Are you married or just dating?
What’s going to happen if you are married and you start fooling around with your partner’s best friend? It’s going to get messy. But what if you have just started dating someone? Can you date other people? The rules are far from clear in modern relationships and they are often no clearer in business relationships.
Business relationships and conflicts of interest
How often have you said in a sales presentation something like “We want to become a Strategic Partner”? You see these claims all over vendor web sites and brochures and customers seem to want strong relationships with partners who can help them deliver better products and services. But what exactly is meant by these partnerships and how do you deal with a conflict of interest? The best thing you can do is anticipate the problem, if it’s too late for that you need to decide on the best course of action.
Why do conflicts of interest arise?
A common scenario is this; you are doing a great job for a client and one of their managers moves on to work for a competitor then gets in touch with you. The other likely scenario is a client is drawing up a short list of potential suppliers with experience of their industry and asks you to tender because of your experience with a competitor.
So how do you deal with potential conflicts of interest like this?
Planning to avoid the problem
This is the best option:
1. Exclusivity clause with a premium
Offer not to work with direct competitors while you are working with your client and for a limited period after. It’s important to be very clear about who are considered to be direct competitors. The level of premium you can expect will depend largely on the number of competitors and geographies included. Even if a client won’t fully accept your suggested premium you can use it as part of the general price negotiation.
2. Make sure all Sales Teams know about exclusions
There is no point in making agreements unless all your sales teams know who they can’t pitch to. This shouldn’t be a problem in a small team but larger and more complex organisations will need to find a way to share this information and keep it up to date. It’s also important to know when exclusion clauses are due to run out because that will open up new prospects.
What if the problem has already come up?
Let’s assume you don’t have a non compete clause with your existing client and a great opportunity to work for a competitor comes along. These are your choices:
1. Grab the opportunity anyway
Don’t tell your existing client and work with the competitor. This is a bit like cheating on your partner. They will find out, your reputation will be damaged and any short term gain is wiped out by long term losses.
2. Tell your client and try to renegotiate
This is a possibility depending on how your client feels about the particular competitor, what stage you are in the relationship with the client and how good your negotiating skills are!
3. Walk away from the opportunity
This might be the best option. By all means tell your client you have turned down the opportunity - it can only enhance your reputation.
It happens to everyone
I recently had to deal with exactly this situation at Infoteam. We were running a global training program for a financial services company that has proven highly successful; our client won many new customers by following our methodology. The programme was coming to an end and a key manager left and joined a direct competitor.
He wanted us to initiate a similar programme in his new company. It was a prestigious project with a potentially high contract value. We didn’t have a non- compete clause with our existing client. But even so, we decided to turn it down, leaving us all out of pocket - especially the highly regarded associate who had been approached. But the cost to our reputation was not worth the short term gain.
What can you do about non-compete clauses?
Write your own clause so it’s not overly restrictive
Charge a premium for committing to a clause – at least 30%
Make sure all your team know about restrictions so they don’t waste time chasing those organisations
Make sure Sales teams are alerted when restrictions are coming to an end so they can target previously restricted organisations.
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