At this point, it’s become an industry – consultants who have grown up over the last decade helping banks and credit unions negotiate new agreements or renewals with their payments vendors – networks, processors, internet banking and bill pay companies, and card fulfillment businesses, to name a few.
Although I’d like to say that the clear majority of these consultants – both companies and individuals – take on these assignments with the intent of doing the best possible job for their clients, I’m not sure I can go that far. I’ve heard enough stories from companies in the payments space as well as individuals I admire and respect to know that some of these consultants can be more self-serving than not. They might operate under the guise of having their client’s best interests at heart, and their intentions might be good. The problem is that what they do and how they do it can cause more harm than good.
Why do I say this? It’s not because these consultants are tough negotiators. Rather, it’s because they pay little or no homage to the value of the relationship itself and how this works to the mutual benefit of both parties. Their primary focus is unit costs, not the health of the working relationship. At worst, their compensation is driven entirely by the savings delivered, creating an incentive to focus exclusively on the cost dimension, as opposed to balancing this with the overall working relationship.
If I’ve learned one thing over my years of working in payments, both as a consultant and an executive, it’s that putting the relationship at risk to save a few extra dollars is never an optimal solution. Dick Parsons, the former chairman and CEO of Time Warner, contributed to an article titled “The Best Advice I Ever Got” in Forbes magazine back in 2005. His advice was simple, and I paraphrase: “This is a small business and a long life. You’re going to see these guys come around again, so how you treat them on each transaction is going to make an impression in the long haul. Don’t let every negotiation become a tug of war to see who can outduel the other to get the slightest little advantage. Keep in mind that your consultants are going to move on to the next deal, while you and your partner are going to have to see each other again.”
Here’s the bottom line – your relationships with your payment partners are comprised of much more than just unit costs. How well do the parties work with each other to get things done, particularly under stressful scenarios? Do your partners make life less or more complex for you? Do your partners treat you with the same level of respect that you treat them with? Do you and your partners really care about and try to maximize the success of each other? These kinds of questions may seem soft and old fashioned, but they are material drivers to the total cost of the relationship. Squeezing the last cent out of your partner may deliver a one-time macho win feeling, but it is also likely to sour the relationship and make life much more difficult over the term of the contract.
These are your partners. Make sure your consultants treat them as such. You want to make sure that the screw is turned during negotiations, but not turned to the point that the threads are stripped.
David Dove is the Managing Partner for Dove Capital Partners. He can be reached at 617-233-8410 or ddove@dovecapitalpartners.com.
