example: if a friend asks you to help him move, you cancel your plans. You spend all of a Saturday helping him, and when he tries to pay you, you say, “Don’t be ridiculous.” That’s a social contract, whereas if he busted out ten dollars, it’s almost an insult because what you’re doing is worth way more than ten dollars. If he was getting your help at a market rate, it would be a much higher price. 

Your company’s core values are what allow the employees to make decisions when you’re not there. But social contracts are a lot of the things we mistake for core values. The reason this happens is because the two are inextricably linked. The core values of your company are also the foundation of your social contract. 

When I was an employee at Rackspace, the market contract was, “I’m paying you fifty-thousand-dollars to be an account manager and you’re going to have a thousand customers.” The core values included “fanatical support” and “full disclosure.” But the social contract included things like, “You respond the same day the customer calls in,” and “Don’t be demanding with the engineers.” 

Your core values guide your hiring, firing, and decision-making, while your social contracts guide all other behavior that lies in the gray areas. Social contracts play a supporting role to your core values and sustain your culture with rules of conduct for both the organization and employees. 

Articulate the Unspoken Rules

If you are a leader, you need to find out and start to write down what your company’s social contracts are. Do that by starting where every good detective movie starts: the word on the street. People want to feel like their voice is heard, and great leaders can often get the lay of the land just by paying attention to what their employees say and how they interact with one another. 

At Rackspace, our social contract included that we were a performance-based company, and pedigree didn’t matter. If you kicked butt and did an amazing job, there was no limit to your growth. We’re here to get a job done and serve customers. 

When we were in cross-functional teams, one of the most powerful, unwritten parts of our social contract was that we put the needs of the team above the needs of the individual. The sales guy knows he can’t sell a terrible deal that benefits him only because he’s literally surrounded by people that will have to eat the crap that he just dished out. They will ostracize him and make his life hell. The prison yard rules say you can’t be a self-centered jerk in that environment.

The social contract includes those base things you should do anyway, as a good human being. Everybody says they want integrity, but the social contract of your company is where you tell the employee what your version of integrity is. You have to define it with stories, principles, and phrases that actually explain what the social contract is and what the consequences of breaking it are. 

Don’t Make Promises You Can’t Keep

Every company should have an honest conversation about what their social contract is. A lot of companies will create social contracts that turn out to be unhealthy. They make a promise without knowing if they can keep it, such as promising a career path for you, which is dangerous. They can’t predict the future of their company. What if they’re static and stop growing? Will they create positions just so that someone can say they are advancing in their career?

A good social contract would say that when opportunities open up, the company prefers to promote from within and will evaluate its own employees first. But that’s not the same thing as a guarantee that employees will have room to advance in the company. That sort of social contract sets both parties up for failure.

The reasoning on the part of the company is that such promises will prevent employees from leaving to go to another fast-growing company. I argue that if your culture is strong enough, you can withstand that. You don’t need to create artificial social contracts that are hard to enforce. 

As a company grows, the social contract, like your core values, may—and often does—change. These are acceptable and expected changes, but you must communicate those changes to employees. And most important, you must communicate the Why. 

No One Should be Caught Off Guard

Every company has at least a base level of social contracts, and every team has a subset of its own agreement. At Rackspace, we had no dress code, but, as discussed earlier, the sales department had its own unwritten dress code. The company explicitly said, “We don’t have a dress code here.” The unspoken rule, however, was, “If you want to be in sales and succeed, you have to dress for success.”

The most successful companies, with the most fulfilled employees, are those who are fully aware of those unspoken rules, like “Dress for Success.” No one should be caught off guard or have to do guesswork to thrive in your organization. It’s worth taking the time to discover, define, and articulate your social contract so everyone can be on the same page. 

For more advice on social contracts, you can find The Rack We Built on Amazon.

Lorenzo Gomez was one of the first one-hundred employees hired at Rackspace. During his nine years there, he served as a team leader and senior manager, pioneered the account manager/business development consultant split, and finished as a director of project management. As one of the leaders in creating San Antonio’s tech scene, Lorenzo deployed the principles he learned at Rackspace as CEO of Geekdom and chairman of the 80/20 Foundation. In addition to his work, Lorenzo has authored two Amazon bestsellers: The Cilantro Diaries in 2017 and Tafolla Toro in 2019.