The Value Iceberg

The Value IcebergContracts limit the exchange of value between customers and contractors. Let me re-phrase that: “contract relationships” prevent both parties from getting optimal value from their engagements. Who knows, possibly two to three times more value lies unseen below the surface?

Contract relationships, by their nature, are inefficient. The concept is outdated. Customers and contractors need much more from their engagements. And contracts, as they’re now managed, can’t deliver.

Think about it. Contracts are still closely tied to sticks and carrots. They have lots of baggage. To see how much, try a little experiment.

Ask someone to tell you the first words that come to mind when they hear the word “contract”.

You’re likely to hear “lawsuit”, “legal”, “attorney”, “penalty”, “court”, “fines”, “sued”, “death”, “adversary”.

Productive ideas for a relationship, right?

Yet these ideas are bound to contracts, and contract management. This is the guidance our minds give us.

Even when the term “agreement” is used, we all know it’s still a “contract”.

No wonder contracting services can feel like we’re doing business in the shadow of the courthouse.

Changing the Game

A new model is needed, one that exchanges more value, better, faster, and cheaper. In both directions, for customers and contractors.

That model may be a more fully engaged customer-contractor relationship that would deliver greater value through:

  • Fully transparent costs & working together to reduce costs (not profits)
  • Continually seeing improvements & innovations
  • Greater flexibility to changing & diverse needs
  • Increased responsiveness
  • Rock-solid reliability & loyalty

This fully engaged customer-contractor model would benefit contractors as much as their customers. It would drive leaner, more efficient operations, force new innovations. As a result there would be more profit, and new capabilities that new customers want.

However, I’ve seen few fully engaged customer-contractor relationships. Those few lasted several years, then dissolved when the customer contact (the leader of the engaged relationship model) left for another company. The replacements were not enlightened, and the former high value disappeared like icicles in July. Eventually, lower quality, lesser service and minimal value became the norm. Customer and contractor had accepted sub-optimal performance. Because it was in the contract.

How engaged are your customer-contractor relationships?

Chris Arlen
President, Service Performance

Technorati: contracts, management, service industries

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