The “Hedgehog and Fox” Contracts Strategy

Flowchart on a chalk boardIn the seminal book, “The Hedgehog and the Fox”, the author Isaiah Berlin writes about the tension in Tolstoy’s life between his philosophy of a unitary defining concept (i.e. the hedgehog) but in real life embraced his many relational experiences (i.e. the fox). Tolstoy, the author submits, had limited success in reconciling the two views. The author then expounded on this theme to divide famous writers and thinkers into these two groups. Quoting the Greek poet Archilochus, “The fox knows many things, but the hedgehog knows one big thing.”

So how would this paradigm apply to, say, a company contracts management process? Contracts administrators learn quickly that, regardless of whatever “system” is in place in their company, there is no “one size fits all” when it comes to the contract process. Instead, its a “one size fits one” in many situations, and rightfully so. Contracts officers learn that, whenever contract management decisions are made “top down”, they need to eventually revise and rethink the process as real facts evolve. So how should a company reconcile the hedgehog and the fox dilemma? The answer is by implementing a strategic contract system.

How do you start a strategic contract system? First, you need to go beyond the top down contract model system of drafting and negotiations, approval and execution, performance, pricing, renewal or termination, and dispute resolution, inter alia, type contract clause review. All are very important, and must be done correctly, but such a contract review should be looked as only the start of a strategic contract analysis. How? You need to begin by asking strategic questions such as the following: Does the risk shifting in the agreement reflect the current business environment? Does the agreement advance the company’s reputation, values, and culture? Does the agreement embrace collaboration? Is the agreement process flow both efficient and effective? What are the current trends in the relevant market sector that impact the success of the company’s service or product? How does the agreement fit into the long-term growth strategy of the company?

Some may say “but we already do that”. If so, then ask yourself how often does senior management meet with the “front line” contracts team to find out what is really happening in the trenches? Why? Andy Grove, CEO and legendary deceased leader of Intel, once said: “when spring rain comes, snow melts at the periphery”. The contracts administrators are on the periphery, and like a fox, they are adapting to market forces weekly. The hedgehog contracts officers need to meet regularly and learn to adapt from them.

More recently, Clay Christensen, the author, and HBS educator, wrote the popular book “How Will You Measure Your Life”. In it, he talks about “deliberate” and “emergent” strategies to be applied to both your work and your life. To evolve you need to find their nexus. We can all learn from Tolstoy’s struggles by embracing the hedgehog and fox as positive sum strategies.