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{{A|negotiation|
{{A|negotiation|
{{Image|Lear|jpg|A [[playbook]] yesterday.}}
{{Image|how playbooks work|png|A [[playbook]] yesterday.}}
}}{{d|{{PAGENAME}}|/ˈpleɪbʊk/|n}}
}}{{quote|“Make your documents better. Stop wasting everyone’s time — including your own — with pantomimes.”}}
 
{{d|{{PAGENAME}}|/ˈpleɪbʊk/|n}}


A comprehensive set of guidelines, policies, rules and fall-backs for the [[legal]] and [[credit]] terms of a {{t|contract}} that you can hand to the itinerant [[school-leaver from Bucharest]] to whom you have off-shored your [[master agreement]] {{t|negotiation}}s.  
A comprehensive set of guidelines, policies, rules and fall-backs for the [[legal]] and [[credit]] terms of a {{t|contract}} that you can hand to the itinerant [[school-leaver from Bucharest]] to whom you have off-shored your [[master agreement]] {{t|negotiation}}s.  


She will need it because without it, she won’t have the first clue about the [[Subject matter expert|ISDA]] [[negotiation]]s, and will need to consult it to decide what do to should the counterparty object, as it certainly will, to the preposterous terms her [[risk controller|risk]] team has insisted go in the first draft of the {{t|contract}}.
She will need it because otherwise she won’t have the first clue what do to should customers object, as they certainly will, to the preposterous terms your [[risk controller|risk]] team has insisted go in the first draft of your {{t|contract}}<nowiki/>s.
 
A well-formed playbook ought, therefore, to be like assembly instructions for an Ikea bookshelf. 
 
But Ikea bookshelves do not answer back.  


Playbooks derive from a couple of mistaken beliefs: one, that a valuable business process can be “solved” and run as an [[algorithm]],<ref>This is a bad idea. See {{author|Roger Martin}}’s {{br|The Design of Business: Why Design Thinking is the Next Competitive Advantage}}.</ref> and two, that, having been solved so that it no longer needs an expensive expert, it makes sense to have an ''in''expensive ''in''expert do it, rather than a machine.
=== Triage ===
As far as they go, playbooks speak to the belief that ''the main [[risk]] lies in not following the rules.''


In most cases, using a machine is ''also'' a bad idea just less bad than using a human.<ref>Assumption two in fact falsifies assumption one. If it really is mechanistic, there is no reason to have a costly, capricious human “helping to manage” — i.e., ''interfering in'' the process.</ref>
They are of a piece with the [[doctrine of precedent]]:  go, until you run out of road, then stop and appeal to a higher authority. By [[Triage|triaging]] the onboarding process into “a large, easy, boring bit” which, in most cases, will be all of it — and “a small, difficult, interesting bit”, playbooks aspire to “solve” that large, easy, boring bit by handing it off to [[Proverbial school-leaver from Bucharest|a school-leaver from Bucharest]].  


=== Playbooks as “business as usual” ===
Doing large, easy, boring things should not, Q.E.D., need an expensive expert: just someone who is not easily bored, can competently follow instructions and, if she runs out, knows who to ask. She thus tends tilled, tended and fenced land: boundaries have been drawn, tolerances set, parameters fixed, risks codified and processes fully understood. Our children may safely gambol in these fields, where nothing perfidious can befall them. 
Playbooks can handle “business as usual”: they map out the known world: tilled, tended, fenced, arable land upon whose fertile soil one will find no conundrums, mysteries or perplexities. Boundaries have been drawn, tolerances set, parameters fixed, risks codified and processes fully understood.


Playbooks maximise efficiency when operating within a fully understood environment. They are inhabited exclusively by [[known known]]s. They are like assembly instructions for an Ikea bookshelf, with the exception that Ikea bookshelves tend not to answer back.
=== Escalation ===
Playbooks maximise efficiency when operating within a fully understood environment. None will ever say, “if the customer does not agree, ''do what you think is best''.” Instead, they will say things like, “any deviations must be [[Escalation|escalated]] for approval by [[litigation]] [[and/or]] a [[Credit]] officer of at least C3 rank”,


As far as they go, playbooks speak to the belief that ''the main [[risk]] lies in not following the rules'': they are of a piece with the [[doctrine of precedent]]: when you run out of road, you must appeal to a higher authority.  
The idea is to set up a positive feedback loop such that, through anecdotal [[escalation]], concerned [[control function|risk control groups]] can further develop the playbook to keep up with the times and deal with novel situations, the same way the [[common law]] courts [[Doctrine of precedent|have done since time immemorial]]. The playbook is a living document.<ref>This rarely happens in practice. [[Control function]]s make ''[[ad hoc]]'' exceptions to the process, do not build them into the playbook as standard rules, meaning that the [[playbook]] has a natural sogginess (and therefore inefficiency).</ref>


So no [[playbook]] will ever say, “if the counterparty will not agree, do what you think is best.” All will say, “any deviations must be approved by [[litigation]] and at least one [[Credit]] officer of at least C3 rank.
In practice, this does not happen because no-one has any time or patience for playbooks.


Thus you [[escalation|escalate]] to a [[control function]], the idea being that the [[control function]] will further develop playbook to deal with each new situation, the same way the [[common law]] courts do — ''[[stare decisis]]'' — and will feed its decision down into the playbook of established [[process]].<ref>This rarely happens in practice. [[Control function]]s make ''[[ad hoc]]'' exceptions to the process, do not build them into the playbook as standard rules, meaning that the [[playbook]] has a natural sogginess (and therefore inefficiency).</ref> In practice, this does not happen because no-one has any time or patience for playbooks.
===Example===
For example, illustrated in the panel above:


===Playbooks, design and user experience===
:A playbook stipulates starting position ''X'', but allows that if a customer of type B does not agree to ''X'', a satisfactory compromise may be found at ''Y''.
Bearing in mind a playbook uses fixed instructions to delegate administrative tasks to unskilled personnel, it only works within normal operating conditions. As long as clients are predictable, and compliant, all will be well.  
:The playbook “empowers” the negotiator to offer ''Y''  — some way yet from any sort of reasonable market standard — without further permission.
:Should customer B not agree to ''Y'', there must be an [[escalation]], to a junior risk officer, who may sanction a further derogation to ''Z  —'' still unnecessarily conservative, but no longer laugh-out loud preposterous. The negotiator trots back to the customer with ''Z''.
:Should customer not accept ''Z'' either, there will follow an extended firefight between risk personnel from either organisation — conducted through their uncomprehending negotiation personnel — taking the negotiation through ''Z''', which will culminate with escalation to sales who might optimistically suggest ''N'', and if that doesn’t do the trick, [[senior relationship management]] will be wheeled in, and will cave instantly to the client’s demand to reach a craven surrender at position ''Q'', some way ''past'' the market standard and anything remotely necessary or reasonable.


For example:
By codifying this process, so the argument goes, not only may we engage materially cheaper negotiation personnel, but we can triage our clients and improve our systems and controls.


:Risk Control Department A has stipulated starting position ''X'', but allows that if Client B does not agree to ''X'', a satisfactory compromise may be found at ''Y''.
But ''really''.
:The playbook accordingly “empowers” the negotiator to offer ''Y'' without resorting to A for permission. Only if Client B should not agree to ''Y'' will there be an [[escalation]], back to Risk Control Department A who may sanction a further derogation from ''X'' to ''Z''.
:Should Client A not accept ''Z'' either, there will then follow an extended firefight between risk personnel representing either organisation — albeit conducted through their uncomprehending negotiation personnel in Bucharest — which will culminate at final agreement at position ''Z'''.


By codifying this process, so the argument goes, not only may we engage materially cheaper negotiation personnel, but we effectively triage our clients and improve our systems and controls over the previous process, whereby the onboarding team just made it up as they went along.
=== Design and user experience ===
We have certainly ''added to'' our systems and controls; no doubt about that.


We have certainly added to our systems and controls; no doubt about that.
But only positions ''X'' through ''Y'' are codified in the playbook. All those wonderful systems and controls were in play only between ''X'' and ''Y'' which turned out, ''quelle surprise'', to be a mile behind the front line.  


But look at this from above: only positions ''X'' through ''Z'' are in codified. Risk personnel still had to improvise to make the key decision, ''Z'''. The playbook, and all those wonderful systems and controls, were in play only for a portion of the negotiation between ''X'' and ''Y'', being a position a mile behind what turned out to be the front line.  
No doubt middle-management can regale its superiors with assorted [[Gantt chart|Gantt charts]], [[dashboard]]s and verdant [[traffic lights]] attesting to how well the [[documentation unit]] is operating. But all these gears are engaged, and all the systems and controls are running, ''over the easy, boring bit'' ''of the process''.  


No doubt this will generate copious  [[management information and statistics]] with which middle management can regale their superiors with Gantt charts, [[dashboard]]s and [[traffic lights]] about the negotiation process. But all these gears are involved, and all all the systems is running over the uninteresting part of the process.  
And, at a cost: following this byzantine process to gather this data occupies people and takes time: ''all'' negotiations take longer, and none of these gears, rules and triage are engaged at any point where the data might be interesting: the exceptions.


At a cost: gathering all this data occupies working days and takes time: negotiation for ''all'' clients takes longer, and now the portfolio will be distributed over a range of points between ''X'' and ''Z'', making practical control portfolio more difficult.
The conundrum: since we know our walk-away position is Z (and, at a push, Q) ''why are we starting at X''? ''Why is there a fall-back to Y?''  


The client will not enjoy the negotiation process any more than you will, if you are presenting your client with its first experience of your organisation as the image of impersonal bureaucracy. With respect for our friends in Romania, your new clients would prefer to be hand-held by a salesperson in London than a school leaver in a call centre in Bucharest.<ref>Granted, in this day and age, your client is almost certainly housing its negotiation probability out of a call centre in Bucharest, too. </ref>
Why mechanise an area of the battlefield behind your opponent’s lines, which you know you have no realistic expectation of occupying?


=== Form and substance ===
=== Form and substance ===
Negotiation snags are either ''formal'' or ''substantive''.  
When it comes to it, negotiation snags are either ''formal'' or ''substantive''. ''Formal'' hitches arise when clients challenge terms they don’t ''understand''. ''Substantive'' hitches arise when clients challenge terms they ''do'' understand, because they are ''unreasonable''.  


Formal hitches arise when clients (or their negotiation teams, which will also have been outsourced to Bucharest) don’t ''understand'' your terms and therefore challenge them.  
Both scenarios are likely; often at once: if, as tends to be the case, people in your ''own'' organisation don’t understand your documents, it is a bit rich expecting your clients to.<ref>Best example is the [[hypothetical broker dealer]] valuation terms in a [[synthetic equity swap]].  The JC, once responsible for legal coverage of a synthetic equity business, asked what the hell these terms, which were gumming up every single negotiation, were for. No-one knew: all kinds of contradictory ''hypotheses'' were offered by [[tax]] advisors, [[Compliance professional|compliance]] and [[Credit risk|risk officers]] and [[operations]] personnel, but they converged on the simple idea: ''everyone else in the market has this concept in their docs''. </ref>


Substantive hitches arise when clients ''do'' understand your terms find your legal terms fundamentally unreasonable.
If your walk away points are genuinely at a point the market will not accept, you do not have a business. Presuming you ''do'' have a business, assume any line drawn ''behind'' the front line is for [[Pantomime dromedary|pantomime]] purposes only. It ''must'' be a false floor. Allow a little gentle pressure on [[senior relationship management]], and it will turn out to be.  


Both scenarios are likely; often at once: it’s likely people in your ''own'' organisation won’t understand your documents, so it is a bit rich expecting your clients to.<ref>Best example is the [[hypothetical broker dealer]] valuation terms in a [[synthetic equity swap]].  </ref>
That being the case the answer to formal and substantive hitches lies not in playbooks, systems and controls or organisational heft, but in improving product [[design]] and [[user experience]].


The answer to both lies not in playbooks and organisational heft, but in improving product [[design]] and [[user experience]]. ''Making your documents better''.  
''Make your documents better''. Stop wasting everyone’s time — including your own — with ''pantomimes.''


===Simplify===
===Simplify===
For confusing and often-misunderstood terms, the answer is straightforward, but difficult: ''simplify'' them. This is usually not just a matter of language, but logical structure — though simplifying language often illuminates convoluted logical structures too.  
For misunderstood documents, the answer is straightforward, but difficult: ''simplify'' them. This is usually not just a matter of language, but logical structure — though simplifying language often illuminates convoluted logical structures too. Pay attention to [[semantic structure]].  


And, while financial markets drafting is famously dreadful, emerging technologies can help: run your templates through a GPT-3 engine and ask it to simplify them. It won’t be perfect and will make errors, but ''it is free''. Checking for errors and running quality control is what ''you'' are for. It will break the back of an otherwise impossible job.
And, while financial markets drafting is famously dreadful, emerging technologies can help: run your templates through a [[GPT-3]] engine to simplify them. It won’t be perfect and will make errors, but ''it is free''. Error-checking and quality control is what your SMEs are for. Technology can break the back of an otherwise impossible job.


===Remove false floors===
===Remove false floors===
If you know you will settle at ''at least'' ''Z'', then what are you doing starting at X? Other than a clink of glasses in the risk team for a job well done, what have you achieved?
If you know you will settle at ''at least'' ''Z'', then ''don’t start at X''.
 
Assuming the goal is to transact, your role is to get to [[Consensus ad idem|“yes”]] as fast as possible. That’s it.
 
There are no prizes for style, difficulty or technique in hand-to-hand combat at points ''X'', ''Y'' and ''Z'' if you don’t agree until ''Q''. Identify walk away points and ''start'' with them.


Your role is to get to the point of agreement as fast as possible. There are no prizes for time and energy expended in hand-to-hand combat at points ''X'', ''Y'' and ''Z'', if you don’t agree until Z'.
“But the client needs to feel like it has ''won'' something”.


Yes, these are marginally preferable risk control terms, but if they are ''meaningfully'' better, then ''you should not be prepared to go as far as Z''.
You will hear this a lot. It is a self-serving justification for deliberately starting at a place clients won’t like because it keeps people in a job. Invite anyone saying this to give concrete examples where this worked as a strategy, where going straight to the final position would not have. Why deliberately aggravate your clients, adopting an unreasonable position, just to [[performative]]ly climb down from it at the first objection? How does ''that'' create a better impression than presenting a clear, coherent and fair document in the first place?


Identify walk away points and ''start'' with them.
External advisors do like to be seen to achieve something — it helps justify their costs — but only to an extent. They tend these days to be on fixed fees, and will quickly tire of grandstanding on points they know you will not move on. If they think you will move, on the other hand, they will happily grandstand. Who doesn’t like a bit of pantomime when you get to win it! Therefore, standing ground is a good tactic. It sends a clear message.
===Legaltech as enabler of sloppy thinking===
Here is a direct quote from a [[legaltech start-up conference|LegalTech start-up conference]] pitch:


“But the client needs to feel like it has ''won'' something”.
{{Quote|“We love automation. We love automating complex things. Our app can handle anything with its structured questions: it can add new clauses, new schedules. The complexity is mind-bending.”}}


You will hear this a lot, as a self-serving justification for deliberately starting at a place clients won’t like, but there’s little data on it, and nor much reason to believe it is true.  
Here is where [[Legaltech|LegalTech]]’s great promise confounds us. Legaltech can accommodate any complication we can be bothered to dream up, as if that is a good thing. It offers the capacity ''to do tedious jobs faster''. It allows more variability, optionality and complication within your standard forms.


With external advisors there is certainly a pressure to be seen to be doing something — but they tend to be on fixed fees and can equally well market themselves as having already reviewed the standard form and being signed off.
But this gets the imperative exactly backward.  ''You do not want '''more''' complication in your standard forms. You want '''less'''. You want your contracts to all to be the same.''


Why deliberately aggravate your clients just for the opportunity to [[performative]]ly climb down at the first objection? How does that create a better impression (off-market, disorganised, weak) than presenting a clear, coherent and fair document in the first place?
Embrace complication not because you can, but ''because you have no other choice''. When you are [[Design|designing]] [[user experience]] for process that is meant to be standard across your platform you absolutely ''do'' have another choice.  
===[[Legaltech]] as enabler of sloppy thinking===
And here is where the great promise to legaltech stumbles. It offers the capacity to do clerical jobs faster. It opens the door to infinite variability, optionality, within your standard forms. Tech can now accommodate any complications in your standard forms that you can be bothered dreaming up.  


''You do not want compllination''
{{sa}}
{{sa}}
*[[Process]]
*[[Process]]
*[[Tedium]]
*[[Escalation]]
*[[Escalation]]
*[[Control function]]
*[[Control function]]
Line 88: Line 101:


{{ref}}
{{ref}}
<references />

Latest revision as of 12:39, 5 December 2023

Negotiation Anatomy™


A playbook yesterday.
Tell me more
Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

“Make your documents better. Stop wasting everyone’s time — including your own — with pantomimes.”

Playbook
/ˈpleɪbʊk/ (n.)

A comprehensive set of guidelines, policies, rules and fall-backs for the legal and credit terms of a contract that you can hand to the itinerant school-leaver from Bucharest to whom you have off-shored your master agreement negotiations.

She will need it because otherwise she won’t have the first clue what do to should customers object, as they certainly will, to the preposterous terms your risk team has insisted go in the first draft of your contracts.

A well-formed playbook ought, therefore, to be like assembly instructions for an Ikea bookshelf.

But Ikea bookshelves do not answer back.

Triage

As far as they go, playbooks speak to the belief that the main risk lies in not following the rules.

They are of a piece with the doctrine of precedent: go, until you run out of road, then stop and appeal to a higher authority. By triaging the onboarding process into “a large, easy, boring bit” — which, in most cases, will be all of it — and “a small, difficult, interesting bit”, playbooks aspire to “solve” that large, easy, boring bit by handing it off to a school-leaver from Bucharest.

Doing large, easy, boring things should not, Q.E.D., need an expensive expert: just someone who is not easily bored, can competently follow instructions and, if she runs out, knows who to ask. She thus tends tilled, tended and fenced land: boundaries have been drawn, tolerances set, parameters fixed, risks codified and processes fully understood. Our children may safely gambol in these fields, where nothing perfidious can befall them.

Escalation

Playbooks maximise efficiency when operating within a fully understood environment. None will ever say, “if the customer does not agree, do what you think is best.” Instead, they will say things like, “any deviations must be escalated for approval by litigation and/or a Credit officer of at least C3 rank”,

The idea is to set up a positive feedback loop such that, through anecdotal escalation, concerned risk control groups can further develop the playbook to keep up with the times and deal with novel situations, the same way the common law courts have done since time immemorial. The playbook is a living document.[1]

In practice, this does not happen because no-one has any time or patience for playbooks.

Example

For example, illustrated in the panel above:

A playbook stipulates starting position X, but allows that if a customer of type B does not agree to X, a satisfactory compromise may be found at Y.
The playbook “empowers” the negotiator to offer Y — some way yet from any sort of reasonable market standard — without further permission.
Should customer B not agree to Y, there must be an escalation, to a junior risk officer, who may sanction a further derogation to Z — still unnecessarily conservative, but no longer laugh-out loud preposterous. The negotiator trots back to the customer with Z.
Should customer not accept Z either, there will follow an extended firefight between risk personnel from either organisation — conducted through their uncomprehending negotiation personnel — taking the negotiation through Z', which will culminate with escalation to sales who might optimistically suggest N, and if that doesn’t do the trick, senior relationship management will be wheeled in, and will cave instantly to the client’s demand to reach a craven surrender at position Q, some way past the market standard and anything remotely necessary or reasonable.

By codifying this process, so the argument goes, not only may we engage materially cheaper negotiation personnel, but we can triage our clients and improve our systems and controls.

But really.

Design and user experience

We have certainly added to our systems and controls; no doubt about that.

But only positions X through Y are codified in the playbook. All those wonderful systems and controls were in play only between X and Y which turned out, quelle surprise, to be a mile behind the front line.

No doubt middle-management can regale its superiors with assorted Gantt charts, dashboards and verdant traffic lights attesting to how well the documentation unit is operating. But all these gears are engaged, and all the systems and controls are running, over the easy, boring bit of the process.

And, at a cost: following this byzantine process to gather this data occupies people and takes time: all negotiations take longer, and none of these gears, rules and triage are engaged at any point where the data might be interesting: the exceptions.

The conundrum: since we know our walk-away position is Z (and, at a push, Q) why are we starting at X? Why is there a fall-back to Y?

Why mechanise an area of the battlefield behind your opponent’s lines, which you know you have no realistic expectation of occupying?

Form and substance

When it comes to it, negotiation snags are either formal or substantive. Formal hitches arise when clients challenge terms they don’t understand. Substantive hitches arise when clients challenge terms they do understand, because they are unreasonable.

Both scenarios are likely; often at once: if, as tends to be the case, people in your own organisation don’t understand your documents, it is a bit rich expecting your clients to.[2]

If your walk away points are genuinely at a point the market will not accept, you do not have a business. Presuming you do have a business, assume any line drawn behind the front line is for pantomime purposes only. It must be a false floor. Allow a little gentle pressure on senior relationship management, and it will turn out to be.

That being the case the answer to formal and substantive hitches lies not in playbooks, systems and controls or organisational heft, but in improving product design and user experience.

Make your documents better. Stop wasting everyone’s time — including your own — with pantomimes.

Simplify

For misunderstood documents, the answer is straightforward, but difficult: simplify them. This is usually not just a matter of language, but logical structure — though simplifying language often illuminates convoluted logical structures too. Pay attention to semantic structure.

And, while financial markets drafting is famously dreadful, emerging technologies can help: run your templates through a GPT-3 engine to simplify them. It won’t be perfect and will make errors, but it is free. Error-checking and quality control is what your SMEs are for. Technology can break the back of an otherwise impossible job.

Remove false floors

If you know you will settle at at least Z, then don’t start at X.

Assuming the goal is to transact, your role is to get to “yes” as fast as possible. That’s it.

There are no prizes for style, difficulty or technique in hand-to-hand combat at points X, Y and Z if you don’t agree until Q. Identify walk away points and start with them.

“But the client needs to feel like it has won something”.

You will hear this a lot. It is a self-serving justification for deliberately starting at a place clients won’t like because it keeps people in a job. Invite anyone saying this to give concrete examples where this worked as a strategy, where going straight to the final position would not have. Why deliberately aggravate your clients, adopting an unreasonable position, just to performatively climb down from it at the first objection? How does that create a better impression than presenting a clear, coherent and fair document in the first place?

External advisors do like to be seen to achieve something — it helps justify their costs — but only to an extent. They tend these days to be on fixed fees, and will quickly tire of grandstanding on points they know you will not move on. If they think you will move, on the other hand, they will happily grandstand. Who doesn’t like a bit of pantomime when you get to win it! Therefore, standing ground is a good tactic. It sends a clear message.

Legaltech as enabler of sloppy thinking

Here is a direct quote from a LegalTech start-up conference pitch:

“We love automation. We love automating complex things. Our app can handle anything with its structured questions: it can add new clauses, new schedules. The complexity is mind-bending.”

Here is where LegalTech’s great promise confounds us. Legaltech can accommodate any complication we can be bothered to dream up, as if that is a good thing. It offers the capacity to do tedious jobs faster. It allows more variability, optionality and complication within your standard forms.

But this gets the imperative exactly backward. You do not want more complication in your standard forms. You want less. You want your contracts to all to be the same.

Embrace complication not because you can, but because you have no other choice. When you are designing user experience for process that is meant to be standard across your platform you absolutely do have another choice.

See also

References

  1. This rarely happens in practice. Control functions make ad hoc exceptions to the process, do not build them into the playbook as standard rules, meaning that the playbook has a natural sogginess (and therefore inefficiency).
  2. Best example is the hypothetical broker dealer valuation terms in a synthetic equity swap.  The JC, once responsible for legal coverage of a synthetic equity business, asked what the hell these terms, which were gumming up every single negotiation, were for. No-one knew: all kinds of contradictory hypotheses were offered by tax advisors, compliance and risk officers and operations personnel, but they converged on the simple idea: everyone else in the market has this concept in their docs.