By Jason Ryan – Principal, Head of Legal Operations Director and GM, South Australia.
To be honest, I don’t know the answer but I do think it has too many contracts. This is a message for lawyers but it’s more important for CEOs. Are your lawyers holding up business by unnecessarily “defending” the company against “myth risks”?
From what we see, most organisations are writing “over the top” contracts to cover against every conceivable “big bad thing”. In manufacturing, this is called over-processing. In fact, the “drag to market” (which is what I call the slow pace some traditional lawyers put on business while they pontificate about the meaning of the word indemnity) is like a tax. If deals were lightning quick and only dealt with real risks then the organisation could be miles ahead but still we see so many in-house lawyers preparing for “mythical risks” (events that will never occur or are sufficiently covered by the common law). Shouldn’t we use numbers to decide business strategy, not “mythical legal risk”? One of our clients, (a FMCG company) had sales people calling on corner stores but were forced by head office to get signed contracts regardless of account size… so off trundle the sales reps on their quest for contractual perfection (despite the fact that their friend the common law already has them covered) to seek the holy director guarantees, the impenetrable credit checks … blah blah before the first order was placed. Months go by before an order can be made. Meanwhile, their competitors place orders on their first call with no paper work at all. The competitor product is on the shelf the next day and they take market share all day and then keep it on the shelf through awesome customer service. No contracts; no need. Default rates are very small so the competitor is miles ahead. Even if the delinquency rates increase (which they rarely do), the numbers stack-up but still the lawyers are over-processing their “myth risks”.
By over-protecting against the rare worst case scenarios, the legal team is doing a massive disservice to its employer by losing market share and revenue, and annoying their customers. Is your legal team too worried about “myth risks”? Is your legal strategy holding you back? Are you writing too many contracts? If so, let’s talk (but only after you sign an indemnity, and I place a caveat over your favourite goat).