In the old days when any two entities - persons or organizations - had a contract the biggest concern over breaking that contract was the legal and financial repercussions.
Don't get me wrong, reputation management still meant something in the old days. When you shook hands you were putting your reputation on the line. While the 'contract' might not hold you to everything implied during your initial discussions, burn a client and you would get a reputation for doing so.
I once knew a COO who told me that contracts don't mean anything really (as you can always hire lawyers to ensure you are covered no matter what unfolds, hence why corporate contracts are so lengthy with caveats) and that the only thing that really matters is someone's hand shake. If they shake your hand and later stab you in the back, no contract in the world will ever cover you in any kind of working relationship with them in the future.
In the past when a contract was broken, the reputation damages were minimal and kept to a small network of relevant stakeholders.
Today though, burn someone on a contract, whether to the full extent of the contract or even to the extent of the spirit of the contract, and you (potentially) have a PR mess on your hands.
I came across a story on the HuffPost that provides the perfect example of this - Amanda House, YoPro Co-Creator: Loblaws Reneged On Deals, Ruined My Business.
Long story short, Loblaws said they wanted their product, they went and got financing to create the product, then Loblaws said they no longer wanted the product and left Amanda hanging. You can hear the story in her own words....
Now, I'm not a lawyer, but I can tell you this, the damage of screwing over a 'mom and pop' operation is HUGE. Loblaws likely has their butts covered according to contract law, I'd be very surprised if they didn't. So by the letter of the law they are probably covered, but by the spirit of the law they probably are not.
I can say this, Amanda's video convinced me to stop shopping at Loblaws.
There's an old rule in retail sales, one pissed off customer will tell at least 10 other people they know about the bad service they got.
So one person who says 'I'm not buying my groceries at Loblaws, will most likely tell at least another 10 not to buy from Loblaws."
Amanda's YouTube video has 226,000 views. Let's say half of them react the way I did and say they aren't going to shop at Loblaws any more, that's 113,000 customers Loblaws lost. Multiply that by ten (in terms of negative word of mouth) and that's 1.3 million people who will be hearing the messaging 'Don't shop at Loblaws'.
Now, I have to say this, huge props to the executive chairman for responding to this situation and stating that he would be speaking with Amanda personally. Good PR move there.
On the negative side, according to YouTube comments, apparently the meeting resulted in nothing.
My view on contracts
My view on contracts, whether I'm attaining services or providing them, is to be clear on deliverables and pay schedules. I really don't know the details of Amanda's situation, but you never want to get yourself in a situation where you NEED a single client to pay you. And if you do put all your eggs in one basket like that, then you need a super clear contract with multiple payment schedules so that you don't front all the up-front costs.
For PR folks doing contracts, my advice is if the contract is under one thousand then do the work and bill the client. If they don't pay, then never do work for them again. If it's over one thousand, or if the job is over the course of many months, then work out a payment schedule.
For instance, if the contract is five months long for five grand, then have the contract state there will be five invoices for one thousand that will be charged at the end of each month. This way if your client doesn't pay, you'll know upfront.
The only time you should break this rule is if you have a history with the client and know they are truly trustworthy.
Some people, often desperate for business, will let contracts of large amounts be paid out upon final completion. That's how you can lose a lot of money though.
If someone you are providing services to really wants those services and really values your product, they will be ok with an incremental payment schedule.
Social Media and Traditional Media hurt more than money
The question remains however, which takes precedence, PR or contract law? While legally contract law does, I'd argue PR is just as important.
How much will Amanda's video cost Loblaws? If the story grows large enough it could be millions in the end.
Often times the cost of bad publicity isn't worth the cost of a settlement (only if you were in the wrong by the 'spirit' of the contract, if not by the legalese of the contract).
Now, talk to any lawyer and they'll tell you I'm off my rocker. If the legalese covers your butt, then give them nothing.
But a lawyer isn't concerned with a company's brand. They just care about defending the company and saving the company money. That is what they are paid for generally speaking.
When you take the long view though, you realize that the cost of a damaged brand is often times far worse than some settlement.
So in my view, PR takes precedence because the potential (monetary) costs from a damaged brand are HUGE.
No Shake downs
Having said that, the one caveat here though is that you never give in to a shake down. I don't think Amanda is shaking down Loblaws, but there are people out there who try to shake down companies all the time. You can't pay them off just to avoid bad publicity (that they generate as part of the shake down).
Here's what you do in that scenario though. You get all the facts together and you take a hard stand that you broke no contract, that you didn't mislead anybody at any point and that when the case is heard in court that will become evident.
The fact that Loblaws didn't do that, tells me that they probably did lead Amanda on, but then went a different direction knowing their butts are covered by some clause in the contract.
So kudos to Amanda for making the YouTube video because against a big company like Loblaws you literally have almost no chance of fighting them in court. They have tons of money to burn just dragging the process out.
The lesson in all this though, and hopefully it is one that Loblaws learns, is that the PR side of things is as equally important as the contract side of things. And this doesn't mean you cave every time someone threatens you with bad PR, but it does mean that if you did nothing wrong that you communicate that.
If you did do something wrong though, the last thing you should do is say you didn't. Which puts you in a pickle, like the one Loblaws is in. Do you use your army of lawyers to win (contractually) at the cost of your brand?
I'd say no. But a good 80 per cent of the lawyers out there would say yes.
This is why the relationship between lawyers and PR folks in corporations is fascinating, because both are trying to protect the company, but coming at it from very different perspectives and strategies.
In the end, as is usually the case, it sounds like the lawyers at Loblaws are in charge of this process. To which I feel sorry for Amanda having to go through what she is going through.
On the PR side of things, Loblaws dropped the ball by not taking a stance. Great, they met with her, but what happened? If the chairman found Loblaws had misled Amanda then he should have cut a cheque and be done with it. Ultimately use the situation as an opportunity to implement stricter policies when doing business with small 'mom and pop' operations so that this kind of thing doesn't happen again in the future.
If he assembled all the facts and found that Loblaws acted in good faith the entire time and that this whole mess is ultimately a result of Amanda's business acumen, then state that and let it go to court.
It's the year 2013 and contracts aren't what they use to be. Burn someone in a contract and even if your butt is covered legally, you may still pay a dear price in terms of your brand.
Social media (as well as traditional media) is the court of public opinion, and losing there is just as costly as losing in an actual court of law.
Don't get me wrong, reputation management still meant something in the old days. When you shook hands you were putting your reputation on the line. While the 'contract' might not hold you to everything implied during your initial discussions, burn a client and you would get a reputation for doing so.
I once knew a COO who told me that contracts don't mean anything really (as you can always hire lawyers to ensure you are covered no matter what unfolds, hence why corporate contracts are so lengthy with caveats) and that the only thing that really matters is someone's hand shake. If they shake your hand and later stab you in the back, no contract in the world will ever cover you in any kind of working relationship with them in the future.
In the past when a contract was broken, the reputation damages were minimal and kept to a small network of relevant stakeholders.
Today though, burn someone on a contract, whether to the full extent of the contract or even to the extent of the spirit of the contract, and you (potentially) have a PR mess on your hands.
I came across a story on the HuffPost that provides the perfect example of this - Amanda House, YoPro Co-Creator: Loblaws Reneged On Deals, Ruined My Business.
Long story short, Loblaws said they wanted their product, they went and got financing to create the product, then Loblaws said they no longer wanted the product and left Amanda hanging. You can hear the story in her own words....
Now, I'm not a lawyer, but I can tell you this, the damage of screwing over a 'mom and pop' operation is HUGE. Loblaws likely has their butts covered according to contract law, I'd be very surprised if they didn't. So by the letter of the law they are probably covered, but by the spirit of the law they probably are not.
I can say this, Amanda's video convinced me to stop shopping at Loblaws.
There's an old rule in retail sales, one pissed off customer will tell at least 10 other people they know about the bad service they got.
So one person who says 'I'm not buying my groceries at Loblaws, will most likely tell at least another 10 not to buy from Loblaws."
Amanda's YouTube video has 226,000 views. Let's say half of them react the way I did and say they aren't going to shop at Loblaws any more, that's 113,000 customers Loblaws lost. Multiply that by ten (in terms of negative word of mouth) and that's 1.3 million people who will be hearing the messaging 'Don't shop at Loblaws'.
Now, I have to say this, huge props to the executive chairman for responding to this situation and stating that he would be speaking with Amanda personally. Good PR move there.
On the negative side, according to YouTube comments, apparently the meeting resulted in nothing.
My view on contracts
My view on contracts, whether I'm attaining services or providing them, is to be clear on deliverables and pay schedules. I really don't know the details of Amanda's situation, but you never want to get yourself in a situation where you NEED a single client to pay you. And if you do put all your eggs in one basket like that, then you need a super clear contract with multiple payment schedules so that you don't front all the up-front costs.
For PR folks doing contracts, my advice is if the contract is under one thousand then do the work and bill the client. If they don't pay, then never do work for them again. If it's over one thousand, or if the job is over the course of many months, then work out a payment schedule.
For instance, if the contract is five months long for five grand, then have the contract state there will be five invoices for one thousand that will be charged at the end of each month. This way if your client doesn't pay, you'll know upfront.
The only time you should break this rule is if you have a history with the client and know they are truly trustworthy.
If someone you are providing services to really wants those services and really values your product, they will be ok with an incremental payment schedule.
Social Media and Traditional Media hurt more than money
The question remains however, which takes precedence, PR or contract law? While legally contract law does, I'd argue PR is just as important.
How much will Amanda's video cost Loblaws? If the story grows large enough it could be millions in the end.
Often times the cost of bad publicity isn't worth the cost of a settlement (only if you were in the wrong by the 'spirit' of the contract, if not by the legalese of the contract).
Now, talk to any lawyer and they'll tell you I'm off my rocker. If the legalese covers your butt, then give them nothing.
But a lawyer isn't concerned with a company's brand. They just care about defending the company and saving the company money. That is what they are paid for generally speaking.
When you take the long view though, you realize that the cost of a damaged brand is often times far worse than some settlement.
So in my view, PR takes precedence because the potential (monetary) costs from a damaged brand are HUGE.
No Shake downs
Having said that, the one caveat here though is that you never give in to a shake down. I don't think Amanda is shaking down Loblaws, but there are people out there who try to shake down companies all the time. You can't pay them off just to avoid bad publicity (that they generate as part of the shake down).
Here's what you do in that scenario though. You get all the facts together and you take a hard stand that you broke no contract, that you didn't mislead anybody at any point and that when the case is heard in court that will become evident.
The fact that Loblaws didn't do that, tells me that they probably did lead Amanda on, but then went a different direction knowing their butts are covered by some clause in the contract.
So kudos to Amanda for making the YouTube video because against a big company like Loblaws you literally have almost no chance of fighting them in court. They have tons of money to burn just dragging the process out.
The lesson in all this though, and hopefully it is one that Loblaws learns, is that the PR side of things is as equally important as the contract side of things. And this doesn't mean you cave every time someone threatens you with bad PR, but it does mean that if you did nothing wrong that you communicate that.
If you did do something wrong though, the last thing you should do is say you didn't. Which puts you in a pickle, like the one Loblaws is in. Do you use your army of lawyers to win (contractually) at the cost of your brand?
I'd say no. But a good 80 per cent of the lawyers out there would say yes.
This is why the relationship between lawyers and PR folks in corporations is fascinating, because both are trying to protect the company, but coming at it from very different perspectives and strategies.
In the end, as is usually the case, it sounds like the lawyers at Loblaws are in charge of this process. To which I feel sorry for Amanda having to go through what she is going through.
On the PR side of things, Loblaws dropped the ball by not taking a stance. Great, they met with her, but what happened? If the chairman found Loblaws had misled Amanda then he should have cut a cheque and be done with it. Ultimately use the situation as an opportunity to implement stricter policies when doing business with small 'mom and pop' operations so that this kind of thing doesn't happen again in the future.
If he assembled all the facts and found that Loblaws acted in good faith the entire time and that this whole mess is ultimately a result of Amanda's business acumen, then state that and let it go to court.
It's the year 2013 and contracts aren't what they use to be. Burn someone in a contract and even if your butt is covered legally, you may still pay a dear price in terms of your brand.
Social media (as well as traditional media) is the court of public opinion, and losing there is just as costly as losing in an actual court of law.
It reminds me of a saying..."Forgive and forget, but remember the fatherless son's name".
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