How Business Agreements Can Ruin Business

I’ve either been a buyer or seller of contracted services for 20+ years now. There are very few things I dislike more than contract negotiations (I’m not arguing against the need for contracts, they are essential). Out of the thousands I’ve been a part of executing, I can count on one hand the number of times I’ve actually had to leverage one. But there’s no question of their importance.

A Better Way?

I dislike them to the point that I‘ve tried to come up with better ways of handling them. And it turns out there are some pretty simple solutions to making the process as painless as possible.

Each of the business parties verbally discuss what is most important to them to protect, and why.

They then outline in standard language what it is they are trying to accomplish and have agreed on.

They jointly turn over that outline to one or both of their attorneys to craft the contract such that those items are covered as mutually agreed.

What SHOULD come back is an agreement that represents those desires.

Simple enough right? Both parties have already agreed to their primary concerns and they just need that put into a legally enforceable form. Yet it doesn’t work. It never, ever works. I have watched clients literally arguing with their own attorney to ‘just make it accomplish the things we agreed on!’, and then watched the attorney argue back that their job is to win…because that’s what is best for the company and that’s why they were hired. Which is a crock of nonsense but sounds good on the surface.

Fair? We Don’t Need No Stinking Fair

The problem is this. The entire system, whether that is HR (hiring, salaries, benefits), legal (contract negotiations, representation), or finance (efficiency models, P&L) has been taught that this process is about winning. It’s about getting more than you give away. It’s about leveraging power and angles. The notion of one side crafting something that is equally fair to the other side (so as to avoid negotiating in the first place) is completely foreign. It is so deeply ingrained into the function of ‘their job’ that it is impossible for them to deviate. It’s how they define success, so asking them to do it differently is akin to asking a painter to write a book instead.

I would argue that in business agreements their job is to ADVISE on any risk so that a leader can then make educated business decisions on whether that risk is worth taking.

And yet some of the very best relationships and opportunities, ones where there was a palpable excitement from both sides about working together, have been ruined before they ever began due to this misplaced priority once it’s put into the hands of the people who have to craft the agreement.

You’ve Got To Know When To Fold ‘Em

I’ve walked away from my share of agreements. Not because we couldn’t have found some compromise eventually, and definitely not because I didn’t *want* to work with the client, but because of such a dogged and adversarial approach to ‘winning’. Or sometimes it’s the more absurd items and excuses, typically from larger organizations, that offend your sensibilities like “that doesn’t fit the template, and we have to use our template”.

It just wasn’t worth it anymore. It wasn’t what I wanted, it wasn’t what my client or partner wanted, but at some point the relationship with the organization is soured to the point that the initial excitement and objectives become completely lost in the fight over things that don’t really matter. Things that go against the very objectives that were defined in the first place. And that seems like a very bad omen to me about who is really in charge. Leaders take guidance, they ask for advice, they analyze risk…but if they allow the risk mitigators to make their choices for them devoid of business context then they are doomed. That form of CYA simply won’t fly in a business world constantly speeding up and requiring constant innovation.

I’ve also signed contracts that I never should have signed because I was just so worn down by the process, or maybe I was more desperate for the contract. And I always resented it, and it always impacted the relationship. I can’t help but take it personally, that’s a major personality flaw in this regard. It eventually got to the point where I once again set my principles aside and just started handing off contracts to my attorney and let them duke it out like everyone else. It’s much easier to simply separate yourself from that part of the process. But then I’m just part of the problem aren’t I?

Why Is There A ‘Bad Guy’?

Do I really WANT to be separate from the process? Doesn’t that essentially imply that I expect it to get nasty so I’ve substituted a proxy in my place to play the bad guy? Not to mention the enormous amount of dollars being spent on engaging in a process in a way I don’t believe in. Why does there need to be a ‘bad guy’? Wasn’t this about two parties who wanted to do business together? How does that get so lost along the way?

It takes two to tango and finding a dancing partner who is willing to take the same approach to contracts as me is next to impossible. So I either hamstring my attorney by giving her a different set of rules than her ‘opponent’, or I get in the middle and only utilize her for new language and suggestions.

There are better ways, no…there IS a better way. But until we escape the mentality that currently converts a potential partnership/relationship into an untrustworthy Battle Royale, until we give explicit direction to the people we depend on to execute these agreements and see it followed, I don’t expect things to change any time soon. And that’s a shame, because a lot of great potential business relationships are being ruined before they even get started.

Is the adversarial system really the best model for business agreements? Is it about besting the other party on paper? What about the deal that has to actually work in real life for the long haul? Risk mitigation is a very real need, for everyone, but ones job cannot simply be risk mitigation without an eye to business objectives or you end at a stalemate that benefits no one.

Feel free to berate my naiveté and idealism in the comments.

Cheers,

Matt Ridings — @techguerilla