Don't Skip The Details - I'm sitting in a room on the 10th floor of Paramount Plaza, NYC. I have a bag of cash on the floor in front of me. Four hundred thousand dollars at last count. There are eight other people in the room. At great cost, their sponsors have flown them in from three different states. They're all here primed and pumped to wrestle the cash from me. This isn't going to be pretty. In this match, anything goes. Soon, a mature prominent man walks in and with the wave of his hand the spectacle begins. The contestants circle the bag, each from time to time diving for a snatch of cash, only to be fended off. After days of testing my strength we are all tired and bruised but nothing has left the bag. We decide that continuing the ordeal would be fruitless. The practical course is to offer a nominal amount in return for an end to the contest. The sponsors are dissatisfied with the result but relieved to be free of the high cost of hosting the match. I'm a professional cash wrestler. I'm an attorney.
My client was a large media sales organization and it didn't have to be this way. This arbitration could have easily been avoided had the parties paid more attention to the details of their business. Let me explain. On its face, this was a simple case of breach of contract. The claimant, a supplier, contended it had delivered pursuant to written agreement. My client, a media sales agency, contended that it ordered wine but received grape juice, and refused to pay.
Now here is where this could have all been avoided. The "written agreement" was really a mishmash IO's, PO's, and email, each using contrary and vague terms, definitions and conditions. All subject to wide and wild interpretation. Each signed by a parade of sales, management and production staff of varying authority and expertise. Add to the mix a gaggle of alleged telephone conversations and vanishing Instant Messages, and by the time this came to trial it was down to a "he said - she said" free for all. Of course, being in arbitration was itself a litigated issue, there being competing documents each requiring a different forum. In other words, the parties were so anxious to do business that they failed to nail down the details. So when things went wrong, they had no road map to resolution.
Having run a sales organization myself, I know that paperwork is its Achilles heel. Sales people try to avoid it at all costs. Easily deleted Email and vanishing Instant Messages have become the preferred way of doing business. But management cannot throw up its hands; it must implement policies to ensure that deals are accurately documented and that proper "paper" trails exist. Here are a few observations:
*Battle of the forms From the salesperson's perspective, when confronted with legal documents - "we sign their PO and they sign our IO" - seems like a fair solution. Unfortunately, nothing could be further from the truth. Inconsistency and poor documentation sends deals to court. The solution is to hash out your differences upfront using your form or their form with a Rider. Using both is an invitation to the quicksand of litigation.
*Old forms Speaking of forms, at minimum, you should annually check your sales documents to ensure they are current and that operative terms are defined and consistently used. For instance, definitions for Internet media change faster then the seasons, i.e., is your definition of "opt-in" up to date? Your sales documents must be sufficiently elastic to encompass dynamic changes. And it's not enough to just revise a form. Fear of technology has many sales people with photocopies in their desk for easy use. Revisions never make into the draw. If you don't search out and destroy the old forms, they will circulate forever.
*Documentation is ongoing Doing business with a buddy list is fast and economical but no substitute for maintaining deal notes or confirming deal points in writing. Management must regularly check contact notes and email logs against sales performance. Any incongruity requires further inspection. Big producers should have substantial contact notes or email logs. If not, too much information is being exchanged via telephone or IM. Remember, your institutional memory is only as good as your documentation.
*Understandings We've all heard this a thousand times: "don't worry, we have an understanding". I always respond with this question: are you dealing with the same person today you were dealing with a year ago? Two years ago? New management means a new interpretation of old deals. What you thought was "understood" now becomes an issue. And what exactly is understood? For instance, in my case both parties had a different understanding of the term "unlimited". My adversaries relied on the paperwork and took it literally, while my client relied on previous custom and practice, so understood it "contextually". Of course, it became a central issue. If you have an "understanding" with regard to specific terms, confirm it in writing.
*Don't rely on your backup system Many managers assume that whatever is not in the files can be found in the company's backup tapes. Guess again. Employees have learned to use the delete button on a daily basis so as to avoid being included in the end of day backup. And even your best employees can't be relied upon to retain info that will negatively reflect on them. Worse, retrieving selective information from a system backup can be an extremely expensive and time-consuming project.
*Document ignorance Too many sales teams, are poorly trained in deal making from a legal perspective. Most haven't read their own sales documents and can't explain the majority of its terms, let alone that of another company. A seminar explaining the legal nuances of the sales process and the attendant forms is a qualitative step in developing true sales professionals. Make sure that the seminar is not given in lawyer-speak, so that the sales force understands and appreciates the information. And since sales people have a low threshold for retaining legal concepts (a/k/a boredom), it's of paramount importance that scripts are prepared and handed out for overcoming objections to contract terms.
If management doesn't take its paperwork seriously, neither will its sales force. This becomes increasingly important with today's ephemeral communications. You can enforce good business habits by conducting random paper audits of current deals. Business is complex. Being proactive will save you time and money down the road.
DANIEL BLUMENSTEIN combines practical business acumen with broad-based legal expertise. A Law Review honors graduate, for over 25 years he has been serving the needs of individual clients and businesses in a wide range of practice areas. In 1998, he was recruited to run the operations of a privately held direct media sales and marketing company. As its Chief Operating Officer, President and General Counsel he provided strategic vision, tactical execution, and wide reaching daily management to drive sales, revenue and cost-effective operations. He tripled the company's growth - approaching $100 million in annual revenue and 300 employees. Having served these posts with distinction, he returned to private practice in 2003.
Daniel Blumenstein, Esq. 1123 Broadway Suite 1118 New York, New York 10010 (212) 647-0450 www.besurelaw.com