Oh dear, I've done it again. Talked myself out of work, that is.
One of the wonderful things about Devant is that we get to talk to all sorts of interesting business people, at many different stages of their business. This means that some of them will be new startups, with no cash, while others will be medium-sized companies having to manage sizeable contracts and cashflow.
Because our objective with all of these companies is to develop lasting commercial relationships, I find myself advising some of them that they really shouldn't be spending money on their contracts right now. When it's clear that what the business needs most is clients, not contracts, and that the risk of everything going wrong (which would be addressed by a contract) is smaller than the risk of going under because of even our modest bills, I feel duty bound to point this out.
Which is why I've just finished a phone call with a lovely lady, whose business is destined to be very successful, in which I've suggested that for now, she puts together a simple letter setting out what she will deliver, and the basis for payment. When the clients (and the cash) flood in, and her risk increases along with the quantities of both, we can look at sorting out her Ts & Cs. In the mean time, I hope I've given her enough pointers to keep her out of trouble.
Eventually, if cosmic karma is doing its bit (!), we'll talk again - and we'll be able to help her business grow and protect against risks, through some really fab terms and conditions.
I know this approach might not be the most commercial - any lawyers reading this will doubtless be thinking 'Take the money now!!', and composing their scare stories to ensure that any such client visiting them is too frightened to venture forth without a contract. But I believe ours is the right approach in the long run. Indeed, the freedom to be able to give this sort of advice - pragmatic, based on a realistic assessment of the risks, issues and benefits - is one of the joys of being a commercial contracts consultancy and not a law firm.
Wednesday, June 24, 2009
Tuesday, June 23, 2009
Twitter - my mid-life crisis?
Last week I turned 40. I have to say I'm quite delighted with my new age. There is bound to be a religious cult somewhere that bases its beliefs on numerology, but for me, some numbers just have a happier resonance. Thirty nine = 3 x 13, which is just not a good vibe.
Forty, on the other hand, is very neat. It's well groomed and rounded... I like it.
I don't know whether my finally caving in to pressure to set up a Twitter account is linked to my new status as a 40-something. It may be just that I feel the tiny character count allowed for 'tweets' will encourage me to communicate with the world more frequently than my blog. If you'd like see whether it's worked (and possibly to laugh at my efforts...) you can find me by clicking here.
Forty, on the other hand, is very neat. It's well groomed and rounded... I like it.
I don't know whether my finally caving in to pressure to set up a Twitter account is linked to my new status as a 40-something. It may be just that I feel the tiny character count allowed for 'tweets' will encourage me to communicate with the world more frequently than my blog. If you'd like see whether it's worked (and possibly to laugh at my efforts...) you can find me by clicking here.
Friday, May 22, 2009
Commissioning for Change
Last week's National Young People's Commissioning Forum, at the Emirates stadium in London, provided an opportunity for the voluntary sector and local Government and other commissioning bodies to share ideas about how to improve the commissioning process.
For those not familiar with the language of the 'third sector' (i.e. neither commercial nor state), 'commissioning' is the term used for the acquisition of services from charities and voluntary organisations by the State. One of the presentations posed the question 'What is Commissioning?', offering a choice of answers including 'The same as procurement!', and indicating that it is far from widely understood, even in this sector.
In essence, when services are 'commissioned', as opposed to 'purchased', the service provider should play a much more active part in the specification of how the service should be delivered, and should be viewed more as a partner in delivery than simply as a 'supplier'.
This is somewhat akin to the 'partnership' models that are often trumpeted by commercial organisations when they are launched, and then quietly forgotten when the good intentions have turned to bickering. There were, however, success stories among the tales of challenges and problems. In particular, one council's Children and Youth Services department talked of the excellent relationship that they had established with a third-sector service provider, developing through honest and fair-minded dialogue that enabled them to work through the inevitable upsets.
The chairperson, Fran Pollard of Catch22, did an excellent job of steering us through the debate about what made good commissioning happen, and how to avoid the pitfalls that had claimed some projects. The breakout groups, a central focus of the forum, provided ample spirited feedback.
It was clear that although none of the third sector participants wanted to alienate potential clients, there were some strong feelings about the way the sector has been treated in the past.
We at Devant have seen many examples of onerous contracts, such as those requiring the provider to give extensive indemnities, where the contract value will barely cover the cost of delivery (assuming all goes perfectly to plan). This sort of indemnity is regularly rejected by commercial entities that stand to make a significant margin on a project, on the basis that it is an unfair allocation of risk. So how does that stack up with the 'commissioning' approach being encouraged by Government?
Not well, it appears.
It seems that although the third sector may suffer occasionally from being too nice to speak out, it is finally finding its voice. Let's hope Government is listening.
For those not familiar with the language of the 'third sector' (i.e. neither commercial nor state), 'commissioning' is the term used for the acquisition of services from charities and voluntary organisations by the State. One of the presentations posed the question 'What is Commissioning?', offering a choice of answers including 'The same as procurement!', and indicating that it is far from widely understood, even in this sector.
In essence, when services are 'commissioned', as opposed to 'purchased', the service provider should play a much more active part in the specification of how the service should be delivered, and should be viewed more as a partner in delivery than simply as a 'supplier'.
This is somewhat akin to the 'partnership' models that are often trumpeted by commercial organisations when they are launched, and then quietly forgotten when the good intentions have turned to bickering. There were, however, success stories among the tales of challenges and problems. In particular, one council's Children and Youth Services department talked of the excellent relationship that they had established with a third-sector service provider, developing through honest and fair-minded dialogue that enabled them to work through the inevitable upsets.
The chairperson, Fran Pollard of Catch22, did an excellent job of steering us through the debate about what made good commissioning happen, and how to avoid the pitfalls that had claimed some projects. The breakout groups, a central focus of the forum, provided ample spirited feedback.
It was clear that although none of the third sector participants wanted to alienate potential clients, there were some strong feelings about the way the sector has been treated in the past.
We at Devant have seen many examples of onerous contracts, such as those requiring the provider to give extensive indemnities, where the contract value will barely cover the cost of delivery (assuming all goes perfectly to plan). This sort of indemnity is regularly rejected by commercial entities that stand to make a significant margin on a project, on the basis that it is an unfair allocation of risk. So how does that stack up with the 'commissioning' approach being encouraged by Government?
Not well, it appears.
It seems that although the third sector may suffer occasionally from being too nice to speak out, it is finally finding its voice. Let's hope Government is listening.
Negotiation planning - we know it works, so why don't we do it?
On Tuesday's IACCM Negotiation Community of Interest call, which I had the pleasure of co-chairing with Jason Anderman of whichdraft.com, we discussed the use of tools and templates to assist with negotiation planning.
In a quick straw poll, it transpired that 50% of those on the call had such tools in their organisations (mainly large, multinational corporates). But only 50% of those actually used their tools regularly.
In a study that Jason recently undertook on behalf of a client, he identified that effective use of negotiation planning tools and processes delivered a 64% improvement in efficiency. That is, on average the negotiations that took place using the tools were concluded in less than half the time of those in the control group, and delivered outcomes that more closely matched the objectives initially set for them.
This study provides a useful evidential basis for a belief long-held by those of us who consider ourselves to be negotiating professionals, that structured planning delivers better outcomes in less time. However, it also provides an unexpected illustration of the old chestnut that we humans don't always do what we know to be good for us. Despite the overwhelming evidence supporting the use of process and templates, the organisation in question decided not to roll them out more widely. Why?
Probably for the same reason that few of us meticulously plan and manage our time, and consequently many of us fail to achieve our longed-for work-life balance. The same reason that, despite the irrefutable evidence that it causes ill-health and contributes to early, painful deaths, millions of sane, intelligent adults continue to smoke. The same reason that I finished my healthy chicken, asparagus and baked potato supper with a fairy cake left over by my children.
Perhaps because humans, despite our longing for order, process improvement and efficiency, seem naturally inclined to chaos. Let's hope the benefits of negotiation planning can help us overcome our chaotic tendencies and bring a little civilisation to our business lives.
In a quick straw poll, it transpired that 50% of those on the call had such tools in their organisations (mainly large, multinational corporates). But only 50% of those actually used their tools regularly.
In a study that Jason recently undertook on behalf of a client, he identified that effective use of negotiation planning tools and processes delivered a 64% improvement in efficiency. That is, on average the negotiations that took place using the tools were concluded in less than half the time of those in the control group, and delivered outcomes that more closely matched the objectives initially set for them.
This study provides a useful evidential basis for a belief long-held by those of us who consider ourselves to be negotiating professionals, that structured planning delivers better outcomes in less time. However, it also provides an unexpected illustration of the old chestnut that we humans don't always do what we know to be good for us. Despite the overwhelming evidence supporting the use of process and templates, the organisation in question decided not to roll them out more widely. Why?
Probably for the same reason that few of us meticulously plan and manage our time, and consequently many of us fail to achieve our longed-for work-life balance. The same reason that, despite the irrefutable evidence that it causes ill-health and contributes to early, painful deaths, millions of sane, intelligent adults continue to smoke. The same reason that I finished my healthy chicken, asparagus and baked potato supper with a fairy cake left over by my children.
Perhaps because humans, despite our longing for order, process improvement and efficiency, seem naturally inclined to chaos. Let's hope the benefits of negotiation planning can help us overcome our chaotic tendencies and bring a little civilisation to our business lives.
Friday, May 01, 2009
Tackling the Profit Munchers
This morning we had a great session at Surrey Enterprise Hub (soon to become an Innovation and Growth Team) in Guildford. The entrepreneurs who attended our breakfast workshop were all keen to learn new hints and tips to help them focus on building profitable relationships and avoid contract clauses that would munch away at their margins!
Everyone engaged actively in our workshop activity, achieving an impressive amount in a limited amount of time and leading to a very lively and interactive session.
One key learning point from the session was the importance of clearly defined client responsibilities, and the potential for making your own service more cost-effective by getting the client to deliver parts of it themselves! At a time when cost-reduction is all important, this is a useful tool for reducing your price without reducing the total value of deliverables to the client. In particular, using their administrative resources to perform routine research is a great way to cut your costs without cutting quality.
Everyone engaged actively in our workshop activity, achieving an impressive amount in a limited amount of time and leading to a very lively and interactive session.
One key learning point from the session was the importance of clearly defined client responsibilities, and the potential for making your own service more cost-effective by getting the client to deliver parts of it themselves! At a time when cost-reduction is all important, this is a useful tool for reducing your price without reducing the total value of deliverables to the client. In particular, using their administrative resources to perform routine research is a great way to cut your costs without cutting quality.
Monday, March 30, 2009
Liquidated Damages in an International Context
In the professional contracting world, we all agree that under English law 'penalties' are a bad thing, while 'liquidated damages' can be a fair and reasonable way to pre-estimate the losses that will flow from a particular breach.
Last week I spent two days at a Falconbury training event, looking at damages and liabilities in international commercial agreements. This time I was being trained, rather than delivering the training (yes, we need CPD too!), and found the session an interesting update. As you'd expect, the penalties vs. liquidated damages discussion was lively and challenging.
The many lawyers present from civil law jurisdictions (who outnumbered those of us from England by about 3:1) couldn't see the problem with penalties agreed between parties of equal bargaining power. The drafting gymnastics required to ensure your LDs were not interpreted as penalties seemed to them to be a bit unnecessary. I can see their point: after all, one of the most useful applications of LDs is when we really don't know what the potential damages flowing from a breach might be, and when we expect them to be really difficult to prove in any event. They can be very useful to the party giving the LDs though - although the likelihood of having to pay out is higher with LDs than with having to seek damages through the Courts, the overall amount of damages could be considerably lower. So don't necessarily push back too hard if you're asked for LDs in a negotiation.
Today, I encountered an interesting response from a US lawyer during a negotiation about a clause in which I'd specified some liquidated damages for a particular breach. This lawyer argued that in his organisation, there was a huge prejudice against LDs, and that certain jurisdictions in the US considered them to be punative damages and would not enforce them. My understanding had been that the US was the home of the punative damage - and that penalties were widely accepted there. This just serves to emphasise that when considering foreign jurisdictions which follow a state-based legal system (including Switzerland) we really have to look not just at the federal law but at the local specifics too.
Last week I spent two days at a Falconbury training event, looking at damages and liabilities in international commercial agreements. This time I was being trained, rather than delivering the training (yes, we need CPD too!), and found the session an interesting update. As you'd expect, the penalties vs. liquidated damages discussion was lively and challenging.
The many lawyers present from civil law jurisdictions (who outnumbered those of us from England by about 3:1) couldn't see the problem with penalties agreed between parties of equal bargaining power. The drafting gymnastics required to ensure your LDs were not interpreted as penalties seemed to them to be a bit unnecessary. I can see their point: after all, one of the most useful applications of LDs is when we really don't know what the potential damages flowing from a breach might be, and when we expect them to be really difficult to prove in any event. They can be very useful to the party giving the LDs though - although the likelihood of having to pay out is higher with LDs than with having to seek damages through the Courts, the overall amount of damages could be considerably lower. So don't necessarily push back too hard if you're asked for LDs in a negotiation.
Today, I encountered an interesting response from a US lawyer during a negotiation about a clause in which I'd specified some liquidated damages for a particular breach. This lawyer argued that in his organisation, there was a huge prejudice against LDs, and that certain jurisdictions in the US considered them to be punative damages and would not enforce them. My understanding had been that the US was the home of the punative damage - and that penalties were widely accepted there. This just serves to emphasise that when considering foreign jurisdictions which follow a state-based legal system (including Switzerland) we really have to look not just at the federal law but at the local specifics too.
Monday, March 16, 2009
No more mister nice guy?
Tough economic times affect different businesses in different ways. Much like people, businesses under stress either embrace collaboration and adopt a 'we're all in it together' mentality to ensure they and their clients and suppliers all make it through - or they retrench along 'every man for himself' lines.
Our new poll is aimed at getting a view on how the current climate is affecting your negotiating outlook. Are you fighting harder before giving up any concessions, making payment terms shorter and penalties bigger? After all, cash flow really matters right now, more than ever before.
Or do you take the approach that companies that support their clients/suppliers during the downturn will be best placed to take advantage of the upturn when it (eventually) arrives?
Click your choice in the poll, and we'll revisit this topic in a few weeks to see what impact the recession is having on our negotiating styles.
Our new poll is aimed at getting a view on how the current climate is affecting your negotiating outlook. Are you fighting harder before giving up any concessions, making payment terms shorter and penalties bigger? After all, cash flow really matters right now, more than ever before.
Or do you take the approach that companies that support their clients/suppliers during the downturn will be best placed to take advantage of the upturn when it (eventually) arrives?
Click your choice in the poll, and we'll revisit this topic in a few weeks to see what impact the recession is having on our negotiating styles.
Friday, January 16, 2009
Recording Negotiations: good use of technology, or limiting creativity?
In December we polled visitors to this blog to see whether they thought recording of telephone negotiations was a good idea. The reason behind the question was that one of our clients offers a nifty call recording service, and we were considering whether this would be a useful value-add for our clients, when we negotiate on their behalf.
The poll was overwhelmingly in favour of recording.
My first instinct upon considering this question was that yes, recording phone negotiations was a good thing - after all, there is nothing more frustrating than working through an hour's contract negotiation, agreeing a number of key points, only to find when you send the updated contract for the client's review that they reject all the points you thought you'd agreed.
Then my mind wandered in the direction of Shrodinger's cat - you remember, the one where a number of possible outcomes (dead cat/alive cat!) co-exist simultaneously, until the point at which the box is opened and we see whether the cat is actually alive or dead.
This thought-experiment made me consider whether the 'observation' of the negotiation (by the recording equipment) would make the parties take a more entrenched view than they would take if the negotiation was unrecorded. In the unrecorded world (Shrodinger's 'closed box'), all possibilities are up for discussion, however creative and strange they may be. This creative space can be extremely useful in enabling the parties to explore alternative means of meeting both of their requirements in a novel way.
Would the fact that the discussion was being recorded inhibit a party's willingness to explore such alternatives? Would the simple fact of 'observation' affect the outcome, as in the world of quantum physics?
I'd be really interested in any research or experience that our readers may have had - if you have thoughts on this topic, please do email me or publish a comment on the blog. In the mean time, I think we'll offer this service and start collecting some data of our own.
The poll was overwhelmingly in favour of recording.
My first instinct upon considering this question was that yes, recording phone negotiations was a good thing - after all, there is nothing more frustrating than working through an hour's contract negotiation, agreeing a number of key points, only to find when you send the updated contract for the client's review that they reject all the points you thought you'd agreed.
Then my mind wandered in the direction of Shrodinger's cat - you remember, the one where a number of possible outcomes (dead cat/alive cat!) co-exist simultaneously, until the point at which the box is opened and we see whether the cat is actually alive or dead.
This thought-experiment made me consider whether the 'observation' of the negotiation (by the recording equipment) would make the parties take a more entrenched view than they would take if the negotiation was unrecorded. In the unrecorded world (Shrodinger's 'closed box'), all possibilities are up for discussion, however creative and strange they may be. This creative space can be extremely useful in enabling the parties to explore alternative means of meeting both of their requirements in a novel way.
Would the fact that the discussion was being recorded inhibit a party's willingness to explore such alternatives? Would the simple fact of 'observation' affect the outcome, as in the world of quantum physics?
I'd be really interested in any research or experience that our readers may have had - if you have thoughts on this topic, please do email me or publish a comment on the blog. In the mean time, I think we'll offer this service and start collecting some data of our own.
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