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Contracts Operate: a whole is better than a half
Craig Conte |
February 8, 2024 |

 23,895 total views

Eight ways to improve legal and compliance risk management

Sounds silly to write it out, but yes – buyers prefer (and should) to get the whole service.

My sons are getting older and now expect compensation for services rendered. As a lifelong member of the services industry (started as a busboy), I am quite proud of their attitude here and applaud the desire. However – occasionally – they forget that they are a team, and I am outcome focused. “But Dad – I cleaned my half of the room” or “I raked my half of the lawn,” have been heard in the Conte house for sure. This is where I then get my blog voice going and try to impart some Dad-wisdom and show them the fallacy of half. Would you pay for half a haircut? How useful is half a taxi ride? Would you want a doctor to only perform half the tests that are needed to diagnose you?

These types of conversations get me thinking more and more about half. Does anyone really just want half of a service? The whole streaming model for consumption media is based upon a rejection of half. If I want to watch all of the John Wick movies on Boxing Day, I want one platform for that – don’t make we logoff and then login again. And don’t give me the half a pizza thing. You are most likely ordering it with some other person to split on your side. The provider very rarely just makes ½ a pizza. If you order that – it’s called a WHOLE small pizza.

Now let’s look at this and the already fragmented contract lifecycle and contracting processes.  Despite all the challenges around “half”, companies seem to do “half” if not a quarter all the time.  Here is where “half” often shows itself:

Pre-signature process

As a lifelong advocate of the “right tool for the job” and using lawyers where lawyers make sense and then tech or other where they make sense, I cannot knock a good and sensible handoff. Having one group handling all the negotiations and then a tool or team (ideally both) doing the admin makes sense – but that’s a different blog. But where this gets silly is when there is a bifurcation and over stratification of contract types or negotiations. Often this looks like having a team do a first level markup and then handoff to a different group to handle negotiations, fallbacks, and the like, and then handing back to the original group or sometimes a third group to look for approvals and admin.

In these situations, no one has a full view of the overall positions, the counter-party objections, why something was agreed or not, and then ping-ponging happens to go back to the various groups to get information from each other. This Spider-man meme of three people pointing at each other creates waste in time, lost information and frustration for the business. “We did our part, but we are waiting on X,” doesn’t fill anyone with joy, contentment or peace. Wouldn’t it be simpler if there was just one group that did all that and took accountability?

Post-signature contract management

This is the one that has been the bane of my existence and the issue that has launched 1000 blogs. Before we even get to the multifaceted issues that arise after the contract is signed, the handoff from those who negotiate to those who manage is often so poor that the chance to avoid revenue or value leakage is lost before it starts. Let me know if this is a familiar story: 

  • Sales or Procurement, Legal, some form of Commercial function spend X months trying to get contract Y to signature.
  • There are many steps on the journey, with approvals, concessions, prayers and promises made to get to signature.
  • After signature, the happy email goes out from some exec (maybe) to thank everyone for their grit, persistence and creativity and state how important this deal is to the company.  (I do realise that this last point doesn’t always happen, because who has time to be thankful?).
  • And then after this birthing of this contract, it is placed in a folder, email, maybe a CLM and pointed out to the business, with minimal, but often no description of how they got to signature. 

Now – is this setting anyone up for success? Was the desired outcome the company needed a signed piece of paper, or perhaps, the rights to Tool Z, Services A, B or C or Product D? And even if there is some group – maybe – who help with the contract management, do they get the full download of the people who actually negotiated the deal? I often describe this as dating for two years and then on the Wedding Day, someone else shows up and you’re just supposed to “guess” based upon “how these things typically go” to manage the marriage. The scenario is the worst case of “halfism” I see, and it happens all the time. And yet, companies still wonder why there are overruns, scope creep, misaligned expectations or insert euphemism for “no one knows what is going on in that contract.” Sadly, these behaviours cost money, time and relationships – things we shouldn’t still be wasting in 2024.

That’s halfism (new word – feel free to use it). But what does holistic contracting look like and why is that good? Let’s look at two common examples.

Contracting 

Imagine you could go to one place where your templates are updated based upon factual data of commonality overseen by the relevant legal expertise and then powered by the right tools for your organisation and need and then managed according to organised, predictable playbooks. And as kicker, most escalations can go to commercial lawyers with experience in a wide variety of contracting, as opposed to just coming back to your legal team. That last point always drives me crazy because you wouldn’t want to go to a restaurant where the chef comes out half-way through meal preparation and asks you to taste the sauce. You want the whole thing, not half done right? 

Anyway, the scenario above looks at contracting as a whole and not a series of episodes vaguely linked to each other. Rather than an action, it focuses on the outcome – a signed contract, on sensible terms, to allow your business to use or sell the goods, services, tools, etc. Gone is the finger pointing, too many handoffs, or back-seat driving, which lead to the inefficiencies and lack of ROI. Maybe someone should do a report on this with the World Commerce & Contracting.

Contract management

Now let’s test this “whole-ism” a bit more. The contract lifecycle doesn’t stop at signature or the congrats email. The management of changes, squabbles, full-blown disputes, renewal and amendment is often the common reality of many contracts. Even if it’s as simple as just checking the invoices against what the contract dictates or terminating/renewing it, these activities need to be monitored. Yes – tech can help a lot. But what use is a hammer without the hand that uses it.  

The point here is that after the contracting is done, the contract and the underlying relationship/performance are not done. In fact – they are just getting started. So why should the support stop there? Back to the restaurant analogy – after the food is served – does the waiter disappear? Even in fast food, the shop is still there in case they got something wrong in your order. And yes, in much more business-critical activities we treat the contracting like a pop-up restaurant that immediately disappears the second you receive your food. That can’t be right.

All the handoffs, gaps and risk of confusion are doubled in post-signature area because often the people who negotiated the deal are gone and those who have to live with the deal are left.  But it doesn’t have to be. We can avoid those gaps, risks and leaks if we just stop accepting half.

In conclusion, a true one-stop shop that looks at everything and not just one thing has a lot of advantages. I realise that much of what I described above is just the way it has always been. But aren’t you a little tired of that? I know I am. 

Source: Craig Conte

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