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'''Headline''': ''Don't design your plane to be waterproof in case it falls into the sea. Design it so it doesn’t crash.'' | '''Headline''': ''Don't design your plane to be waterproof in case it falls into the sea. Design it so it doesn’t crash.'' | ||
In its original physical manufacturing sense, {{wasteprov|over-processing}} refers to ''unnecessary complexity in design'', whether brought about through carelessness or over-specification. The production cost of features that realistically no-one will ever use is as much a form of wastage as any. | |||
===={{ | The chief production cost in contract negotiation is ''time'' and ''human resource''. The longer a contract takes to read, and the more it invites challenge<ref>Which will be, in part, a function of its length - there more there is to read, the more there is to challenge.</ref>, the more expensive it is to produce. ''Any'' time taken over the bare minimum needed and ''any'' client challenge to a term that is not really vital the the firm’s risk protection strategy is a waste in the contract negotiation process. | ||
As we have seen, client challenges to credit terms create their own additional wastes ({{wasteprov|waiting}}, {{wasteprov|transport}}, as well as risking of {{wasteprov|overproduction}} and {{wasteprov|defects}}). | |||
In contract negotiation, {{wasteprov|over-processing}} arises in two chief ways: | |||
===={{risk|Risk controller}}s are short an option==== | |||
[[Risk controller]]s are short an option. They are incentivised to err on the side of caution: they don't get a bonus if the client generates extra revenue, but they will be regarded as having failed if the client blows up owing the firm money<ref>In theory. But see the [[circle of escalation]].</ref>. So no wonder there are overreaches in the terms they require in general client documentation. | [[Risk controller]]s are short an option. They are incentivised to err on the side of caution: they don't get a bonus if the client generates extra revenue, but they will be regarded as having failed if the client blows up owing the firm money<ref>In theory. But see the [[circle of escalation]].</ref>. So no wonder there are overreaches in the terms they require in general client documentation. | ||
While credit teams do not typically monitor or collect data about the frequency with which they invoke specific credit terms, we know for sure that: | |||
*Well over 90 percent of client contracts never default at all, | |||
*Of those contracts which ''are'' closed out, in nearly all cases the cause of default is failure to pay or insolvency. These two events of default are generally not challenged during the negotiation process (it is hard to argue that if you are bust or you fail to make payments, your counterparty should not be able to terminate your contract! | |||
====[[Barnacles]] and the effluxion of time==== | ====[[Barnacles]] and the effluxion of time==== | ||
''“[[Rework - Book Review|Policy is institutional scar tissue]]”'' - [[Jason Fried]]<br> | ''“[[Rework - Book Review|Policy is institutional scar tissue]]”'' - [[Jason Fried]]<br> | ||
Over time contract templates will inevitably accumulate what I call | Over time contract templates will inevitably accumulate what I call “[[barnacle|barnacles]]” — ''ad hoc'' responses to historic situations, reactions to unexpected risks, flourishes to cater for a particularly truculent counterparty. If a client insists on adding redundant (or mistaken) terms “[[for the avoidance of doubt]]”, the pragmatic response is to agree them and move toward execution. But, as people move on the reason for these concessions will be lost to time, and the instinct of successive negotiators upon encountering them will be, “I don't know why that is there, but whoever put it in must have had a reason, so the safest thing is to leave it there.” | ||
This will lead to complexity in templates, additional length of templates and a proliferation of different templates. | |||
'''Summary''': '' " <br> | '''Summary''': ''Over-processing arises through excessive caution in credit terms and through the natural, pragmatic process of getting negotiations across the line. The length and complexity of documents creates significant {{wasteprov|over-rprocessing}} wastage and, as a by-product, creates significant {{wasteprov|waiting}} and {{transport}} wastage as well through unnecessary [[escalation|escalations]]." <br> |