Articles Posted in Contracting as a Business Function


The Point

“It’s nice to meet the newest member of our ‘department of business prevention’.”

The head of marketing greeted me with these words when I joined a Fortune 500 company as an associate general counsel.

That was in 1986. I don’t think much has changed. Continue reading


The Point

Why approach the contracting function as a form of business process management? Two reasons.

First, efficient contracting drives — and ad hoc contracting impedes — cash flow. By making the order-to-cash cycle fast or slow.

Second, efficient contracting enables quick action — and ad hoc contracting creates roadblocks — in any operation where the company collaborates with, or marshals the resources of, a party outside of the business.

That’s from a business process management vantage point, at least. But there’s another approach to contracting: that of lawyers.

From law school, law firm experience, and in-house counsel practice, their view of contracting centers on a request to an attorney, writing a document, deliberation between business person and attorney on terms, then negotiating with the third party about terms, signing the paperwork, and then putting the contract is a file of some kind.

This ad hoc sequence is not a “business process”. And, of course, it’s not efficient at all. Continue reading


The Point

Some contracts are more important than others. Figuring out what’s “good enough” depends on the deal’s potential consequences — both good and bad.

Some are considered “bet-the-company”. They call for a degree of quality, investment of time, and costs (especially lawyers’ fees) commensurate with their potential benefit and potential risk. Other, more routine, “run-the-company” agreements might not warrant the same mix of quality, time, and costs.

In business contracting there is no such thing as perfection; only compromises in the allocation of a company’s resources. Continue reading


The Point

As both lawyer and executive I’ve seen multiple variations of this scenario: A friend heading an industry lending group at a money center bank calls me. Agitated. He and his counterpart at the potential client company have agreed on all business points for a large loan. But one lawyer’s insistence on their pet wording of some clause threatens to kill the deal, or at least add unnecessary time and work before closure.

Though occasionally legal counsel’s preferred wording may be sound, too often it just reflects one lawyer’s stylistic preferences over another’s — without adding to legal protections. Here’s a corrective viewpoint from Jeff Carr, lawyer and former P&L executive:

Contracts really are simply business project management charters (who is going to do what when). We lawyers have made them far more complicated by focusing on what happens when something goes wrong. Far better to make sure obligations are understood and can be fulfilled.” Continue reading


The Point

1. A good business strategy: Accelerate revenue by making the order-to-cash cycle as short as prudently possible.

2. Tactically:

(1) Have lawyers draft pre-approved risk protection terms for sales contract templates before any discussions with customer,

(2) Agree in advance on the terms of all other standard risk protocols among lawyers, business unit management, and all other relevant corporate functions — again, before any discussions with the customer have taken place.

(3) Give your business unit head the authority to sign (i.e., no additional legal or other review required) if either (a) all prescribed terms of risk protocols have been met, or (b) he / she has approved any deviations from standard risk protocols that are within his / her authority to waive. Only if proposed deviations go outside those allowed by standard risk protocols should your lawyers be brought in as a condition for approval / disapproval.

3. Too many lawyers favor meddling as a matter of course — via last-minute contract mark-ups made while “running it by Legal” in mother-may-I fashion — rather than delegating their approval via protocols that sales people can implement themselves.

4. Protect your order-to-cash strategy by having your attorneys do their job in advance to the extent possible — to avoid such meddling and consequent choke points. Continue reading

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