Can You Teach Old Outsourcing Lawyers New Tricks?
Not too long ago, I had the pleasure of dealing with some former colleagues who had shifted from one buyer-side law firm to another.
The experience was both awkward and interesting because there was a tension that was omnipresent during the negotiations — largely because I knew their negotiation training, history and positioning and they knew mine. I was on the provider side of the table for this deal and, at the end of the day, I was disappointed in some of the “old-school” tactics used by my former colleagues during the negotiation. As I see them, these tactics are remnants of an earlier time in the industry — when the buyer-side was far less sophisticated than the provider-side.
This cold-war style of negotiation originated sometime in the mid-1980s and is most closely associated with a few buyer-side firms that had a big share of the market.
As disciples from those firms fanned out to spread the gospel, a veritable “beat-the-hell-outta-the-supplier” mentality became prevalent throughout the U.S. Before discussing three examples of this negotiation style that have been “ridden hard and put away wet” and no longer work, let me give you some more background about its raison d’etre.
There is a theory in the world outsourcing bar that one is either a buyer-side or a provider-side lawyer — and that you can’t have it both ways. Now, in fairness, this seems to be more of a U.S. school-of-thought and the reason may have a lot to do with the relative size of the U.S. outsourcing market vis-‡-vis other countries — although this would not hold true for Europe as a collective market.
In my little corner of the world, people believe that the Canadian market is too small to allow a lawyer to take a position on either side — because one will not be able to sustain a one-sided legal practice. This view is complete malarkey. Given the lack of focus on outsourcing by Canadian law firms and the size (and projected growth) of the Canadian market, this just isn’t true.
Is There Such a Beast as a “Win-Win” Deal?
I believe in a far less-cynical viewpoint: that many of us in the outsourcing bar are interested in achieving the best deal for our respective buyers through a robust, adversarial process but one that stops short of poisoning the atmosphere between the two parties — which could linger long after we (the lawyers) are gone.
In short, the central goal of the win-win theory is achieving a fair deal, which is side-independent; it sounds hokey but I think it’s totally doable.
Look, I like to win as much as the next guy — probably more, actually — but I recognize a greater responsibility to my client — whether it is on the provider-side or the buyer-side. Having been on both sides of the table numerous times over my career, I believe that I am experienced enough to spot the “grandstanders” from the real McCoys during the negotiation phase of a deal.
As a mea culpa, I admit that there may have been a time when I believed that in order for my client to get the best deal, I had to obliterate the position of the lawyer on the other side — whenever I had an edge. It was a “move in for the kill if it’s available” sort of mind-set — that lawyers are trained for starting in year one of law school. (I think the course was called “Feeding Frenzy Basics.”)
Age, wisdom and being on the wrong side of a deal or two (i.e. the thin edge of the bargaining position) taught me, in a good way, the veracity of the clichÈ — what goes around comes around.
Here are three examples of certain old school tactics that seem ridiculous in today’s mature market.
Playing Hide and Seek with “Trick-Screws” in the Agreement
I often come across contractual language that not even God would seek to argue on behalf a buyer — if God were a lawyer. (I can almost picture George Burns at the negotiation table with a big fat stogie in his mouth arguing about a limitation of liability (LOL) clause!)
As an aside, I have often thought about what should be the norm for certain, recurring flashpoints in outsourcing agreements, perhaps by deal type, and I am convinced that the data is out there to answer this question. For example, in a data centre outsourcing, can’t we, as the outsourcing bar, come up with a formula for a reasonable, rolling-liability pool based on some factor of the value of a deal and draft an appropriate model clause to reflect that?
A statistical analysis or benchmarking of a random sample of data centre deals by a major research firm — Gartner, IDC, Meta Group — could, absolutely, yield normative data that would allow us to do just that. (The impediments are actually lawyer-created and I’ll leave it at that for now — because I have views on this topic that I will share with you in another article.)
There are certain buyer-side counsel that start with a form of agreement that includes hidden “trick-screws” — designed to shift most risks of a deal entirely to the provider. (“Trick-screw” is a phrase coined by a senior in-house attorney — who is also a hidden comical genius — at a major provider a few years ago that just stuck.)
Instead of focusing on a legitimate tailoring of the outsourcing agreement to fit the issues, one has to spend time rooting-out the trick-screws, tabling them and then spending needless hours arguing about why they are ridiculous. My patience for this game is diminishing rapidly; it may have been amusing once or twice, but let’s move on already! Whenever this tactic rears its ugly head, though, I suggest you deal with it by getting in a few polite digs about how playing hide-and-seek with trick-screws is a colossal waste of time — and money — for both sides.
My additional suggestion for counsel is to really think about the positions you wish to take in an agreement in advance and, like DellÆ, just be direct!
Gratuitous and Ad Hominem Comments at the Negotiation Table
Every so often, when an attorney is cornered by an untenable position that he or she has taken, the response is a gratuitous comment directly to the other side’s business people about “reigning in your counsel” or making a flippant remark that is personal and has nothing to do with the deal.
This is usually a desperate attempt to drive a wedge between the outside or inside counsel and the business people of a deal team and to detract from the exposure of a trick-screw. In addition, in my experience, it is usually followed by a declaration, by buyer’s counsel, that provider’s counsel is “jeopardizing” the closure of a deal — which is nonsense because the latter is simply being thorough.
More sophisticated and seasoned deal teams will immediately recognize these tactics and simply ignore them. As counsel, if you’re involved with a less experienced team, this is a good point for a break to make sure everyone understands what is going on.
Again, I am all for good humor and levity in a long negotiation, but I think there is a difference between that and making gratuitous comments that are nothing more than grandstanding for your client. If you have any doubts about interjecting a comment that you think is really clever, take a sip of your latte instead.
The Tag-Team Approach to Justification for a Certain Position
Then, there’s the “say-it-twice-by-two-different-lawyers” approach to justifying a position taken in a negotiation.
In essence, one of the deal team lawyers on side A will take a position which may be debated and shown to be untenable or, at least, unreasonable in the context of the deal, by side B. Then, another deal team lawyer on side A — almost like he or she is reading from a cue card — will pipe-up, repeat the unreasonable position and then actually declare to side B why it is right for the deal.
For some reason, the side A lawyers really believe that this will cause the side B lawyers to say: “Gee, since two of you said the same thing and said that it was right, then, it must be right for the deal.” It’s an absolutely bizarre approach and a time-waster — but, believe it or not, there are a few dynamic-duos out there that have this routine down pat.
And so, round and round the negotiation will go until someone tables a position that was really on the table seven drafts and five days ago. It’s frustrating to witness.
The practice point for counsel is to spot this approach when it comes up and make sure you have the right personalities at the table to deal with it because “personality goes a long way” (as noted by Samuel L. Jackson’s character in Pulp Fiction).
So, the million-dollar question is: What distinguishes good versus bad advocacy regardless of your “side”? I believe that good advocacy does not simply mean bullying the other side — regardless of your relative bargaining power — and I am on the warpath to change the “old” way of doing things.
The bottom line is that you can excise several months of negotiation from a typical outsourcing deal — which simply means cutting-out bullshit negotiation tactics. Many outsourcing lawyers will disagree with me and think that I am absolutely crazy to promote a more streamlined approach to negotiations because they will see it as machine-gunning myself in the foot when it comes to hourly fees.
I beg to differ and I think that disagreement and debate about these issues keeps us honest in this industry and, at the end of the day, leads to better deals for both sides.
In my view, quality and consistent, early delivery of a deal will mean repeat or new word-of-mouth business, especially when contrasted to a protracted deal that left a bad perception of you (rightly or wrongly) with a client. Besides, a more balanced negotiation allows me to go to a post-closing dinner without slipping into daydreams of throttling opposing counsel.
Lessons from the Outsourcing Journal:
- Outsourcing attorneys need to adopt a more collaborative approach to contract negotiations and cease and desist from the older antagonistic style.
- The new approach can cut several months from the negotiations.
George Atis is the Chairman of the Outsourcing and Technology practice groups at McMillan Binch LLP, a major Canadian business law firm based in Toronto and dubbed “America’s Canadian Law Firm.” His email is [email protected]