Heartbreak in Contracts

The potential for heartbreak exists in all relationships, contracts included. But the risk / reward calculation tips us into engaging.

Contract relationships start out rosy. Then, when familiarity settles in, expectations go unrealized, or some unknown internal timer goes off, changing contractors turns serious.

From out of nowhere the slippery slope appears.

If contractors and customers are lucky, they become aware before it’s too late, and do what they can to help the relationship survive. If it’s worth it.

Ending contracts is painful for customers and contractors alike. They both have:

• Sunk costs
• Bruised reputations
• Hurt feelings

The last thing both sides want to talk about (in the beginning) is breaking up.

However, as high school taught us, there’s no eliminating heartbreak. Contract heartbreak can be minimized through attention and effort. At the beginning and along the way. Some efforts may seem a little unorthodox.

In the Beginning

Lawyers handle contract legalese. But it’s customers and contractors’ expectations that carry the seeds of heartbreak. And these are rarely, if ever, defined and documented at the beginning of service. See Gap 5 & Roswell for more info on customer expectations.

DOCUMENT EXPECTATIONS FIRST

Expectations need to be explicitly stated in Service Level Agreements (SLAs), Key Performance Indicators (KPIs), and any other tool that can measure service delivery and/or fulfillment of expectations.

This is best done after contract award but before service start. It’s part of contractors’ transition plans, isn’t it?

REQUEST PERFORMANCE REVIEWS

One way to manage expectations are regular Performance Reviews (aka QBRs - Quarterly Business Reviews or other frequency).

By getting positive face time with customers, contractors can build up credits against inevitable service failures. Contractors need a good sized balance before customers will cut them slack for deficiencies. Reviews provide that accounting.

CUSTOMERS’ TRUST CAN HURT LATER

There’s a downside for superior contractor service. When customers trust their contractors, they tend to bail on the regular reviews. Customers figure they can spend that time on more pressing issues. And that’s the contractor’s slippery slope.

Without customers hearing contractors’ positives, they end up hearing only complaints. Not pleasant. And unfortunately too common.

Therefore, a key contractor goal should be to secure customers’ commitment to attend performance reviews. At the beginning of a relationship.

Here’s the unorthodox part. Have the contractors request for customers’ entered into the service agreement. That’s right, make it official. And visible. Great skin in the game if you can get it.

Alternatively, the customer signs an agreement to participate in on-going business reviews.

It makes sense. But when was the last time it was done?

During Service

Now that the contractor has successfully started, customers get busy with their core tasks.

But bumps in the road come.

The heartbreak question is how are they handled? Does the customer find out first hand? Through one of their customers? Or from the contractor?

Even with those contractors’ credits banked and ready for use, this is a tricky time.

Contractors (most if not all) will quickly fix the problem and communicate with the customer.

This is great for the quick fix. However, the critical need is to communicate corrective actions taken to prevent the problem from happening again.

To avoid contract heartbreak, effort and commitment must make the relationship better going forward.

Meaning, solve the root causes of problems in addition to putting out the fire. For more info on root causes, see “When is the Right Time to Improve?”

Lessons Learned

Customers and contractors have volumes of experience with contract heartbreak.

It takes courage to address in the beginning and bake it into documents. Once it’s written, it’s more real. At least it’s easier to reference later.

How do you protect against contract heartbreak?

~~~~~~
Chris Arlen
President, Service Performance

Technorati: Communication, Contracts, Performance

Add comment March 4th, 2008