As the president of a small company that frequently works with big companies, I am often frustrated by how long it takes to get from a handshake agreement to a signed contract. The process can be absurdly slow and painful, and that’s bad for business on both sides.
As an example, BDTI was recently contacted by a big company that had an urgent high-priority project they needed our help with. We quickly reached a verbal agreement with the responsible manager there, and we were ready to start the project… but it took three more months to get a formal contract in place.
The contract itself was one major obstacle: The company’s standard services contract was 21 pages long, including sections on hazardous waste (generally not much of an issue with benchmarking projects, but I guess you never know), the Family and Medical Leave Act (yes, we do comply with federal law), etc., etc. Much of the 21 pages was irrelevant to our project—but it still had to be reviewed and understood.
The other obstacle was the company’s process for getting its contracts approved, which required the manager there to run the gauntlet of administrative departments, each with its own mysterious procedures. It didn’t take long before he was as frustrated as we were.
Why do the big companies operate this way? It seems to me that they are always fighting the last war. Any time they get burned by a vendor or customer—or by themselves, for that matter—they add a new clause to their contract to (theoretically) make sure it never happens again. Such additions are a one-way street, of course; nothing ever gets removed. Talk about hazardous waste. It’s a big problem for small companies (who lose business and profits over intractable contracts) but perhaps less obviously; it’s also a big problem for big companies.
While we waited for our customer to wade through its own bureaucracy, the project didn’t progress, and the customer didn’t get closer to achieving its objectives. It’s hard to assess how much revenue they lost due to the delay, but it wouldn’t surprise me if it was a significant amount. Furthermore, big companies tend to rely on small companies for much of their innovation, which they often get by partnering with small companies. By making the interaction so cumbersome and slow, big companies make it very difficult for themselves to exploit the very innovation they depend on.
Companies that are able to move quickly and get contracts signed efficiently have a big competitive advantage. I just wish there were more of them.
Add new comment