Contracts are not just a game of numberwang

It’s summertime, 2011.  It’s hot in Lagos, Nigeria and my colourful shirt is sticking to my back. But I’m in a good mood.

I’m also holding hands with a 72 year old Chief.

That’s because the Chief is in a very good mood. As good a mood as I’ve ever seen him in the three years we’ve been meeting up at his rather large house on Victoria Island. He’s so happy he’s even given me a copy of his Dad’s autobiography!

The Chief is the lead joint venture partner in one of our Nigerian businesses. And we’ve just agreed a fairly monumental change to what our JV business does, to respond to a big change in the market. Hence the good mood – and me not refusing his hand when he grabs mine as we walk around his gardens, dodging the peacocks whose cries have added a surreal touch to our meetings over the last few months.

Three years ago, you’d have got very, very, very long odds on the Chief agreeing to anything we wanted.  In fact, you might have struggled to get him to talk to us at all.

That’s because, until then, our head office’s approach to JV management had been to tell the local JV partners what to do – loudly if necessary – and then just expect them to do it. And when I first started, that’s exactly what I was told to do.

But funnily enough, the Chief didn’t react particularly well to that approach. In fact, he downright hated it.  So the more head office demanded, the more obstructive the Chief became.

I couldn’t blame him.  Head office’s approach was dismissive and disrespectful. It was also a wasted opportunity: what’s the point of having local knowledge if you’re not going to use it. But above all, it was distrustful: our HQ was more worried about the possibility of the Chief potentially taking advantage of them than they were of helping our business succeed on the ground.

So I decided I would have nothing to do with the head office’s approach. Instead, I decided to give the Chief the benefit of the doubt. I decided to trust him. I decided to actively seek his views and input.

It took him a wee while to believe I was serious. But gradually, slowly, over many visits (and several nights of incredibly potent gin and tonics), the foundation was established that enabled us together – me & him – to work out & agree something as big as how our JV business needed to change to respond appropriately to a huge new challenge in the market.

______

The commercials in a deal are obviously very important.  Prices, payment terms, product or service specifications, margins all matter. A lot.  Get the pricing or profit calculations wrong in an agreement and you’re literally wasting your money by having that contract.

But commercials are definitely not the only things that are very important. You can have the best commercial structure in the world – one that will deliver hugely for both sides for years to come – and yet that still doesn’t guarantee a deal will get done. Agreements are not all about the numbers: contracts are not just a game of numberwang.

And that’s because, ultimately, every successful deal needs two people to have a meeting of minds. And people are messy, complicated, emotional beings.

______

I once went into a big negotiation, after prepping our arguments for days and with more than enough bargaining firepower in my pocket to actually close the gap to the other side, only to be given the most fierce beating of my career.  Like, a proper ‘left me slumped on the floor’ beat down.

All because it turned out the executives at the other business were genuinely upset with us.  Much to our surprise.

We stupidly had just assumed that the amount they were going to get was all that mattered. And the deal didn’t get done until we recognised, acknowledged and responded to the upset on the other side (much, much later than we should have).

So you cannot just focus on the numbers when it comes to contracts. You need to focus just as much, if not more, on the people.

That’s especially the case as AI changes how a lot of things are done. As AI starts to become more and more involved in the production and execution of contracts, agreements and deals, excelling at the messier human side will become where the real difference between success and failure lies.

______

So exactly how do you focus on the people and not just the numbers?

First, remember that every great long-lasting relationship is built on trust, not commercials. Trust is the magic ingredient for long-term success.

Second, understand that you cannot build trust without first building some rapport. For someone to reach out and trust you, you have to show them the likeable human you really are.

You have to open up to the Nigerian Chief who’s your partner. You have to want to seek his views. You have to want to listen to him. You have to actively build a connection with him, and from that build a relationship. You even have to be willing to hold his hand when he wants to hold your hand.

For a successful deal or contract that works across the long-term, you have to encourage the other person to want to deal with you – not just your business, you.

So before you get into the details of how you’re both going to work together, take time to talk to the person you’re deal with. Get to know them, at least a bit, maybe even more. Smile. Look them in the eyes. Connect with them as people, not business automatons working for an evil corporation. Try not to even think about the detail of the contract until you’ve started to do that.

In short, before you do anything else, put your relationship first.

______

Now, that may not be rocket science. But its still bloomin’ powerful, all the same. Because once you get to know the person, that connection will make your relationships with them stronger & more successful, right from the get-go. 

It will make you more confident that they’re not going to stiff you: that they’re going to work with you, rather than against you. It’ll make it easier and quicker to fix any little niggles that come up, so they don’t become big issues. It’ll open up possible additional opportunities for you to work together that might otherwise have remained hidden.

Best of all, that connection will make the whole process of doing business together more fun. And who couldn’t do with a bit more fun in today’s challenging business climate?

______

In the next edition, we’ll move into how to structure your contracts to base them around collaboration rather than combat.  

But before that, if you’ve got any questions, likes, dislikes, suggestions, please just hit ‘reply’. I’m genuinely keen to hear what you like and what I’m doing wrong.

Till next week, collaborators

Andrew

PS: If you’ve tried AI Andrew yet, please do let me have any feedback: he/it is new and I need to know what wrinkles need to be ironed out. (And if you haven’t tried AI Andrew yet, what are you waiting for?)