A FRESH PERSPECTIVE: A PROACTIVE APPROACH

Savvy managers no longer look at contracting processes and documents reactively, but use them proactively to reach their business objectives. The proactive approach adopted in this book has two dimensions, both of which emphasize forwardlooking action: a preventive dimension, seeking to prevent problems and disputes, and a promotive dimension, seeking to secure the respective actors' success in reaching their goals. in the context of this book, this means using contracting processes and documents proactively to (1) decrease the possibility and impact of failure and negative events; (2) increase the possibility and impact of business success and positive events; and (3) enable sound risk-taking, which includes balancing risk with reward. Success requires attention to both risks and opportunities, along with their causes, likelihood, and effects.

Contracts are known for being effective risk-allocation tools. However, legal and business priorities may differ. While this book discusses ways in which contracts can be used to allocate risk, we do not stop there. Success requires contract literacy of the organization and its supply chain—in fact, the entire extended enterprise. Armed with this contract literacy, those involved in the contracting process can move beyond allocating risk to managing risk. Moreover, they can use their contracting processes and documents to realize business benefits and manage opportunities for value creation.

To reach their business objectives, companies seldom need legally "perfect” contracts; they need usable, practical contracts that achieve desired business goals and reasonable risk allocation at an acceptable cost. Contracts do not make things happen—people do. People need to know what their contracts require them to do, where, and when. Today's complex contracts are seldom easy for their users in the field, mostly non-lawyers, to understand and to implement. If contract language and complexity overload readers' cognitive abilities, contract implementation will fail. Such contracts—even if they are legally "perfect”—are far from good, operationally efficient contracts and fall short of their ultimate purpose. This is where a fresh perspective represented by what we call lean contracting and contract visualization enters the picture. Along with the proactive approach, this fresh perspective helps move from a "contracts are legal tools” attitude toward seeing contracts as managerial tools. At the same time, these approaches seek to change the view of contracts as risk allocation tools, made to win in court and needed only when things go wrong, to seeing contracts as value-adding devices and as enablers of business success that help the parties manage risk together. These aspects are presented in Figure 1.1.

A fresh perspective

Figure 1.1 A fresh perspective

For companies, the contract itself is not the goal; successful implementation is. So we take the view that the core of contract design should be securing the performance and business benefits the parties expect, not just a legal contract. Success in managing contract risks and opportunities often requires changing the ways corporate contracting works: from precontract to negotiation and signing and then to post-contract stages. This, in turn, requires the involvement of both business management and the legal department. Both need to see the need for change and must be willing and able to change their current ways of working.

 
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