Tuesday, July 17, 2007

The Cost of Doing Business (formally or informally)

A lot of deals go south these days between people trying to do business with each other and someone recently asked me if there was a new norm for dealing with people who seem to be acting flaky with regard to a perceived deal. I think a lot is at play and some of it is the current state of affairs.

I think the game is changing a little but I think the change is that people are becoming keenly aware of the already established sets of rules about how it works. A lot of times we can dodge the formality of the rules, but that is the exception to the rule these days and hardly ever the rule itself. Back in the day we could depend on perceived intent. That is no longer a reasonable expectation.

The "rules" in my opinion are established around the ideas of legal partnership, contract law and legally defendable intellectual property. This doesn't mean that we have to run off and only work alongside of people where we have established a legal partnership and a defendable boundary and agreed relationship about intellectual property or a written contract. I think what it means is that we have to understand what those legal boundaries actually are, in all three cases, and each time we get into a situation where we are operating with respect to a perceived partnership, a social contract or intellectual property, both parties should understand and set expectations - at least verbally. This is the old law and the new norm: if no expectations are verbalized, then the assumption is the boundaries established in the law, forget handshakes or unspoken intent or "a good vibe." If someone wants to walk away, then the law establishes their right as well as the expectation to do so. Any other expectation assumed is only personal and not considered a social contract, defendable intellectual property or a partnership.

Having said all of that, when I was working with one company not long ago we brought a group from Madison up to work on a project with us. They were simply going to finish the project. Once we hired them it seemed that they were unable to do the work and needed us to show them how to do their job. I was put under pressure to teach them how to do it. I told my company that what we did (our implementation) should be considered intellectual property and if they said they could do it but brought nothing to the table outside of interest, then they were actually in breach, not us. The vendor preemptively fired us (which was funny, since they were the ones getting paid.) Here is my rule of thumb on this stuff:

  1. Is the partnership established or am I still pitching?
    If we are still dreaming and not working on a work order, then I am still selling and not partnering.
  2. What do they/are they bringing to the table?
    If we are still talking about ideas and not implementations, then I am still selling. If they are discussing more than project ideas, then I should be past selling and working to establish a contract.
  3. What do I/ am I bringing to the table? If I think we are in a partnership and we both understand the ideas at hand, but I am already hashing out implementation ideas, but without a contract, I might do better to switch back to establishing a contract. Otherwise, they could take what I have said and go with some other vendor (who is cheaper/crappier?) and the law would absolutely defend their right to do so (and I would feel like they were violating some unspoken social contract, partnership and/or my intellectual property - and I would be to blame for that; I would have decided to assume the risk.)

Put the "golden rule" into action: Proactively establish reasonable and understood boundaries in partnership, contracts and intellectual property, as you would have someone do with you (and if you do not have that, then you shouldn't expect people to act as if you do.)

I think I like the idea that people could just let their "yes" be yes and their "no" be no, when it comes to talking about doing business with you. But I think that is what a contract actually does for people and anything short of that is OK to get excited about, but not go put money down on a new swimming pool with regard to it. We are working with the world and just because I said "iguana-flavored popsicles" out loud first doesn't mean they weren't thinking the same thing and now violating my intellectual property (that is a common misunderstanding of intellectual property rules.)

I also think stuff doesn't work out all of the time, the law defends their right (my right as well) to decide that, and I also reserve the right to simply be disappointed about it. I think that is OK. But in short, I think a familiarity of the law with regard to legal partnership, contract law and rules about defendable intellectual property are worthy of reading and letting those realities establish the boundaries of expectation in me. I think that we can reserve the right to convince people of more informal contracts and expectations, but they reserve the right to disagree (and likely would.) But I think it is OK to be disappointed about that.

Check out Wikipedia (for a free starter resource and I am likely preaching to the chior here):

Contract law: http://en.wikipedia.org/wiki/Contract
(as well, check out http://www.cei.org/sections/subsection.cfm?section=43 )
Intellectual property: http://en.wikipedia.org/wiki/Intellectual_property
Partnership: http://en.wikipedia.org/wiki/Business_partnership

If someone isn't at the point of establishing any of the above three expectations, and something doesn't work out, it is OK to be disappointed, but their expectations and communication skills should be adjusted to establish this stuff (at least verbally) earlier in the process. Heaven forbid, if you are operating as if these things are established (especially in terms of intellectual property), stop right now and fix what's clearly broken.

You need to do this to be fair with yourself and the ones with which you are working!