Thoughts

Contract or Handshake. Past or Future.

By October 24, 2014 September 19th, 2016 No Comments

The last couple of weeks have been interesting from a business perspective. First, we had a client through their lawyers provide us with a contract to sign before we proceeded with doing the work. I often think back to the origin of lawyers and how their fees were based on the number of words provided in the document. While the fee structure has changed the mindset is still the same. Create a contract that is filled rules and obligations so that the purchaser is responsible for as little as possible while the vendor does the majority of the work and takes on the majority of the responsibility. Loopholes and fine print are there for a reason. And it’s not to make the vendor happy. When questions arise about roles, deliverables timelines etc. the fall back on this is always “We agreed on this, go read your contract. Just get it done as per the terms of the contract. Goodbye.”

On the other hand we had a much different experience with a new Client. A very successful entrepreneur approached us to become involved with a very exciting project. The meeting was casual, he was on and off the phone with other producers and partners and once we had hammered out a deal it was a simple handshake. As we wrapped up our meeting I got the impression that this is how this individual has conducted all of his business past, present and future. A look square in the eye, a firm handshake, smile and a parting “I’m really looking forward to working with you and your team. I think this is going to be a great partnership”.

After reflecting on the two processes it struck me that the contract process lives in the past. It can easily dissolve into a battle or words and semantics that can suck the joy out beginning a new relationship or starting a new project. What I liked about my experience with the handshake deal was that it was very much about the future. Sure, either side can claim loopholes or wriggle out of a commitment, but the consequence is clear—if you disappoint us, we won’t be back for more. The participants in a handshake deal are investing in the future, doing more now in exchange for the benefits that trust and delight and consistency bring going forward.

Now I’m not naïve enough to believe in the everlasting power of the handshake. While I prefer these types of agreements, it does pay to write your handshake deal down, to confirm the key promises in an email. If your goal is to delight and to exceed expectations, the clearer you are about the expectations, the more likely it is you’ll exceed them.

But it also pays to hesitate when you (or your advisers) start pushing to transform the handshake about the future into a contract about the past. “I’m hoping to do this again with you,” can dissolve into a very different reaction “but you said…”

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