The Auto-Renewing Contract

As an owner of a recruitment marketing agency, I think about our customers every day. Their challenges and opportunities are mine. The Clixers and I that support them are an extension of their team. If they sleep well at night then so do we.

The end of the year and beginning of the new year are always busy because we have been planning for the new year and there are countless contract renewals to be executed to deliver on the new strategy for the year ahead.

Now that the dust has settled a bit, there is one sales contract issue that always rubs me the wrong way: the “Auto-Renewal.” Some people might say that an auto-renewal in your contract is just there to make it easy for you to continue using the service. Maybe it would even help you save money by locking in your price for years to come (unless they have an automatic price increase baked into that too.). Unfortunately, I have seen auto-renewals be used more often as a negative tactic versus a positive way to do business.

What would happen if I brought the auto-renewal into my regular life? In some ways it is already there. I have my cell phone account, my gym membership and my Netflix account and those just auto-renew all the time. So I should be ok with it, right? Sure. It works for me because I typically have the flexibility to cancel any of them within 30 days at any time. The legal term is a termination for convenience.

Although those agreements are certainly automatically processed, I COULD cancel them at any time. They don’t lock me into another dreaded 12 month term automatically. What if my barber had a twelve month auto-renewal contract? Would it make sense for me to keep getting charged each year if I no longer had hair? (That’s actually true now).

When we are talking about our clients – Talent Acquisition (TA) leaders – who work within large businesses, it just so happens that priorities change. Budgets change. People change. Strategies change. The auto-renewal has to be the dream child of the laziest salesperson in the world or the smartest attorney in the world.

Lazy Salesperson*. “If we add an auto-renewal provision, I bet we could get their renewal without them even knowing it. As long as I don’t bring it up or consult with them too much, it will be money in the bank.”

Wicked Smart Attorney*. “We could easily add an auto-renewal provision and at least half the customers will forget and miss the cutoff so I could help generate a lot of revenue if I add this to every agreement.”

When we work with a client that has an auto-renewal built into their contract with a vendor, we try to cancel these right away. Even if it is months before the notification deadline to cancel, you can’t be too safe. We notify the vendor as soon as possible. We would prefer to ask vendors to remove this provision if we are helping negotiate a new contract on the clients’ behalf since it is just a disagreeable business contract provision to our team. If a vendor won’t remove it – which is nothing but short-sighted and intentionally being difficult – then put a calendar invite to cancel it within a week of signing the agreement. By cancelling it days after you sign the agreement, you cover yourself from the trap of letting it renew and maintain maximum flexibility. Is it a pain to do that? Sure: but at least you are covered.

Friendly advice for the vendors out there: focus on helping the customer and providing value, not snaring customers in an auto-renewal trap. If you think your solution can’t stand on its own each year and really need to trap customers, maybe you should be doing a little introspective thinking about the place you work and how your ethical barometer fits in there.

And for the love of God, if a client or an agency misses the cancellation date by a few days or even a couple of weeks, consider the long-term impact of holding someone over a barrel. Forcing a customer to pay for something they don’t want or don’t have the budget for just because you can say ‘Gotcha’ about the auto-renewal doesn’t mean it’s the right thing to do. You or an executive at your company can make a smart long term business decision versus holding someone hostage. Imagine how many times that TA leader or a recruitment ad agency executive would tell the story of how inflexible you were given the circumstances. Imagine your name and your organization coming up dozens of times at industry events or on conference calls for a lousy $10,000, $20,000 or more.

We want to EARN our clients’ business, every day. That’s why we don’t have overly complicated agreements with our clients and we do have a standing 30-day-out, no harm, no foul, exit as part of our agreement. We keep growing, and we can sleep well at night.

If you want to learn more about how we mitigate these issues, and manage vendors notorious for this auto-renewal practice in the talent acquisition space, then connect with me and I’d be happy to give you best practices and discuss how we can help working up your agreement.

*The lazy salesperson and wicked smart attorney quotes are slightly dramatized fiction and not meant to represent