Playbook

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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.

Thus, you maximise your efficiency when operating within a fully understood environment.

Escalation

So, no playbook will ever say, “if the customer does not agree, do what you think is best.” They will say, “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 episodic escalation, the control function 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.

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

Example

For example:

Risk Control Department A has stipulated 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 without further permission. If customer B should not agree to Y will there be an escalation, back to department A, who may sanction a further derogation to Z. The negotiator trots back to the client with Z.

Should Client A not accept Z either, there will follow an extended firefight between risk personnel from either organisation — conducted through their uncomprehending negotiation personnel — which will culminate at final agreement at position Q.

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.

Design and user experience

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

But look at this from above: only positions X through Y are codified. Risk still had to improvise to make the key decision, Q. The playbook, and all those wonderful systems and controls, were in play only between X and Y, which turned out to be a mile behind what the front line.

No doubt this will generate copious management information and statistics with which managers can regale their superiors with assorted Gantt charts, dashboards and traffic lights. But all these gears are engaged, and all the systems and controls are running, over the boring bit of the process.

And, at a cost: following this byzantine process and gathering this data over the boring part of the exercise occupies personnel and takes time: negotiation for all clients takes longer, and the gears, rules and triage are not engaged exactly the data set might get 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 expend effort mechanising an area of the battlefield behind your opponent’s lines which you have no realistic expectation of occupying?

Form and substance

Negotiation snags are either formal or substantive.

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.

Substantive hitches arise when clients do understand your terms find your legal terms fundamentally unreasonable.

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.

The answer to both lies not in playbooks and organisational heft, but in improving product design and user experience. Making your documents better.

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.

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.

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?

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'.

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.

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, 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.

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.

Why deliberately aggravate your clients just for the opportunity to performatively 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?

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.

See also

• Process
• Tedium
• Escalation
• Control function
• Internal audit
• Algorithm
• Heuristic