An executive with the authority signs an outside partnership that commits the company to a direction, so internal debate moves from whether to change to how, since reversing would break a contract.
Borderline: whether this move is justified depends on the situation, and only the person in it can judge.
An example
Hospital contracts were going to distributors that carried full product lines, and the chief executive of a mid-sized orthopedic device maker had argued for a year that its 120-person direct sales force could not compete. The sales leadership disagreed, and the debate had stalled. She took the question to the board with a draft agreement: a global medical supplies company would carry the products into 3,000 hospital accounts, and the device maker would move its reps into clinical support roles over eighteen months. The board approved the deal and the transition in the same resolution. She walked the sales leaders through the terms before signing, offered the head of sales the job of running the transition, and announced the deal the following week. Internal argument moved to which reps would cover which surgeons.
Why it works
Before signing, the change was a contested internal decision. After it, accepting the change looks better, because it comes with the partnership's capabilities and revenue, and easier, because going along ends the argument. Resisting looks worse, since the best it can win is a messy renegotiation, and costlier, since it means breakup fees, legal exposure, and a company that looks unreliable to future partners. The move depends on real authority to sign, a reputable counterparty, terms that tie the change to the deal, and a decision that would survive the board's scrutiny.
The thinking behind it
Thomas C. Schelling Credible commitment, from The Strategy of Conflict (1960): binding oneself can be a source of bargaining strength, because a party that visibly removes its option to retreat forces the other side to adjust. A signed partnership removes the company's option to keep its old structure without breaking a contract, so internal opponents must adjust to it. Only a bind others can see changes what they do, which is why the commitment has to be real and public.
Oliver E. Williamson Asset specificity, from The Economic Institutions of Capitalism (1985): investments specialized to one relationship lose much of their value outside it, leaving the parties dependent on each other. Once reps have moved into roles built around one distributor, the relationship is hard to unwind, which is what makes the lock-in real. His point in Markets and Hierarchies (1975) that contracts are always incomplete explains why opponents search the terms for gaps.
Robert B. Cialdini Commitment and consistency, from Cialdini's Influence (1984): once people have taken a public or written position, they feel pressure to act in line with it. An announced partnership is the company's public position, and every executive who stood behind the announcement now has a reason to see it through. That pressure keeps the change moving long after the signing.
When it fits
Signing a partnership fits when an internal change is right for the company, the debate over it has run its course, and a credible outside partner offers something the company cannot build itself. You need the authority to sign, the board's approval where the change is material, and terms you would defend in public.
How to use it well
Win the board first. A deal that commits the company to internal change belongs in front of the people entitled to approve it, and their approval is what makes the commitment hold.
- Make the internal change an explicit part of the deal you present, with its costs and its owners.
- Walk the affected leaders through the terms before you sign.
- Give a leading opponent a real role in carrying out the transition.
- Keep the contract's milestones and exits realistic, so the commitment is one you can keep.
What it costs and where it backfires
Contracts outlast the people who sign them. If the partner disappoints, you have bound the company to it, and the opponents you overrode will remind everyone whose deal it was. The line is approval. Signing a contract that commits the company to internal changes the board or the affected leaders were entitled to review, or hiding those clauses until after signing, turns a commitment device into an end run around governance, and boards answer it by taking signing authority away.
When it is used on you
Once a deal is in negotiation, ask whether it commits the company to internal changes and who approved them. If it is signed and approved, your influence lies in how the change is carried out. If it was not approved, read the contract for exits, check whether the internal change can be severed, and take the question of authority to the board.