|The design of legal products
Headline: Over to you, Chuck
Whenever no-one is actively handling work in progress, in the sense of marking it up, or arguing with someone (internally or externally) about it, it is waiting. In a typical negotiation that is likely to be more than 90% of the time.
How do these waiting periods arise? Well, it’s not hard to understand.
- Waiting on the client: The negotiation process requires client input. waiting on that is largely but not entirely outside your control — if the client doesn't read emails, there’s only a certain number of polite, passive aggressive reminders before you just have to shut up and wait. But let’s say the client is looking at the document: the shorter, easier and less objectionable your document is, the faster the client’s review, all other things being equal,and the faster it will come back and with fewer comments. Each comment requires action and implies more waiting. Right?
- So, how to make your client documents easier and less objectionable?
- Make it shorter: the fewer words there are to read, the faster the client will read it.
- Make it nicer: Don’t include terms you don’t really need. Do you really need that NAV trigger? Before you say yes, ask yourself, “how many times have I ever actually used a NAV trigger?”
- Talk, don’t email: You guarantee some waiting time if you email with your comments and questions. If you pick up the phone, you just might clear the questions on the spot.
- Waiting on an internal escalation: Eventually the client replies, and it doesn’t like that NAV trigger. Per policy, you must escalate this to Credit team. This involves composing and sending an email, then waiting for credit to reply. That is a 15 sec decision, but it will take 24 hours (on a good day) to achieve. Reduce this wait time (and improve data control) by:
- Standardising terms to pre-approve obvious giveaways empowering negotiators to approve common points of contention; '
- Recalibrating standards to reduce the gap between “starting offer” and “walkaway point”;
- Standardising the escalation process to capture metadata about variations from the requested terms
- Talk, don’t email: See above. Same principle.
Summary: Most of your negotiation time is dead air. Fix that.
- I totally made that up, but I think it is conservative. Over a three-month ISDA negotiation, if you aggregate actual time physically editing a document, typing escalation emails and speaking to internal stakeholders and the client on Skype about the content of the document, would that be 24 hours? Highly doubtful. but let's be a little crazy and call it 48 hours. Forty eight straight hours - six full working days — of doing nothing but typing, editing and discussing. Over a three month period, 48 hours is 2.1% of the total time. So waiting time is 97.9% of the process.
- But see overproduction — a client who isn't answering your emails is disinclined — or maybe isn’t under that much pressure — to respond to you. What does this say about how much it values your business? Is that really the million buck prospect?
- See over-processing.
- The answer you will get is “I have absolutely no idea because we don’t keep data on that.” The actual answer, for the fiendishly interested, is never.
- Credit will, eventually, be fine with dropping the NAV trigger — see over-processing.