Tag Archives: Contingency contracts

Meetings devouring your life? Contingency contracts to the rescue

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It’s a common organizational problem—probably one of the MOST common: the proliferation of long meetings and inability to get anything else done. Here as in other areas, however, negotiation research can help. Indeed, I suspect a negotiation concept called contingency contracts might actually make many meetings—and thus much of organizational life—more negotiable.

There are really two interrelated problems with meetings: their number and their length. Let’s deal with the second, and specifically with the fact that it seems like many meetings should really last about half as long. The problem, of course, is convincing our colleagues: WE know our meetings don’t need to last that long, but the people around us are just as sure they do. For example, we’re certain a discussion of the company’s new widget strategy requires no more than 30 minutes, but the widget strategizer thinks we’ll certainly need an hour.

How do many people respond? By scheduling an hour-long meeting in the interest of avoiding unnecessary conflict and wishing on their lucky stars that it takes less. But of course, it never does.

So consider an alternate strategy: What if you said to the widget strategizer, “Widget strategizer, you think we need an hour, and I suspect we need a half-hour. I don’t know which one of us is right, but what if we scheduled a half-hour right now and then regrouped for an additional 30 minutes later if necessary?”

And then, what about scheduling the initial meeting such that you and—even better—the widget strategizer have a hard stop after a half-hour?

Assuming your initial estimate was accurate, I think you’ll miraculously see the widget strategy requiring no more than 30 minutes of discussion.

What does this example have to do with negotiation? The basic situation is all too common in negotiations: Two negotiators are deadlocked on their differing expectations of the future. A wholesaler thinks a holiday sweater is going to sell like hotcakes—a retailer’s not so sure. A used car dealer is sure the aging transmission is just fine—the buyer’s dubious.

When negotiators get stuck on differing expectations of the future, they usually fight and quite often impasse. But negotiation research and theory urges them to sign what’s called a contingency contract—a bet about the future—instead. They agree that if the retailer doesn’t sell 15,000 sweaters by December 31st or the transmission dies within a year, for example, the wholesaler or car dealer pay a rebate. If the sweaters sell like hotcakes or the transmission runs just fine, the retailer or car buyer pay a surcharge. The nice thing about such agreements is that, assuming no one’s bluffing, everyone thinks they’re right at the outset. They’re not, and the winner will eventually shine through, but their universal confidence makes a deal possible now.

Although your meeting proposal doesn’t involve rebates or surcharges—it’s more about time than money—time IS money in organizations, and the structure of the deal is quite similar. As in negotiations, contingencies contracts can make our organizational meetings more negotiable.

Of course, contingencies contracts aren’t a cure-all. In negotiations, for example, you wouldn’t want to reach such an agreement with a used car dealer who will move his entire operation to an undisclosed location after selling you a clunker. And in an organizational setting, you wouldn’t want to make such an arrangement with someone who has the supervisory right to tell you how long to sit in a room, or someone who knows a great deal more than you do about widget strategizing.

Still, bets about the future are not always seedy arrangements confined to the Las Vegas Strip. Sometimes, they can make your negotiations and meetings more negotiable. Give it a try—I bet you’ll agree!

Stop wasting food! Kids and contingency contracts

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The world sometimes seems populated with two types of children: those who refuse to eat anything you put in front of them, and those who want to eat everything in the fridge—or at least say so. Previous posts have considered the former type, but I haven’t yet considered the latter. In the interest of getting 2017 off on a negotiable foot, I thought I’d consider the overeager eater now.

Consider the following, common pattern—not that I’ve experienced it recently or repeatedly. A young child, say four going on five, is offered an array of dinner options. She responds by saying: “I want pizza, apples, and a hotdog.” Now, the child speaks with such confidence that you can see she’s certain she will consume all of these foods. But you know—based on many or even innumerable prior experiences—that she will not. She’ll get halfway through the apples, freshly heated hotdog steaming on her plate, and say, “I’m full.”

Faced with this situation, the common impulse is to argue. “You won’t eat all that, little Petunia.” To which little Petunia will surely retort: “Yes I will!” And thus begins a pattern of disagreement and dissension that will carry all the way through dinner, spoiling everyone’s meal.

Luckily, negotiation research offers a better way: the contingency contract. In plain English, contingency contracts are bets about future events—agreements to be settled when the fickle hand of fate eventually casts its die. Negotiators use them when they disagree about an uncertain future event—next quarter’s sales figures, perhaps, or the performance of a particular piece of technology being purchased.

But can’t you, the frustrated parent, also use a contingency contract to deal with little Petunia’s obstinate insistence on the three dishes? Can’t you say something like: “Little Petunia dearest, I’ll heat up the pizza and cut up the apples for you, as requested. And I’ll take the hotdogs out of the fridge and place them right here next to the microwave. If I see you gobble up the pizza and apples and hear that you’re still hungry, why, then I’ll happily heat the dogs. It’ll take just a minute. But if you start feeling full sometime before the dogs, then I’ll return them to the fridge for future consumption.”

Voila! Based on Petunia’s sheer certainty that she will eat all three items, she should be more than happy to oblige, sure as she is that this solution will result in her eating the coveted hotdogs. And, given your comparable certainty that the apples will fully satiate her, you should be more than happy with this solution too, sure as you are that the dogs will go right back in the fridge, unspoiled and unwasted. That’s the great part about contingency contracts: both sides think they’ll get exactly what they want.

Of course, they won’t: the fickle hand of fate will cast the die. Petunia will either have room for the dogs or she won’t, and she’ll get what she initially wanted or you will. So one of you will eventually have to admit you were wrong. Seeing as the consequences of that admission are either a comfortably settled stomach or a fully satiated child, though, neither of you should be particularly unhappy with that admission. And both of you should be happy that you avoided pre-dinner warfare.

In short, contingency contracts offer useful end-runs around debates about the future. Faced with differing predictions, don’t waste time and energy arguing—no one ever wins. Instead, let the fickle hand of fate cast a die, then agree to settle up later.

Have you ever used a contingency contract, with a child or otherwise?