Contracts are bad for business and bad for relationships. It is time we forget about them. Burn them. Now, before you actually go and put your contracts in the shredder (or crucify me for blasphemy), hear me out.
Relationships are the foundation
Think of your relationship with your clients. And think of the best relationship that you have ever had with any of your clients. The best business relationship is almost akin to a friendship. You feel that you can be open, you feel understood and you know you can be direct to each other. You think of the wellbeing of the other party as much as your own. And you try to help each other.
Now, when there is a matter of life and death situation, who do you go to? Who do you rely on? Perhaps your partner, your siblings, and most commonly, your friends or neighbours. These relationships, the relationships we have with the people we choose to associate with, are not governed by any contracts. We are willing to entrust our most prized possessions, our lives and the wellbeing of our children to people with whom we have no officially signed contracts.
So why should we use contracts for far less important matters?
Contracts with your friends
Yes, you can easily say, my client is not my friend. But, then again, why not? Because you don’t exchange goods and services with your friends? Because you cannot develop a personal relationship with each one of your clients? Why not?
Now you may say that there is no real exchange of services or goods in friendships and other personal relationships, but is that so? We actually do exchange some of the most valuable services without a contract. We listen to grievances and complaints and share our own deepest secrets with friends. We offer and ask for advice. We babysit, we fulfill our needs for socialisation, we help each other move houses. And we do not have actual contracts for this. We do not specify what we do with received information or the quality of service we get.
Granted, there are relationships that we engage in for which we do sign official contracts. Think of official marriages and prenups. In most cases, these cohabitation contracts are needed to define the relationship between the couple and the state, and not necessarily the relationship with one another. And the trend we see in those is, that more and more, people choose less formal formats of cohabitation arrangements. Where marriage was once the cornerstone of civilisation, in the last decades, we moved to registered partnership, to cohabitation agreements and also living together without contracts.
So. Back to the relationship with your client.
Insecurities and speed dating
Contracts are put in place to essentially deal with our insecurities. We believe that contracts will protect us if the relationship goes sideways. Essentially we put our trust in the contracts instead of the people. We expect that the contracts will guide and define our relationships. We expect the contracts to deal with our lack of trust in the other party. We believe the contracts are there to protect us. (And rightfully so.)
As in your relationship with your friends, also in business you will not entrust your life and the life of your loved ones in the hands of people you do not trust - or completely unknown people. So we want to get to know our clients. In the case of a relationship with a client, we attempt to hyper speed up an entire process of building a trusting relationship - and this is where a contract plays a role.
I often think of relationships with clients in terms of relationships with life-partners. When you look for a partner, traditionally you take your time for that relationship to develop. You go out for a drink or two, you have a few conversations, and then you date for a while. This is a period of testing, getting to know one another, before you commit - if it ever comes to that.
In relationships with clients, we often tend to skip this extensive dating process, and default to speed dating. The risk of speed dating we mitigate with contracts.
The problem with contracts is that they can never fully protect every aspect of the relationship.
Companies often tend to draft these extensive agreements that contain all kinds of expectations about the relationships, the deliverables, the requirements and the costs thereof. I have never experienced a contract that has not been breached on at least a few of the articles that it pertains to protect. Some may say this is wrong - most of them lawyers of course.
The nature of contracts is that they pretend to describe the interests of all parties and the rules of interactions. That’s the theory. In truth, they are a deterministic snapshot in time, which attempts to govern a complex and non-deterministic nature of human interactions. In practice, the moment a contract for software delivery is signed, it is already outdated. The relationships with people have the possibility to evolve, but contracts that ‘govern’ these, not so much. Of course, you can make addendums, amendments to the contracts. But do you? And even so, even those become outdated.
The wrong kind of power
As a very negative consequence of this approach, what we see is that contractual parties aim at following the contract instead of developing their customer relationship. We aim to value contracts more than the potential within the relationship. We put project managers in place and we instruct them that their role is to protect the contracts, count the hours and watch the deliverables, risks and costs.
Wrong, wrong, wrong.
In this case, project managers protect an already expired understanding of the problem we try to resolve. Instead, we should instruct them to work on developing the relationship with our clients.
Perhaps the role of project managers should be to make sure that a contract does not become an impediment towards delivering value for the client. That breaching a contract is not only not a bad thing, but a necessity, if you value your relationship and care for one another.
So, burn your contracts - or not.
Just don’t make them more important than the relationships you should forge or the work you should do. Contracts should not govern the work, and they should not be the obstacle for you to deliver what you believe in.