Vested Wisdom from a Lawyer

After coming down (mostly) on the side of economists over lawyers for negotiating contracts in my post last week, I thought it would be only fair to mention a notable exception on the lawyer side of the ledger, George Kimball, an author and outsourcing attorney.

Kimball is a long-time specialist in outsourcing, whose latest book, Outsourcing Agreements: A Practical Guide, is a valuable and detailed resource on the ins and outs of outsourcing. Kimball isn’t just any lawyer – but is one of the best-known lawyers in the industry, and he’s represented buyers and service providers. He recently left Baker & McKenzie and joined Hewlett-Packard’s legal team (good call for HP to scoop him up!).

I didn’t even get past the preface before I was hooked on Kimball’s book. Kimball starts off nicely by setting the stage that outsourcing differs from other types of contracts because of “the imperatives of mutual success through collaboration.”  Kimball frequently stresses that “Outsourcing works best when both parties succeed.” In other words, focus on ‘What’s in it for We.’

I particularly like that Kimball challenges how lawyers typically address outsourcing deals.  “Outsourcing contracts can fill large binders, but, although some complexity is unavoidable, bulk is not always necessary or desirable.   Endless complexity may be an interesting intellectual exercise for the specialist, but is more likely to confuse than to fascinate the poor client who must later make sense of what the lawyers leave behind.” He continues by stating “Conventional adversarial thinking (so common by lawyers) often proves counterproductive. Stringent, overarching terms – of the kind still found in too many ostensibly ‘standard’ forms – are rarely acceptable.  Time wasted crab-walking toward sensible middle ground is expensive, not only in legal and consulting fees, but lost goodwill and distractions from more important practical issues.”

I am not the only one singing the praises for Kimball’s book. Outsourcing analyst Phil Fersht, founder and CEO for Horses for Sources, did a nice write up on Kimball’s book as well.  In the piece, Fersht revealed Kimball’s  “top tips” for dealing with outsourcing contracts:

–      Get good advice.

–      Focus on essentials. “Details matter, but spend time and attention where it matters most: on scope, performance standards, pricing and adjustments, transitions, people, governance.”

–      Keep it simple, or at any rate, as simple as reasonably possible.

–      Service levels matter, but do not equal or assure quality.

–      Prepare to manage the contract and relationship. “Weak governance – too few people, without sufficient clout, and accustomed to managing operations, rather than relationships – remain the single most common, avoidable error among customers.”

–      Remember why contracts work. “Good contracts motivate parties to perform through a reasonable equilibrium in the allocation of risks, responsibilities and incentives. Performance yields benefits – savings and service for customers; margins, opportunities and references for suppliers. Failures to perform have consequences sufficient to help keep everyone on the straight and narrow.”  Motivation matters, but fear alone can rarely motivate excellence.

–      Propose reasonable terms. “On both sides, too many start with ‘tough’ terms – the sort that no one in his or her right mind would dream of accepting. Why bother?  Suppliers are unlikely to sign harsh contracts unless they are desperate or inept.”

Thank you George Kimball!   Your gems of wisdom are mined from many years of negotiating successful outsourcing contracts.  I am simply elated that a first rate lawyer’s thinking and approaches to outsourcing mesh so incredibly well with the Vested Outsourcing approach and the Five Rules!

For those picking up George’s book, you will find Vested Outsourcing’s rules and approaches echoed throughout his book. Kimball does a nice job of sharing his thoughts about the need to get away from a focus strictly on transactions in favor of mutually beneficial outcomes (Rule 1), agreeing from the start on defined and measurable outcomes (Rule 3) and governance structures that provide insight not oversight (Rule 5).

“There are no known substitutes for clarity, courtesy, intelligence, integrity, common sense or good judgment. ‘Tough’ methods and terms are not necessarily best. ‘Scorched earth’ tactics singe everybody. In the long run, neither side will succeed unless both succeed.”

That’s all vested wisdom, and from a lawyer no less. How is that possible you ask? Well, he is raising three daughters.

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