Search
  • Author Contribution

Breaking bad. How bad habits are perpetuating dysfunction in contracts, and how to break them

By Denis Potemkin.


I see a lot of unproductive, trust-destroying, supplier-centric behaviours in the way legal work is done. I can explain it in one of 3 ways: ignorance, obstinacy, or habits.


Let me explain where I’m coming from.

So many of us talk about changing and modernising how the law looks and works. The biggest focus is new business models and legal tech, with legal design a distant third but gaining supporters. User-centric design and behavioural psychology are relatively recent imports and are gathering under a new LUX (legal UX) umbrella. William Gibson’s famous “the future is already here, it’s just not evenly distributed” is so true here.


While legal tech, design thinking and “new law” are going mainstream, the traditional law firm model, hourly billing, archaic contract language, unstructured data and old-fashioned ways of delivering content remain the norm on the ground. As is so often the case, the real problem is with the basics: the day-to-day behaviours that are keeping us in the past.


So is it ignorance, obstinacy, or habits? Ignorance is surely no longer an excuse, and I don’t believe the profession is obstinately against change. I put it down to bad habits: ingrained behaviours that are difficult to break. And it is not just lawyers who display those habits - our clients have picked up some pretty bad habits from us, too.


In this article, I look at legal work - especially contracts - through a behavioural psychology lens. I explore bad habits we have developed over decades of legal practice and how they lead to unproductive ways of working. These habits are not just bad for productivity. They are bad for business - and our wellbeing - in deeper ways. I will share my thoughts on how we - as individuals, teams and businesses - can go about forming better (more productive, trust-building, customer-centric) habits.

The backstory

I occasionally tune into Behavioural Grooves, a behavioural psychology podcast. The hosts have great chemistry and really smart guests. I think about how the insights translate into legal practice. A recent episode about habits struck a chord. Habits are response mechanisms formed through repetition over a period of time. The process involves strongly embedded trigger-response-reward sequences. The trigger tells your brain to initiate a behavior - it’s a piece of information that predicts a reward. Then the response is the habit you’ve formed to get the reward. And the reward feels good. That’s why it’s so hard to break old habits. It seems it’s much more productive to try to form new habits instead.


Let’s look at how this relates to habits in the office and the way we go about delivering legal work and executing legal processes. The key is that those habits don’t just affect productivity, they also affect how we build business relationships and create (or destroy) trust. Which in turn impacts productivity - for example how efficiently we execute projects, how fast we close deals and how frictionless our business relationships become.


Bad habits in the office

My go-to example of how the trigger-response-reward mechanism works, and leads to unproductive behaviours, is email. Let’s say you get an email that requires you to do something that you don’t want to or have little time for. Often the easiest thing - and the thing we do so often - is to copy the message to more people and pass on or spread the responsibility. So there is the trigger (an annoying email you don’t want to deal with or don’t have time for), the response (you immediately socialise it with a broader range of people), and there’s the immediate gratification (it’s off your desk and someone else’s problem now, and you’ve ticked an item off your list). We all do it, and it just increases churn and clogs up people’s inboxes - often without moving the issue any closer to resolution.


What would a more productive behaviour look like? Perhaps finding or suggesting a partial answer, or framing the problem in terms of simple questions and allocating them to specific people, or picking up the phone, or arranging a short meeting. There are plenty more examples in how we use and abuse email.


So let’s turn to contracting. Many of the bad habits I describe are well known by those who think about better contract design and more productive contract processes. Yet I see this all the time in my work so they are still very much prevalent habits that I believe are holding us back - as individuals, as teams, and as a profession. And they hold back our business customers because they’ve learnt from us.


Bad habit 1: frankensteining

By this, I mean drafting contracts by pulling together bits of different precedents, to form one unnatural whole.


Now, re-using previous examples is fast and effective if done right. But starting from that process as a matter of course is a bad habit. The “reward” is a sense of progress and the comfortable feeling that you know what you’re doing because it’s been done before. It also panders to our lazy gene: sitting at your desk and copy-pasting is easier than talking to the business and trying to think creatively about the fundamentals.


But this way of working perpetuates poor unclear drafting (Ken Adams writes brilliantly and often about this on his blog, so I don’t need to), increases complexity (you’re more likely to add than reduce) and embeds documents into contract processes that are not truly fit for purpose. It also reinforces Bad Habit 3 - a focus on detailed risk management rather than big picture business outcomes. It is a big reason for the pervasive dysfunctions in contracts.


Bad habit 2: redlining

Redlining or tracking changes (and exchanging redlines by email) is still the go-to workflow for aligning on documents internally between teams and negotiating them with counterparties.


Redlining is a fossil from the analogue age. It encourages an excessive focus on the minutiae. It builds contracts which are optimised for risk rather than outcomes. It increases rather than reduces complexity especially when multiple redlines are layered on top of each other. It is uncollaborative, adversarial, and I believe destroys rather than builds trust.

In negotiations, redlining encourages the stating of one’s position and protecting one’s corner - it does not encourage forward thinking about outcomes and how to get to them quicker. It does not force clarity, often leaving the other side to figure out what a change is getting at or the reason for it. The reward is a bit like the email example: it’s off your desk and someone else’s problem. Of course it then comes back to you, repeating this unproductive cycle.


I am not saying that redlines are not useful. Sometimes it’s good to see a history of what has changed.


Good negotiators do think forward about outcomes and how to get there quickly, and will often put explanatory comments in the margins. But redlining as a tool does not require or encourage those behaviours. So using redlines as a primary way of working (which is what I see in my day-to-day work) is a poor habit.


Bad habit 3: prioritising the least important

This habit has many facets. The vast majority of contracts and the lawyers who are building and negotiating them are overly focussed on risk and remote contingencies, to the detriment of business outcomes and deal velocity. Annual studies by IACCM (recently rebranded to World Commerce and Contracting) show that the relationship between what are the most important terms versus the most negotiated terms in contracts is completed off. This summary from their 2020 study shows that none of the top 5 issues by importance are in the list of the most negotiated terms:

Most Important Term

  1. Scope and goals

  2. Responsibilities of the parties

  3. Change Management

  4. Delivery and acceptance

  5. Communications and reporting

Most Negotiated Term

  1. Limitation of liability

  2. Price|Charge|Price changes

  3. Indemnification

  4. Service levels and warranties

  5. Payment

It’s not just the way negotiations are conducted. Contract narrative tends to follow the logic of the supplier - the lawyer - rather than the customer. It looks something like this: (a) start with definitions and obscure points of structure and interpretation; (b) begin introducing risk controls and caveats in the very first few clauses; (c) spread key information around the document and patch it all up with a matrix of cross-references; and (d) leave all the important business content to the end by which point the reader has lost the will to live. Perhaps that’s a slightly cynical view but many readers will relate to it. It’s closely related to the first habit (frankensteining).


I suspect the reward mechanism is the dopamine of being in your comfort zone, the space where lawyers have a unique skill set: working through intricate connections, risks and contingencies, and imaginary dispute scenarios. Like we are taught to do throughout our education and working lives. Perhaps there is also fear of moving outside of convention, and the feeling of safety from staying within it. And there’s the lazy gene of course.


Bad habit 4: same old tools

Poor habits are created or perpetuated by the tools we use. Most people (and not just lawyers) still default to Word+email as their tool of choice. In contracting workflows, the Word+email combination encourages an iterative adversarial process while discouraging real-time collaborative work.


Lawyers are Word super-users. But the same was said about Blackberries and I doubt many lawyers would swap back their smartphones. There is a wonderland out there full of free or low-cost collaboration and productivity tools that offer amazing possibilities far beyond what Word and email can offer you. Should lawyers code? Not generally, in my view. Should we all be using new tools? Yes, every day.


Bad habit 5 - treating the legals as the last mile

This is a habit that our clients and business colleagues are particularly guilty of. As lawyers we are constantly frustrated by clients who do the commercials and then hand over to the lawyer, too late, without real prior alignment on the contractual terms. The result are the familiar delays, finger-pointing and friction. Why is it so difficult to get clients to involve lawyers earlier? Because it’s a habit, and I believe it’s the result of the many bad habits lawyers have displayed over the decades. I believe that to break this habit, we need to break habits 1-4, and start building the good habits to replace them.


Breaking bad

Breaking habits is hard. Introducing new, better habits is a better strategy. Here are my suggestions for better contracting habits for lawyers, and for those who work with lawyers.


Better habit 1 - start with purpose

When creating a new contract, start by creating something meaningful, before pulling out and frankensteining precedents. A good way to begin is to think about purpose: what is the purpose of the contract or transaction? What are the objectives that each side needs to achieve? Put those down in the middle of your piece of paper, and draw an agreement map around it. Prioritise the top line business objectives rather than legal risk. Use that to create a skeleton contract - you can then put flesh on the bones from your precedents. In my experience this doesn’t slow the drafting process down. It can actually speed it up, and the result is better - which leads to efficiencies further down the line.


Better habit 2 - negotiate meaningfully

When aligning on documents internally or negotiating with a counter party, don’t negotiate through redlines. Don’t “walk through” the document. This should be left to the lawyers right at the end when everything is agreed. Instead, pull out the top issues, summarise them and agree on the principles. Using aids which are separate to the contract really help: a term sheet, or a table. There are of course collaborative negotiation tools, which is outside the scope of this article. If you are going down this route, my first recommendation is to find something that goes beyond merely digitising the same redline+messaging process.


Better habit 3 - prioritise the most important

Prioritise your contracts based on what is most important. This should be driven by commercial purpose and business objectives, not risk management. Take one of your key templates and reorder the sections to make it more focussed on those priorities. It requires some effort but it’s not difficult to create an improved structure. For practical methods for doing this, take a look at the “Better Contracts” series on my blog (link in bio).


Better habit 4 - use new tools

Introduce a new (simple) tool into one part of your process. Use it every day. Think beyond team communication tools like Slack and MS Teams which you should have tried out already! My top picks:

  • Spreadsheets. Yes, spreadsheets. The entire world outside of Legal still runs on them and the possibilities for building tools and interactions are more amazing than you think. Even simple tools like negotiation aids and contract risk reviews are easier to put together with a spreadsheet than other standard office tools - and your business customer will love it.

  • Products like Airtable or Coda which are next-generation spreadsheets, with an app-like UX, automation features and integrations with other productivity apps.

  • Interactive whiteboard tools like Miro and Canvas, which are fantastic for both individual work, small group collaboration and multi-player experiences.

Better habit 5 - bring the legals forward

Breaking Habit 5 or replacing it with something better is the most challenging, since it involves changing the habits of our clients and business partners. If contracts are there to structure and record relationships, then they should be part of the conversation from the beginning. In my experience, two things need to happen:

  1. the business folk need to have the right communication tools to have those conversations;

  2. they need to love the contract so they feel happy to integrate it into the commercial process from the beginning.

This may not be so easy, but here is a suggestion on how to get started. Create a summary of the key terms of your most important contract template. It should look nice and clear on a single slide. Focus on the business topics, not legal risk. Talk to your business partners about embedding it in their early stage discussions - to manage expectations upfront and give early visibility to possible deal-breakers. Talk to them about what should go in there, the tone and how it can be presented in the best way so it reduces friction while increasing understanding and trust. Discuss how tensions between key terms (such as liability caps) can be reconciled with the marketing/sales pitch that is the focus of the early stages. At some point in the process these tensions will need to be reconciled anyway.


You may need to go further, such as redesigning your contract into something that the business understands, likes working with - and ideally is even proud of. Truly embedding this means changing the habits of the commercial people on the ground - that can be done if (but only if) you give them the right tools.


Final thoughts

One of the meanings of “to break bad” is to go wild, defy authority. We need a bit (and a lot) of that here: unshackle ourselves from old habits and false professionalism, and defy the years of convention that have formed them. It will make us better at law and better at business.

About the Author Denis is a lawyer, legal designer/engineer and legal tech entrepreneur. Denis has a 360° legal background, having been in private practice and in-house, now a consultant helping businesses with contract processes and deal-making, and founder of next generation legal automation start-up Majoto (majoto.io). Denis is passionate about using design and behavioural change to make legal processes and technology not only productive, but also better at creating positive relationships, trust, and wellbeing. He writes about better contracts on his blog at potemkin.legal.

#DenisPotemkin #behaviours #oldhabits #legal #innovate #legalcontracts #legaltech #legaldesign

Endorsing Legal Business World Television ®

BACK TO TOP

© 2017|2020 LegalBusinessWorld™| All Rights Reserve

Australia | Asia | Africa | Canada |  Belgium | China | Cyprus | Czech | Denmark | Estonia | Finland | France | Germany | Greece | Hungary | Hong Kong | Iceland | India | Indonesia | Israel |Italy | Japan | Latvia | Lithuania | Luxembourg | Malta | Mexico| Norway | Poland | Portugal | Romania | Russia | Singapore | Slovakia | South America | Spain | Sweden | Switzerland | Taiwan | The Netherlands | Turkey | Ukraine |United Kingdom | United States |Middle East | Africa