“The horror, the horror” were the final words of Kurtz, one of the main characters in Joseph Conrad’s Heart of Darkness, as he reflects on his life’s work, the atrocities he witnessed and perpetrated. Words echoed every single day by countless contract managers, auditors, and legal professionals, as they evaluate their organization’s contract practices. Every company has a contract horror story. But some are worse than others.
In fact, as Zeal has been helping companies meet their contract management needs since 2019, whether it’s for compliance, financial, or operational objectives, we’ve seen some scary stuff.
For this reason, and in honor of Halloween, we are going to give you a bite of some of the stories that we’re not contractually bound to keep confidential. Hopefully, some of these prompt you to check which contracts are expiring soon, or to finally centralize the agreements that are scattered in your email inbox.
These might read like fictional stories, but be well aware that they are true and make us constantly cringe about the practices certain industries have normalized.
Without further ado, here’s our curated list of contract horror stories:
WHILE YOU WERE SLEEPING: THE CONTRACT BLEED ($$)
Some time ago, while auditing a new client, we discovered something they would dread learning: The company’s negotiated cost-of-living increases in candidate contracts hadn’t been accurately updated for over 12 years. Something that sounds like a quick fix, but that in reality represented a considerable sum they had to pay, well into the millions.
When a contractual obligation is not met, a company is typically liable for the difference. An external financial or HR audit is often the way this type of systemic, long-running error is finally uncovered, leading to a massive, immediate financial obligation to rectify the underpayments, potentially with interest.
Cost-of-living adjustments are typically negotiated as annual percentages of 2% to 4% (tied to inflation). These are often automatic escalations triggered by contract renewals and geographic adjustments, and in-demand roles also impact them. And if you don’t pay attention, the losses will definitely stalk you in your nightmares.
THE CANDIDATES THAT WERE NEVER THERE
Horror stories end in many different ways. Sometimes there’s a light at the end of the tunnel, a semblance of hope, meaning the nightmare is over. This isn’t one of them. Here, everyone lost.
A staffing agency once had to retract offers to many candidates who had already accepted jobs. The candidates couldn’t meet the background check requirements that had been written into the contracts. Both the agency and the client wanted the candidates to fill these positions, but the damage was done. The entire situation stemmed from a fundamental flaw in contract and offer management.
Thousands of dollars in billable hours were spent sourcing, screening, interviewing, and making offers. This time was completely wasted. The candidates were never hired, but the costs were very real. Phantom positions with real monetary and reputational damage for the staffing company.
I HAVE NO REPOSITORY, AND I MUST COMPLY
A company had received a failed audit notice. None of the employees understood what had happened or even where the failed contract terms were. Utter despair on all fronts.
The one saving grace was a short but workable remediation period. A ticking clock with suspension looming at the end. Panicked, the company spent a significant sum to hire a very reputable but costly advisor.
With relatively little effort and a dose of determination, plus the intuition that only experience provides, the advisor found the contract in question. It was sandwiched between many other versions of the same contract in someone’s email inbox.
The advisor realized right away that the company lacked internal controls or any operational procedures to address this kind of situation. Having seen enough, they laid out a plan:
- Contact the candidates currently on billing
- Collect signatures
- Run the necessary background checks
- Send everything to the MSP as remediation
Lack of document management costs money. But the advisor also knew an old and dark truth: most companies, no matter how many times they are warned, will not implement a contract management process until they are hit with an audit.
Whenever a company needed a compliance issue fixed, as long as a remediation period was looming, the advisor could charge top dollar to fix the nightmare these companies had gotten themselves into.
And so, when it was all resolved, when the praise died down, the company was back to normal operations, and the advisor was paid, they were sure that before day’s end, another call would come. Another desperate company on the line. Day after day, night after night. The cycle of contract incompetence would never stop, and they hungered for it.
If these horror stories sound more like a reality you need to get in contact with us, so we can exorcise whatever contract presence is haunting your process. Click here to learn more.
