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Employment Relations Today Winter 2002 27 Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics Shirley Chan is a lawyer admitted in England and Wales. She specializes in information technology (IT) law and is interested in the relationship between technology, business, and law. After having been in private legal practice, she became an independent IT consultant. Her most recent assignments have been with Compaq Computer and Land Information New Zealand. Her areas of expertise include virtual teams, teleworking, extranets, and e-commerce. She can be reached at [email protected]. © 2002 Wiley Periodicals, Inc. DOI: 10.1002/ert.10013 GETTING THE VIRTUAL WORK CONTRACT DONE—PRACTICALITIES AND ORGANIZATIONAL DYNAMICS Shirley Chan I nformation technology has redefined many facets of our hu- man society. One of these is the way we work. The increasing use of computers, e-mail, mobile phones, and other communi- cation devices has resulted in the popular deployment of virtual work. Virtual work involves two or more people working and communicating in cyberspace using information and communica- tion technologies. In light of our increasingly globalized economy, very often virtual workers are located in different parts of the world. Virtual work therefore cuts across the traditional bound- aries of time and space, maximizing opportunities of international trade and commerce. Traditional forms of work involve team members meeting face to face and working in the same geographical location and time zone. Virtual work is different from conventional work in terms of the “invisibility” involved—virtual team members do not see each other and may not have even met. Intangibility brings along a higher degree of uncertainty. Many questions may come to mind when deciding whether we should work virtually: Would team members perform up to standard? How about communication breakdown? How do we resolve disputes when we are miles away? Apart from technological means and managerial strategies, one of the ways that businesses and organizations handle such uncertainty in virtual work environments is by entering into virtual work contracts that are legally binding. These contracts include provisions addressing various issues arising from such uncertainty, such as work responsibilities, performance standards, communication protocol, and dispute resolution. Experience tells us that preparing a contract involving cross-organizational, cross- cultural, and cross-jurisdictional parties could take more time and effort than we expect. There are many cyberspace practicalities

Getting the virtual work contract done—practicalities and organizational dynamics

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Employment Relations Today Winter 2002 27

Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics

Shirley Chan is a lawyeradmitted in England andWales. She specializes ininformation technology (IT)law and is interested in therelationship betweentechnology, business, andlaw. After having been inprivate legal practice, shebecame an independent ITconsultant. Her most recentassignments have been withCompaq Computer andLand Information NewZealand. Her areas ofexpertise include virtualteams, teleworking,extranets, and e-commerce.She can be reached [email protected].

© 2002 Wiley Periodicals, Inc.DOI: 10.1002/ert.10013

GETTING THE VIRTUAL WORK CONTRACTDONE—PRACTICALITIES ANDORGANIZATIONAL DYNAMICS

Shirley Chan

Information technology has redefined many facets of our hu-man society. One of these is the way we work. The increasinguse of computers, e-mail, mobile phones, and other communi-

cation devices has resulted in the popular deployment of virtualwork. Virtual work involves two or more people working andcommunicating in cyberspace using information and communica-tion technologies. In light of our increasingly globalized economy,very often virtual workers are located in different parts of theworld. Virtual work therefore cuts across the traditional bound-aries of time and space, maximizing opportunities of internationaltrade and commerce.

Traditional forms of work involve team members meeting faceto face and working in the same geographical location and timezone. Virtual work is different from conventional work in terms ofthe “invisibility” involved—virtual team members do not see eachother and may not have even met. Intangibility brings along a higherdegree of uncertainty. Many questions may come to mind whendeciding whether we should work virtually: Would team membersperform up to standard? How about communication breakdown?How do we resolve disputes when we are miles away?

Apart from technological means and managerial strategies,one of the ways that businesses and organizations handle suchuncertainty in virtual work environments is by entering intovirtual work contracts that are legally binding. These contractsinclude provisions addressing various issues arising from suchuncertainty, such as work responsibilities, performance standards,communication protocol, and dispute resolution. Experience tellsus that preparing a contract involving cross-organizational, cross-cultural, and cross-jurisdictional parties could take more timeand effort than we expect. There are many cyberspace practicalities

Shirley Chan

28 Winter 2002 Employment Relations Today

and organizational dynamics involved in this process requiringour diligent and tactful attendance if we want to get the contractdone in a timely manner.

Although this article examines the clauses commonly foundin virtual work contracts, the focus is on identifying thesepracticalities and organizational dynamics as well as strategiesin managing the same.

MAIN PROVISIONS COMMON IN VIRTUALWORK CONTRACTS

It is practical to set out the nature, scope, and objectives of thevirtual work initiatives at the beginning of the contract. The nextsection could be on rights and responsibilities of the respectivecontractual parties. Virtual workers might never meet and yethave to rely on each other’s contribution to a project or piece ofwork. It is therefore imperative for each of the contractual partiesto assert in the contract that he or she has the requisite qualifica-tions, skills, and experience to undertake the assigned tasks.Certified copies of virtual workers’ educational and professionalqualifications and experience statements could be attached asappendices to the contract. In addition, virtual workers shouldagree on performance standards and guarantee that they wouldtake their best endeavors to reach such standards.

Some skeptics of virtual work would argue that cyberspacecooperation could result in ineffective communication or commu-nication breakdown, in the event of any systems failure or anyaccidental occurrence on the information superhighway. It istherefore imperative for contractual parties to commit to propersystems maintenance and checkups on a regular basis. Theyshould also agree to coordinate from time to time on noteworthyissues relating to systems functioning. Another way of ensuringeffective communication among virtual workers is by includingcontractual provisions that specify the frequency of communica-tion required. For example, the contract could state that e-mailmessages must be returned within 24 hours, or videoconferencesmust be held at least once every two weeks to keep each virtualteam member updated on work progress.

Virtual workers often rely on the Internet to communicate orconduct business. Given that the Internet is in some ways an openforum, virtual workers’ online communication could be vulner-able to security threats. This could be damaging to businesses,especially today when industrial espionage is prevalent. It istherefore practical for contractual parties to employ security tech-nologies and appropriate organizational policies to ensure thattheir systems are secure.

It is thereforeimperative for each ofthe contractualparties to assert in thecontract that he orshe has the requisitequalifications, skills,and experience toundertake theassigned tasks.

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Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics

GET MANAGEMENT INVOLVEDAs stated above, main provisions common in virtual work

contracts include rights and responsibilities, work performancestandards, communication protocols, and systems maintenanceand security measures. Given that contractual provisions are bynature “legal technicalities” in some sense, the common percep-tion is that the task of preparing, drafting, negotiating, and final-izing the virtual work contract should be left to legal counsel.

A legal contract divorced from organizational and businessconsiderations would not be effective in regulating the behav-ior of virtual team members. It is crucial to note that legalcontracts are also meant to attain business objectives and orga-nizational goals. Relevant management staff from divisionssuch as human resources and operations, as well as managersof business units where virtual workers are from, should workclosely with legal counsel.

It is usual practice for lawyers to present a contract checklistto managers that pertains to specific information that is to beincluded in the contract—for example, name and location ofvirtual workers, working hours, preferred language of commu-nication, and method of dispute resolution. Such informationshould be compatible with the business objectives of the virtualteam or the organizations involved. Some lawyers, managers,and organizations prefer to have joint discussion sessions eitherin lieu of or in addition to the contract checklist. If time and otherconditions allow, such sessions provide opportunities for therelevant legal and management personnel to have more in-depthdiscussion on the contractual terms and how they relate to thebusiness requirements.

Having the participation of business managers would helpensure that the contractual terms fit into the business require-ments. Moreover, involving managers from various functional ordepartmental units such as human resources, operations, andquality assurance could have the benefit of pooling intellectualresources and different viewpoints. Nonetheless, it is possible togenerate organizational dynamics or interpersonal complexitiesas stated below that need to be resolved in order to ensure that thevirtual work contract can be completed as soon as practicable.

ORGANIZATIONAL DYNAMICS—DIFFERENT PRIORITIESGiven management staff are from different function or depart-

mental units, they may not share the same sense of perspective orpriorities regarding the virtual work initiatives. For instance, thehuman resources department may consider this as a major step inpositive organizational development, but the quality assurance

Relevantmanagement stafffrom divisions suchas human resourcesand operations, aswell as managers ofbusiness units wherevirtual workers arefrom, should workclosely with legalcounsel.

Shirley Chan

30 Winter 2002 Employment Relations Today

team would caution against the possibility of having less controlover product/service quality if work is done virtually. In this case,it is more likely for the quality assurance team to have inertia andnot to be as responsive as expected when it comes to givingcomments on the draft of the virtual work contract. It is notunusual to have the following phone conversation between law-yers and their clients:

Lawyer: Did you receive the second draft of the virtual contract I sentyou two weeks ago? Is it OK? Do you have any comments?

Client: Oh yes, I got your draft. Thanks. I passed it to several of ourbusiness units for them to take a look—people in human resources,operations, marketing, and quality assurance. I have heard back fromoperations but not others. Sorry about that. I know it has been quitesome time. I will follow up.

Different departmental agenda could potentially have animpact on the process of preparing and finalizing the virtualwork contract. To ensure that the virtual work contract is com-pleted in a timely manner, it is important for related businessunits to sort out their differences as soon as possible. Theyshould communicate on why they have different perspectivesand how they think virtual work would impact on the function-ing of their respective units. As in the above scenario, the humanresources department might have to make a business case as towhy and how virtual work would make a positive contributionto the organizational development, rendering it more respon-sive and flexible to the ever-changing business environment inthe digital economy. On the other hand, the quality assuranceteam would have to explain to the human resources and otherrelated departments how working virtually might compromisethe quality standards and possibly result in products or servicesthat are of lower professional quality.

In today’s increasingly competitive market, having both aflexible organizational structure or culture and offering productsor services of excellent quality is important to any business thatstrives to succeed. It is not a matter of judging the merits of thearguments of each of the human resources and quality assuranceteams in this case. The issue is whether, during the implementa-tion of the virtual work initiatives, there could be a solution orstrategy so that the organization can be adaptable to constantchanges and at the same time offer high-quality products orservices—thus keeping both human resources and quality assur-ance happy. Such a solution or strategy can come in the form ofcloser monitoring of quality standards and procedures and more

In today’sincreasinglycompetitive market,having both a flexibleorganizationalstructure or cultureand offering productsor services ofexcellent quality isimportant to anybusiness that strivesto succeed.

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Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics

frequent communication with virtual workers to see whether theyneed extra help in meeting these standards. No matter whatsolution is adopted, it all takes open communication, teamwork,and trust among the business units involved.

Business units should agree to certain milestones or deadlinesregarding their respective contributions to various stages in thecontract drafting and negotiation processes. This is particularlyimportant when it comes to intradepartmental dynamics (forinstance, senior staff within the quality assurance team may havemore conservative responses to virtual work than those of theyounger or more progressive colleagues). Interdepartmental dy-namics, such as those between human resources and qualityassurance as indicated above, may also cause delays. If there arestated deadlines throughout the process, department heads ormanagers would have a time frame within which they would needto resolve their intradepartmental dynamics. If they cannot agreeout of departmental self-interests or other organizational or inter-personal reasons, it would be necessary to approach the CEO toassist in reaching a feasible solution.

START EARLY—RESOLVING NATIONALCULTURAL DIFFERENCES

Never underestimate the amount of time involved in thewhole process of preparing, drafting, negotiating, revising,and finalizing the virtual work contract. Virtual work veryoften requires cooperation among individuals living in differ-ent countries and working for different organizations. Muchtime and energy is required to resolve differences in nationaland legal cultures.

With regard to national cultural differences, it is important tobear in mind that organizations or individuals from Western andnon-Western countries might have different reception levels to-ward virtual work and, more specifically, toward using a legaldocument to regulate the behavior of virtual team members.Generally speaking, Western Anglo-Saxon cultures such as thoseof the United States, Australia, and New Zealand have a traditionof emphasizing institutional systems and rules of law in conduct-ing business rather than personal relations. Professionals fromthese cultures are more likely to put their faith in a legally bindingcontract to effectively regulate the operation of the virtual teameven though team members might have never met. However, innon-Western cultures, such as in Japan or Korea, where profes-sionals tend to rely on personal contacts and trust in doingbusiness, it might take individuals longer to get used to workingvirtually with others whom they cannot see or have never met.

Virtual work veryoften requirescooperation amongindividuals living indifferent countriesand working fordifferentorganizations.

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32 Winter 2002 Employment Relations Today

Further, in these cultures, starting off a working relationship witha detailed legal document might be perceived as distrust amongvirtual team members.

CHOOSE YOUR LAWYER CAREFULLY—LEGALCULTURAL DIFFERENCES AND GOVERNING LAW

Differences in legal cultures may also affect the process ofpreparing and finalizing the virtual work contract. It is importantto choose your lawyer carefully. Select someone who is capable ofhandling cultural differences. Contracts drafted by lawyers whoare from British-law–based jurisdictions such as those of theUnited States, Canada, Hong Kong, and Singapore usually con-tain detailed stipulations, especially if the business transactions orsituations are complex. It is not uncommon to find their contractsrunning up to 40 to 50 pages! In contrast, lawyers from Soviet-law–based jurisdictions such as those in China and Russia tend to draftcontracts with short and simple clauses and that are only a fewpages long. A U.S. lawyer might consider a Chinese lawyer’scontract unusually short and not sophisticated enough to protecthis or her client’s interests. Conversely, a Russian lawyer mightconsider a 50-page contract drafted by a Canadian lawyer to be toomuch to digest!

Resolving differences in national and legal cultures as statedabove is important in facilitating the completion of the virtualwork contract. Human resources or other related managementprofessionals are advised to work with legal counsel in thisrespect. Do research on the national and legal cultures wherevirtual workers come from. Talk to professionals such as journal-ists, diplomats, academics, and government officials who haveworked in these cultures.

Human resources professionals should also help devise astrategy for communicating your cultural standards and practicesto virtual team members from other cultures and their profes-sional advisers. Think about the most effective channels of com-munication in this regard—videoconference, phone, fax, e-mail,or face-to-face meeting, if time and financial resources allow. Pickthe “right” person as the initial recipient of your message. Havinginformation about other virtual team members including theireducational and professional backgrounds would help in thisregard. Try to deliver your message to one or two individuals inthe virtual team who are most likely to provide positive feedback.Once you have one or two “yes” votes, the rest of the team may bemore open minded about adapting to different cultural standards.For instance, if a U.S. corporation and its lawyer want to convincetheir Chinese virtual workers about the merits of adopting West-

Human resourcesprofessionals shouldalso help devise astrategy forcommunicating yourcultural standardsand practices tovirtual team membersfrom other culturesand their professionaladvisers.

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Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics

ern-style virtual work contracts, they should initially send theirmessage to a Chinese virtual worker who has attended graduateschool abroad in a country like the U.S. rather than to a Chineseworker who was educated locally. You would assume that some-one who had overseas experience would be more receptive to theconcept of a virtual work contract.

Another practical issue is having a lawyer experienced ininternational transactions and cyberspace law to advise you on thegoverning law of the virtual work contract. Communication amongvirtual team members challenges the traditional concept of juris-diction, which is very much based on national borders and sover-eignty. This is because virtual communication spans acrossboundaries. For instance, for a message sent by virtual workers inCountry A through a server in Country B to another virtualworker in Country C through a server in Country D, it is stillunclear which law governs. In many cases, there may bemultijurisdictional implications. Resolving conflict of laws is usu-ally quite complex. To avoid confusion, it would be practical forparties involved in international transactions to specify the gov-erning law in the contract. Common practice is to pick either U.S.or U.K. law. Given the highly volatile nature of the Internet,choosing the governing law does not completely rule out thepossibility of having virtual communication devoid of the ramifi-cations of other jurisdictions. However, the chosen law is usuallythe first source of law used if disputes arise between the parties.

CHANGE MANAGEMENTJust as virtual workers must adapt to different cultural norms,

people within your organization must also adapt to a neworganizational culture that includes working with colleagues,clients, or business partners in remote locations. It is a paradigmshift, which requires rethinking conventional notions and ac-cepting new values. Although disagreement over virtual workcontractual terms is often due to business interests, it is also theresult of people being psychologically unprepared for the dras-tic change to a virtual work environment. Successful changemanagement would, therefore, potentially expedite the virtualwork contract-making process.

It is not uncommon to find that many people resist change. Itmay be part of human inertia to keep the status quo—especiallyif we have already become used to the normal pattern of life.Change is unsettling to many and may even be perceived asthreatening. However, organizations must adapt to constantchange in our political, economic, and business environment inorder to succeed.

Althoughdisagreement overvirtual workcontractual terms isoften due to businessinterests, it is also theresult of people beingpsychologicallyunprepared for thedrastic change to avirtual workenvironment.

Shirley Chan

34 Winter 2002 Employment Relations Today

Although many organizations recognize the need to change,many change programs fail because organizations either as-sume that people are ready to accept change or underestimatethe resources required to ensure a smooth transition during thechange. Organizations must start by addressing some simplequestions, such as the following: What is the change? Why isthe change needed? Who will be involved in the change? Whatare the logistics? How long is the change process expected tolast? Any kind of change would bring along uncertainty. Tack-ling these common concerns would hopefully reduce the levelof uncertainty and give affected parties some sense of certaintyand security.

To put these in the context of virtual work contract, begin byidentifying affected parties and sharing with them what exactly“virtual work” is. Follow by explaining why your organizationintends to adopt virtual work practices. Tell them the benefits ofvirtual work: flexible organizational culture, the ability to serveclients on a 24-hour basis, access to a pool of intellectual andprofessional resources from all over the world, the potential forachieving balance between work and personal lives, etc. Citesuccess stories in other organizations or countries. Make a con-vincing case.

Common concerns towards the change process of introducingvirtual work are the following: How can managers make sure thatemployees are working hard “at a distance”? Would it be easier toleak confidential information if some or all of the team memberswere in remote locations and relying heavily on the Internet tocommunicate? Would the work be of good quality? How can wecommunicate when systems break down? Convey the messagethat not only are you able to identify these issues of concern andthe people or business units that are likely to be affected, but alsothat you have devised a set of strategies in helping them to tacklethese issues. The strategies in responding to the above questionscould be the following: setting out clear and specific work-prod-uct targets; entering into intellectual property undertakings andtightening up system security to protect confidential information;introducing detailed work-quality standards and performanceguarantees; and establishing alternative modes of communicationother than through the Internet.

When you feel that the relevant people and business units startaccepting the changes involved, provide them with appropriatetraining about the role of a contract in the virtual work initiativesand, in particular, how the contract is tied in with the business andorganizational goals as discussed above. Talk about the differentstages of the contract-making process—gathering business re-

Convey the messagethat not only are youable to identify theseissues of concern andthe people orbusiness units thatare likely to beaffected, but also thatyou have devised aset of strategies inhelping them to tacklethese issues.

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Getting the Virtual Work Contract Done—Practicalities and Organizational Dynamics

quirements, doing a first draft, making comments, negotiatingand redrafting from time to time, finalizing the draft, and signingthe contract. Spell out the people who would be involved in thisprocess and their respective responsibilities and expected timeinvestment. Many lay people have the impression that contractsare usually written in heavy language and filled with long sen-tences and legal jargon. This serves as a “psychological barrier” forthem to approach the contract, not to mention reading it carefullyand giving comments. Keep them informed of the latest trends inlegal drafting—it should be in simple and plain English suitablefor a nonlegal audience. Hopefully that will make it less likely forthem to be put off by the prospect of participating in the contract-making procedure.

MANAGE EXPECTATIONSAfter having done whatever you can to be in control of various

practicalities and organizational dynamics as described above,there still may be some obstacles to overcome. Virtual work isoperating in a highly volatile business environment. Anythingthat is changing in the environment would affect the functioningof virtual work. For instance, recent terrorist attacks might lead tomore stringent computer security measures to be taken in respectof the systems and networks linking the virtual workers. Therecould be corresponding changes to certain clauses in the con-tract—that each of the virtual workers undertakes to implementand coordinate tighter security-monitoring mechanisms.

As human individuals, we may differ in our expectations.There may be skeptics who doubt whether a written contract canfix most problems, and others may optimistically view the virtualwork project and the contract as a panacea. Managing expecta-tions involves training the skeptics to be more open-minded andthe optimists to be more realistic. It might also involve communi-cating with the moderates to ensure that they are too moderate tothe extent of being conservative. Admit that there are pros andcons of virtual work, and a legal contract might solve at least some,if not most, of the problems. Clearly convey the message thatsuccessful management of virtual work involves not just theemployment of legal measures, but also technical and manage-ment strategies. Also unequivocally indicate that everyone in theorganization as a whole should be committed to working togetherto overcome the challenges and come up with solutions to makethe virtual work project a success. �