FROM THE BULL: Bond

My word is my bond. It’s a powerful sentiment, isn’t it?

How many meetings or conversations have you been in when someone is trying to convince you how fair, reasonable, sincere and committed they are? This is probably after they have failed to deliver something as promised or are trying to renegotiate themselves out of an existing arrangement. Probably too many to count. I just glaze over when I hear it. I’m not heartless or cynical (far from it),  I’m just a realist.

The bottom line is that most people or businesses don’t deliver what they say they are going to do, either on time and/or on budget. This non-delivery wastes a lot of time and effort. Businesses start to falter when this type of  behaviour is considered normal and, even worse, acceptable. It is not. An example of this is when your customers starting paying invoices 10 days past terms; within 1 year, this is accepted as  “normal trading terms”; within two years they’re 15 days past terms, and then when you attempt to bring them back within terms, all hell breaks loose.

These types of situations can be dealt with efficiently and more quickly if the appropriate written agreements are in place, and non-performance is discussed at the time it occurs. Written agreements should be agreed and signed prior to any commerce commencing. There is always greater urgency to get it done if you make it clear that you won’t do business unless they are signed. If you commence business without them, it will take more time to implement them later and you may be forced to negotiate again what was agreed originally. Why have the hassle?

These agreements don’t always need to be formal legal agreements (although key agreements like shareholder agreements, real estate agreements, sale and purchase agreement etc should be). A form of commercial agreement written by the parties and containing a description of the responsibilities, obligations, requirements and other important terms and conditions should suffice. The absolute clarity that this approach provides should remove a lot of the problems you will face. Naturally, it won’t overcome problems caused by cheats and liars. However,  forcing these types to negotiate a written agreement with you may draw out some of these issues in advance and stop you entering into an arrangement with them . Call it cheap due diligence!

Write any agreement based on the worst possible situation occurring. Most of the time the agreements will gather dust but when the shit hits the fan, it is the first thing you will reach for.

My word is my bond – yeah right! Give me a written agreement any day – I’ll sleep easier. Have a great week!

In the mean time, click on the heading to enjoy some insirpation places to work from thanks to the Cool Hunter. Enjoy.

This entry was posted on Wednesday, August 19th, 2009 at 9:59 am and is filed under THE WHITE ROOM, The Bull and tagged with BUSINESS, Research, STRATEGY, Teamwork. You can follow any responses to this entry through the RSS 2.0 feed.