hotel california contracts

I was trading thoughts on Twitter recently about Brexit (I know, I know, life’s too short and I should get out more!). Someone was complaining that the EU had taken away the UK’s sovereignty. I pointed out, amongst other obvious characteristics of sovereignty, that the UK had always retained the option to leave the ‘club’. Hardly consistent with being some sort of conquered or ‘vassal’ state, as some have argued. The response was, “What, you mean like ‘Hotel California’? In a way, she was right. If you know your Eagles songs, you’ll remember that at Hotel California, “You can check out any time you like but you can never leave.” 

Relationships can be easier to set up than to unravel. Brexit is strikingly like many outsourcing arrangements I have seen. The deal is set up, with a focus on how it will work, operationally, commercially. Quite right too. The part about how we end it though is rather a fudge. The likelihood of ongoing management of the Exit process is similarly rare. There is cost involved, it can be disruptive and people need to find the time to do it. The issue is easy to put off until later, or to pay lip service. After all, how hard will it be, even if we do ever choose to terminate the arrangement?

It is likely that there are more than a few companies who are in all practical terms trapped in ‘Hotel California’ outsourcing arrangements. Some of them will be highly strategic. These arrangements are rolled over at contractual intervals, 5, 7, 10 years, not because there aren’t better providers but simply due to the cost and disruption of making the change.

It doesn’t need to be this way. All outsourcing arrangements need to be set up with the end in mind. Along with very clear Exit provisions and not some fudge (“6 months prior to termination the parties will come together, blah, blah, blah”) there needs to be a process to ensure that when it is required the provisions are up to date and will work successfully. When we stop and think about this it is simply Business Continuity Planning / Disaster Recovery and there’s not great argument about doing that as far as I am aware, particularly in regulated sectors.

 

The more complex the arrangement the more important it is to have clear Exit plans and a robust process for keeping it up to date. I can hear some people challenging that with highly complex processes it might be virtually impossible to unravel the arrangement. I don’t think that will ever be true. What we are usually saying is that it will take a long time, the change will probably need to be phased and the cost will be high. That needs to be factored into the decision to do it in the first place but it is not necessarily a reason not to still go ahead if the benefits so merit. 

The issue as I see it with Brexit, looking at it through the outsourcing lens, is that the Exit plan was woefully inadequate and clearly there was no continuing process to maintain the processes up to date if there had been a plan. Unravelling 40 years of integration was always going to take many years – to my mind at least 10 years, probably longer. This was a major mistake made by the UK and the EU which has been enormously expensive, not least of all to the social fabric of the UK. 

Yes, my Twitter friend is right, any arrangement can turn into a Hotel California contract without proper Exit planning and management.  Brexit might be beyond most of us to fix but individual organisations can learn a stark lesson from all of this.

Take it Easy!