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Organization Development

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Organization Development ­ MGMT 628
Lesson 14
Entering and Contracting
The planned change process generally starts when one or more key managers or administrators somehow
sense that their organization, department, or group could be improved or has problems that could be
alleviated through organization development. The organization might be successful yet have the room for
improvement. It might be facing impending environmental conditions that necessitate a change in how it
operates. The organization could be experiencing particular problems, such as poor product quality, high
rates of absenteeism or dysfunctional conflicts among departments. Conversely, the problems might appear
more diffuse and consist simply of feelings that the organization should be "more innovative," "more
competitive," or "more effective."
Entering and contracting are the initial steps in the OD process. They involve defining in a preliminary
manner the organization's problems or opportunities for development and establishing a collaborative
relationship between the OD practitioner and members of the client system about how to work on those
issues. Entering and contracting set the initial parameters for carrying out the subsequent phases of OD:
diagnosing the organization, planning and implementing changes, and evaluating and institutionalizing
them. They help to define what issues will be addressed by those activities, which will carry them out, and
how they will be accomplished.
Entering and contracting can vary in complexity and formality depending on the situation. In those cases
where the manager of a work group or department serves as his or her own OD practitioner, entering and
contracting typically involve the manager and group members meeting to discuss what issues to work on
and how they will jointly accomplish that. Here, entering and contracting are relatively simple and informal.
They involve all relevant members directly in the process without a great number of formal procedures. In
situations where manager and administrators are considering the use of professional OD practitioners,
either from inside or from outside the organization, entering and contracting tend to be more complex and
formal. OD practitioners may need to collect preliminary information to help define the problematic or
development issues. They may need to meet with representatives of the client organization rather than with
the total membership; they may need to formalize their respective roles and how the change process will
Let's first discuss the activities and content-oriented issues involved in entering into and contracting for an
OD initiative. Major attention here will be directed at complex processes involving OD professionals and
client organizations. Similar entering and contracting issues, however, need to be addressed in even the
simplest OD efforts where managers serve as OD practitioners for their own work units. Unless there is
clarity and agreement about what issues to work on, who will address them, and how that will be
accomplished, subsequent stages of the OD process are likely to be confusing and ineffective.
Entering into an OD Relationship:
An OD process generally starts when a member of an organization or unit contacts an OD practitioner
about potential help in addressing an organizational issue. The organization member may be a manager,
staff specialist, or some other key participant, and the practitioner may be an OD professional from inside
or outside of the organization. Determining whether the two parties should enter into an OD relationship
typically involves clarifying the nature of the organization's current functioning and the issue(s) to be
addressed, the relevant client system for that issue, and the appropriateness of the particular OD
practitioner. In helping assess these issues, the OD practitioner may need to collect preliminary data about
the organization. Similarly, the organization may need to gather information about the practitioner's
competence and experience. This knowledge will help both parties determine whether they should proceed
to develop a contract for working together.
The activities involved in entering an OD relationship are: clarifying the organizational issue, determining
the representatives of the client organization, and selecting the appropriate OD practitioner.
Clarifying the Organizational Issue:
When seeking help from OD practitioners, organizations typically start with a presenting problem--the
issue that has caused them to consider an OD process. It may be specific (decreased market share,
increased absenteeism) or general ("we're growing too fast," "we need to prepare for rapid changes"). The
presenting problem often has an implied or stated solution. For example, managers may believe that
because members of their teams are in conflict, team building is the obvious answer. They may even state
the presenting problem in the form of a solution: "We need some team building."
In many cases, however, the presenting problem is only a symptom of an underlying problem. For example,
conflict among members of a team may result from several deeper causes, including ineffective reward
systems, personality differences, inappropriate structure, and poor leadership. The issue facing the
Organization Development ­ MGMT 628
organization or department must be clarified early in the OD process so that subsequent diagnostic and
intervention activities are focused correctly.
Gaining a clearer perspective on the organizational issue may require collecting preliminary data. OD
practitioners often examine company records and interview a few key members to gain an introductory
understanding of the organization, its context, and the nature of the presenting problem. Those data are
gathered in a relatively short period of time, typically over a few hours to one or two days. They are
intended to provide enough rudimentary knowledge of the organizational issue to enable the two parties to
make informed choices about proceeding with the contracting process.
The diagnostic phase of OD involves a far more extensive assessment of the problematic or development
issue that occurs during the entering and contracting stage. The diagnosis also might discover other issues
that need to be addressed, or it might lead to redefining the initial issue that was identified during the
entering and contracting stage. This is a prime example of the emergent nature of the OD process, where
things may change as new information is gathered and new events occur.
Determining the OD Team Members:
A second activity in entering an OD relationship is to define who are the team members involved in
addressing the organizational issue. Generally such organization members are involved who can directly
impact the change issue, whether it is solving a particular problem or improving an already successful
organization or department. Unless these members are identified and included in the entering and
contracting process, they may withhold their support for and commitment to the OD process. In trying to
improve the productivity of a unionized manufacturing plant, for example, it will be necessary to include
union official as well as managers and staff personnel. It is not unusual for an OD project to fail because
the team members were inappropriately defined.
Determining the team members can vary in complexity depending on the situation. In those cases where
the organizational issue can be addressed in a specific organization unit, members of that unit must be
included in the entering and contracting process. For example, if a manager asked for help improving the
decision-making process of his or her team, the manager and team members would be the part of the OD
process. Unless they are actively involved in choosing an OD practitioner and defining the subsequent
change process, there is little likelihood that OD will improve team decision making.
Determining the team members is more complex when the organizational issue cannot readily be addressed
in a single unit. Here, it may be necessary to include members from multiple units, from different
hierarchical levels, and even from outside of the organization. For example, the manager of a production
department may seek help in resolving conflict between his or her unit and other departments in the
organization. The requirement of team members would extend beyond the boundaries of the production
department because that department alone cannot resolve the issue. The team might include members from
all departments involved in the conflict as well as the executive to whom all of the departments report. If
that interdepartmental conflict also involved key suppliers and customers from outside of the firm, the
team might include members of those groups.
In such complex situations, OD practitioners need to gather additional information about the organization
to determine the relevant team members, generally as part of the preliminary data collection that typically
occurs when clarifying the issue to be addressed. When examining company records or interviewing
personnel, practitioners can seek to identify the key members and organizational units that need to be
involved. For example, they can ask organization members such question as who can directly impact the
organizational issue. Who has a vested interest in it? Who has the power to approve or reject the OD
effort? Answers to those questions can help determine who is the relevant team for the entering and
contracting stage, although the members may change during the later stages of the OD process as new data
are gathered and changes occur. If so, participants may have to return to and modify this initial stage of the
OD effort.
Selecting an OD Practitioner:
The last activity involved in entering an OD relationship is selecting an OD practitioner who has the
expertise and experience to work with members on the organizational issue. Unfortunately, little systematic
advice is available on how to choose a competent OD professional, whether from inside or outside of the
Perhaps the best criteria for selecting, evaluating, and developing OD practitioners are those suggested by
the late Gordon Lippitt, a pioneering practitioner in the field. Lippitt listed areas that managers should
consider before selecting a practitioner, including the ability of the consultant to form sound interpersonal
relationships, the degree of focus on the problem, the skills of the practitioner relative to the problem, the
extent that the consultant clearly informs the client as to his or her role and contribution, and whether the
practitioner belongs to a professional association. References from other clients are highly important. A
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client may not like the consultant's work, but it is critical to know the reasons for both pleasure and
displeasure. One important consideration is whether the consultant approaches the organization with
openness and an insistence on diagnosis or whether the practitioner appears to have a fixed program that is
applicable to almost any organization.
Certainly, OD consulting is as much a person specialization as it is a task specialization. The OD
professional needs not only a repertoire of technical skills but also the personality and interpersonal
competence to use himself or herself as an instrument of change. Regardless of technical training, the
consultant must be able to maintain a boundary position, coordinating among various units and
departments and mixing disciplines, theories, technology, and research findings in an organic rather than a
mechanical way. The practitioner is potentially the most important OD technology available.
Thus, in selecting an OD practitioner, perhaps the most important issue is the fundamental question, how
effective has the person been in the past, with what kinds of organizations, using what kinds of techniques?
In other words, references must be checked. Interpersonal relationships are tremendously important, but
even con artists have excellent interpersonal relationships and skills.
The burden of choosing an effective OD practitioner should not rest entirely with the client organization.
Consultants also bear a heavy responsibility for seeking an appropriate match between their skills and
knowledge and what the organization or department needs. Few managers are sophisticated enough to
detect or to understand subtle differences in expertise among OD professionals, and they often do not
understand the difference between intervention specialties. Thus, practitioners should help educate
potential clients, being explicit about their strengths and weaknesses and about their range of competence.
If OD professionals realize that a good match does not exist, they should inform managers and help them
find more suitable help.
Developing a Contract:
The activities of entering an OD relationship are a necessary prelude to developing an OD contract. They
define the major focus for contracting, including the relevant parties. Contracting is a natural extension of
the entering process and clarifies how the OD process will proceed. It typically establishes the expectations
of the parties, the time and resources that will be expended, and the ground rules under which the parties
will operate.
The goal of contracting is to make a good decision about how to carry out the OD process. It can be
relatively informal and involve only a verbal agreement between the client and OD practitioner. A team
leader with OD skills, for example, may voice his or her concerns to members about how the team is
After some discussion, they might agree to devote one hour of future meeting time to diagnosing the team
with the help of the leader. Here, entering and contracting are done together informally. In other cases,
contracting can be more protracted and result in a formal document. That typically occurs when
organizations employ outside OD practitioners. Government agencies, for example, generally have
procurement regulations that apply to contracting with outside consultants.
Regardless of the level of formality, all OD processes require some form of explicit contracting that result
in either a verbal or a written agreement. Such contracting clarifies the client's and the practitioner's
expectations about how the OD process will take place. Unless there is mutual understanding and
agreement about the process, there is considerable risk that someone's expectations will be unfilled. That
can lead to reduced commitment and support, to misplaced action, or to premature termination of the
The contracting step in OD generally addresses three key areas: what each party expects to gain from the
OD process, the time and resources that will be devoted to it, and the ground rules for working together.
Mutual Expectations:
This part of the contracting process focuses on the expectations of the client and the OD practitioner. The
client states the services and outcomes to be provided by the OD practitioner and describes what the
organization expects from the process and the consultant. Clients usually can describe the desired
outcomes, such as decreased turnover or higher job satisfaction. Encouraging them to state their wants in
the form of outcomes, working relationships, and personal accomplishments can facilitate the development
of a good contract.
The OD practitioner also should state what he or she expects to gain from the OD process. This can
include opportunities to try new interventions, report the results to other potential clients, and receive
appropriate compensation or recognition.
Organization Development ­ MGMT 628
Time and Resources:
To accomplish change, the organization and the OD practitioner must commit time and resources to the
effort. Each must be clear about how much energy and how many resources will be dedicated to the
change process. Failure to make explicit the necessary requirements of a change process can quickly ruin an
OD effort. For example, a client may clearly state that the assignment involves diagnosing the causes of
poor productivity in a work group. However, the client may expect the practitioner to complete the
assignment without talking to the workers. Typically, clients want to know how much time will be
necessary to complete the assignment, which needs to be involved, how much it will cost, and so on.
Resources can be divided into two parts. Essential requirements are things that are absolutely necessary if
the change process is to be successful. From the practitioner's perspective, they can include access to key
people or information, enough time to do the job, and commitment from certain people. The
organization's essential requirements might include a speedy diagnosis or assurances that the project will be
conducted at the lowest price. Being clear about the constraints on carrying out the assignment will
facilitate the contracting process and improve the chances for success. Desirable requirements are those
things that would be nice to have but are not absolutely necessary, such as access to special resources and
written rather than verbal reports.
Ground Rules:
The final part of the contracting process involves specifying how the client and the OD practitioner will
work together. The parameters established may include such issues as confidentiality, if and how the OD
practitioner will become involved in personal or interpersonal issues, how to terminate the relationship, and
whether the practitioner is supposed to make expert recommendations or help the manager make decisions.
For internal consultants, organizational politics make it especially important to clarify issues of how to
handle sensitive information and how to deliver bad news." Such process issues are as important as the
needed substantive changes. Failure to address the concerns may mean that the client or the practitioner
has inappropriate assumptions about how the process will unfold.
Application 1: Contracting at Charity Medical Center
Charity Medical Center (CMC), a five hundred-bed acute-care hospital, was part of the Jefferson Hospital
Corporation (JHC). JHC, which operated several long-term and acute-care facilities and was sponsored by a
large religious organization, had recently been formed and was trying to establish accounting and finance,
materials management, and human resources systems to manage and coordinate the different facilities. Of
particular concern to CMC, however, was a market share that had been declining steadily for six months.
Senior management recognized that other hospitals in the area were newer, had better facilities, were more
"user friendly," and had captured the interest of referring physicians. In the context of JHC's changes,
CMC invited several consultants, including an external OD practitioner named John Murray, to make
presentations on how a total quality management process might be implemented in the hospital.
John conducted an initial interview with CMC's vice president of patient-care services, Joan Grace. Joan
noted that the hospital's primary advantage was its designation as a level-one trauma center. CMC offered
people needing emergency care for major trauma their best chance for survival. "Unfortunately," Joan said,
"the reputation of the hospital is that once we save a patient's life, we tend to forget they are here."
Perceptions of patient-care quality were low and influenced by the age and decor of the physical plant.
CMC had been one of the original facilities in the metropolitan area. Finally, Joan suggested that the
hospital had lost a substantial amount of money last year and considerable pressure was coming from JHC
to turn things around.
John thanked Joan for her time and asked for additional materials that might help him better understand
the hospital. Joan provided a corporate mission statement, a recent strategic planning document, an
organization chart, and an analysis of recent performance. John also sought permission to interview other
members of the hospital and the corporate office to get as much information as possible for his
presentation to the hospital's senior management. He interviewed the hospital president, observed one of
the nursing units, and spoke with the human resources vice president from the corporate office.
The interviews and documents provided important information. First, the documents revealed that CMC
was not one hospital but two. A small, 150-bed hospital located in the suburbs also reported to the
president of CMC, and several members of the hospital's staff held managerial positions at both hospitals.
Second, last year's strategic plan included a budget for initiating a patient-care quality improvement process.
Budget responsibility for the project was assigned to Joan Grace's department. Third, the mission statement
was a standard expression of values and was heavily influenced by the religious group's beliefs. Fourth, the
performance reports confirmed both poor financial results and decreasing market share.
John's interviews and observations pointed out several additional pieces of information. First, the corporate
organization, JHC, truly was in a state of flux. There were clear goals and objectives for each of the
Organization Development ­ MGMT 628
hospitals, but patient, physician, and employee satisfaction measures, human resources policies, financial
practices, and material logistics were still being established. Second, the management and nursing staff
heads at CMC were extremely busy--usually attending meetings for most of the day. In fact, Joan's
secretary kept a notebook dedicated to tracking who was meeting where and when. Third, a large
consulting firm had just been awarded a contract to do "job redesign" work in two departments of the
hospital. And fourth, most of the nursing units operated under traditional and somewhat outdated nursing
management principles.
In developing his presentation, John thought about several issues. For example, the relevant client would
be difficult to identify. Joan Grace was clearly responsible for the project and its success, but the president,
referring physicians, the suburban hospital, and the corporate office were important stakeholders in a TQM
process and needed a voice if it was to succeed. In addition, the presenting problem was a decline in market
share. The job redesign contract awarded to the other consulting firm seemed disconnected from the TQM
effort, and both efforts seemed disconnected from the market share problem. John wondered how the
hospital viewed the relationships among total quality management, job design, and market share. He also
questioned whether he was the appropriate consultant for CMC. The firm doing the job redesign used a
packaged approach to change that conflicted with John's OD-based philosophy.
Using the information gathered and his reflections on the project, John gave his presentation to senior
management about implementing a total quality management process at CMC. His presentation included a
history of the quality movement and how it had been applied to other health-care organizations. Several
examples of the gains made in patient satisfaction, clinical outcomes (such as decreased infection rates), and
physician satisfaction were incorporated. He noted that implementing a quality process was a major
organizational change, requiring a thorough diagnosis of the hospital, a considerable commitment of
resources, and a high level of involvement by senior management. Without such involvement, it was not
reasonable to expect the kinds of results he had described, John also suggested that total quality
management was capable of addressing certain problems but was not designed to address directly such
broader performance issues as market share.
Finally, John described his track record at implementing quality improvement process in health-care
organizations. He shared several references with the group members and encouraged them to talk with
former clients regarding his style and impact. John also noted that he had been referred to CMC by the
religious organization that sponsored the hospital system and that it was aware of his work in another
medical facility.
John Murray's presentation to the senior management team at CMC, based on the information outlined in
Application 4.1, was well received, and patient-care vice president Joan Grace asked John to meet with her
to discuss how the change process might go forward. At the meeting, John thanked Joan for the
opportunity to work with CMC and suggested that the next year or two represented a challenging time for
the hospital's management. He identified several knotty issues that needed to be discussed before work
could begin. Most important the hospital's rush to implement a total quality management process was
admirable, but he was worried that it lacked an appropriate base of knowledge. Although performance and
market share were the big issues facing the hospital, the relationship between those problems and a quality
program was not clear. In addition, even if a TQM process made sense, managers and nursing heads were
frustrated by their inability to influence change because of their busy meeting schedules. A quality
improvement process might solve some of those problems but certainly not all of them.
Joan acknowledged that both performance and frustration with change were problems that needed to be
addressed. She explained that the hospital wanted help to improve the quality of patient care and to
increase patient, employee, and physician satisfaction with the hospital. Improvements in those areas were
expected to produce important gains in hospital performance. Joan asked John if he could generate a
proposal that addressed those issues as well as managerial frustration with the inability to make necessary
John agreed to put a proposal in writing but suggested that it would be helpful to discuss first what should
be included in it. John thought that discussing several issues now would improve the chances of getting
started quickly. He outlined several issues that the proposal would cover. First, the hospital should
thoroughly diagnose the reasons for market-share decline, the current level of patient-care quality, and
managerial frustration with making changes. That diagnosis would require access to the corporate officer's
at JHC to discuss their relationships with CMC. In addition, several managers and employees of the
hospital, as well as some physicians needed to be interviewed. Second, the proposed job redesign effort
being conducted by the other consulting firm should be postponed. Finally, CMC management should
meet for two days to examine the information generated by the diagnosis and to make a joint decision
about whether a total quality management process made sense.
Joan looked uncomfortable. John's requirement seemed unreasonable given that the hospital simply wanted
to improve patient-care quality and stakeholder satisfaction. For example, getting the senior administrators
Organization Development ­ MGMT 628
to commit to two days away from the hospital would be difficult. Everyone was busy, and finding a time
when they could all meet for that long was nearly impossible. In addition, there was a sense of urgency in
the hospital to begin the process right away. Collecting information seemed like a waste of time. Finally,
and perhaps most important postponing the job redesign effort was a sensitive issue. The project had
strong political support, and the other consultants had provided a clear ten-step process and timetable for
John told Joan that he appreciated her concerns and her willingness to confront these issues. He explained
that his requests were necessary if the prospect was to be successful and that he had thought carefully about
them. Collecting the diagnostic information was, in fact, the first step in any quality management process.
The very basis of a TQM effort was data-based decision making. To begin a quality process without valid
information violated fundamental principles of the approach. More important to proceed without that
information could very well mean that the wrong change would be implemented. John suggested, for
instance, that the market share problem could result from the way CMC was treating the physicians. If that
were true, a quality program would be inappropriate and costly. Instead, a program to improve the
relationships with physicians might provide a better return on CMC's investment.
The two-day meeting was therefore very important. Once appropriate data were collected, the senior
managers could decide, based on fact, what exactly should be done to address hospital performance;
employee, patient and physician satisfaction; and managerial frustration. John explained that a quality
management process, if necessary, required attention to CMC's structure, measurement, and reward
systems as well as its culture. The two-day meeting of the senior management team would permit a full
explanation of the TQM process a description of the necessary resources, and a discussion of the
commitment necessary to implement it. Following that meeting, he could provide a more explicit outline of
the change process.
Finally, John acknowledged that the politically sensitive nature of the job redesign program made resolving
this issue more difficult. He explained his belief that any redesign effort that did not take into account a
potential TQM process likely would have to be redone. He argued that to proceed blindly with a job
redesign effort might result in money spent for nothing.
Joan believed that John could have access to the consulting firm doing job redesign but that there was little
chance of postponing the program for very long. Again acknowledging the political support for the
program, John offered to coordinate with the other consultants but strongly urged Joan to postpone
initiating the project until after the two-day management meeting. Joan said she understood his concerns
but stated that she could not make that decision without talking with the senior management team.
John accepted that and asked if his other requests now made better sense. Joan replied that a two-day
meeting did seem important and worth the effort. In addition, access to the corporate officers, employees,
managers, and physicians was a reasonable request and could be arranged. Responding to John's example
of a physician relations program, Joan informed him that although CMC had such a program, it was not
very effective because managers had become too busy to pay attention to it.
At this point, Joan had to go to another meeting. They adjourned with the understanding that Joan would
speak with the other managers and get back to John. A week later, Joan called and agreed to John's
requests. She asked him to submit a written proposal covering the issues discussed as soon as possible.
Table of Contents:
  1. The Challenge for Organizations:The Growth and Relevance of OD
  2. OD: A Unique Change Strategy:OD consultants utilize a behavioral science base
  3. What an “ideal” effective, healthy organization would look like?:
  4. The Evolution of OD:Laboratory Training, Likert Scale, Scoring and analysis,
  5. The Evolution of OD:Participative Management, Quality of Work Life, Strategic Change
  6. The Organization Culture:Adjustment to Cultural Norms, Psychological Contracts
  7. The Nature of Planned Change:Lewin’s Change Model, Case Example: British Airways
  8. Action Research Model:Termination of the OD Effort, Phases not Steps
  9. General Model of Planned Change:Entering and Contracting, Magnitude of Change
  10. The Organization Development Practitioner:External and Internal Practitioners
  11. Creating a Climate for Change:The Stabilizer Style, The Analyzer Style
  12. OD Practitioner Skills and Activities:Consultant’s Abilities, Marginality
  13. Professional Values:Professional Ethics, Ethical Dilemmas, Technical Ineptness
  14. Entering and Contracting:Clarifying the Organizational Issue, Selecting an OD Practitioner
  15. Diagnosing Organizations:The Process, The Performance Gap, The Interview Data
  16. Organization as Open Systems:Equifinality, Diagnosing Organizational Systems
  17. Diagnosing Organizations:Outputs, Alignment, Analysis
  18. Diagnosing Groups and Jobs:Design Components, Outputs
  19. Diagnosing Groups and Jobs:Design Components, Fits
  20. Collecting and Analyzing Diagnostic information:Methods for Collecting Data, Observations
  21. Collecting and Analyzing Diagnostic information:Sampling, The Analysis of Data
  22. Designing Interventions:Readiness for Change, Techno-structural Interventions
  23. Leading and Managing Change:Motivating Change, The Life Cycle of Resistance to Change
  24. Leading and managing change:Describing the Core Ideology, Commitment Planning
  25. Evaluating and Institutionalizing Organization Development Interventions:Measurement
  26. Evaluating and Institutionalizing Organization Development Interventions:Research Design
  27. Evaluating and Institutionalizing Organization Development Interventions
  28. Interpersonal and Group Process Approaches:Group Process
  29. Interpersonal and Group Process Approaches:Leadership and Authority, Group Interventions
  30. Interpersonal and Group Process Approaches:Third-Party Interventions
  31. Interpersonal and Group Process Approaches:Team Building, Team Building Process
  32. Interpersonal and Group Process Approaches:Team Management Styles
  33. Organization Process Approaches:Application Stages, Microcosm Groups
  34. Restructuring Organizations:Structural Design, Process-Based Structures
  35. Restructuring Organizations:Downsizing, Application Stages, Reengineering
  36. Employee Involvement:Parallel Structures, Multiple-level committees
  37. Employee Involvement:Quality Circles, Total Quality Management
  38. Work Design:The Engineering Approach, Individual Differences, Vertical Loading
  39. Performance Management:Goal Setting, Management by Objectives, Criticism of MBO
  40. Developing and Assisting Members:Career Stages, Career Planning, Job Pathing
  41. Developing and Assisting Members:Culture and Values, Employee Assistance Programs
  42. Organization and Environment Relationships:Environmental Dimensions, Administrative Responses
  43. Organization Transformation:Sharing the Vision, Three kinds of Interventions
  44. The Behavioral Approach:The Deep Assumptions Approach
  45. Seven Practices of Successful Organizations:Training, Sharing Information