Contract Negotiations Transcript

TRANSCRIPT
COMMERCIAL AWARENESS FOR BETTER BUSINESS OUTCOMES

SECTION 3: COMMERCIAL AWARENESS IN MARKET ENGAGEMENT
MODULE: CONTRACT NEGOTIATIONS
Effective Organizational Approach to Contract Negotiations
There is extensive evidence to show that negotiation that is power based or adversarial limits the
value that can be achieved. If successful negotiations are measured in terms of concessions won
and levels of compliance achieved, you are unlikely to create the nature of relationship that you
are looking for.
The media provides daily evidence that negotiation - seen as a battle - is alive and well in the
political as well as the commercial worlds.
To be successful, negotiation must be organizationally integrated and operate within a

negotiation plan. Otherwise we run the risk that our interactions with the other party are
fragmented, inconsistent and confusing. This means that it must be appropriate to the type of
transaction and the relationship that will be needed to deliver a successful outcome. For
example, as indicated, a power based, or adversarial negotiation is unlikely to result in a
collaboration or partnering.
The plan may need also to recognize the need for negotiation to be an ongoing activity. For
example, if there is uncertainty about requirements or a likelihood of significant change during
the lifecycle of the contract.
Commercial awareness in this context is not the you must personally be a great negotiator but
rather that you must be a proponent and supporter of developing and executing an appropriate
negotiation strategy.
What is your role?
● Responsible
● Advocate / Advisor
● Consultant
● Influencer
Depending on which category that you fall into - what should you be doing to demonstrate your
commercial awareness and competence?
© IACCM 2020
What role do others have and how will you interact with them?
Increasingly leaders are taking actions to transform their organization’s approach. The most
effective are those that are targeted on eliminating the causes of negotiations being adversarial.
In the next section we have listed a number of initiatives that will make a difference. However,
key areas for focus are:
● Clarity of Scope and Goals

● Clarity of Roles and Responsibilities
● Appropriate Service Levels and Key Performance Indicators
● Opportunities for Risk Mitigation and Management
Often the legal and contract management teams rely on the understanding of other regarding
these areas and by working closely together, risks and opportunities can be identified, assessed
and managed.
Transforming the Organizational Approach to Contract Negotiations
Organizations can transform their approach to negotiation and realize massive opportunities to
improve the value they gain from collaborating with other organizations with the following
techniques (further details at “Is Negotiation Dead? IACCM Thought-Leadership Paper)
1. Put your cards on the table: The most effective negotiations focus first on core
commercial outcomes or goals. This is often boiled down to agreeing the ‘intent of the
deal’. It seems obvious that this is fundamental to a successful negotiation, but in our
experience too often desired commercial outcomes and the basic ‘intent of the deal’ are
not well defined or consistently understood.
1. Eliminate negotiating tricks: We all know what’s going on, but too often we turn a blind
eye to behaviors that should be called out, to underhand tactics that cut across the trust
lines. These ‘tactics’ don’t work – or if they do work, they work just the once.
Everyone agrees, trust is the vital component of any commercial deal. What is not done
enough is to really get into the dirt and fight for it. Too often we are not tough enough
when it comes to trust – we give in too easily and accept that trust doesn’t exist but we
do the deal anyway. We know a lot about how trust works, what we don’t do is to take
advantage of that available knowledge to ensure it is defended and nurtured in
negotiations and long-term relationships.
Get experts in to help you and your people understand how trust works and how it needs
to be actively managed.
2
3. Mine your market and dig deep: It’s all well and good to suggest that outcomes must be
clear, but all too often organizations don’t know enough about the market to develop
clear outcomes that can be practically achieved. By failing to engage with the market,
proposed contract terms and risk transfers are often inappropriate and prevent
structuring the right commercial model or contract to deliver the best potential outcome.
4. Reward relationships, not deals: Change your bonuses and incentive structure so that
people who set up the deal get paid incentives and bonuses only if you stay in the
relationship and achieve the desired outcomes.
5. Get lean and agile with your process: Take a cold, hard look at the processes that you’ve
not put in place to manage your contract negotiations and ask what value they are adding.
Have you simply added in more process upon more process and not taken a step back to
see if it is all still necessary? There must be rules in place to address risk and compliance
issues, but the growing complexity of markets means that the way these are implemented
must be simplified if they are to manage your risks effectively and allow efficient
contracting arrangements to be developed.
6. Bring on the robots Advances in technology are providing exciting opportunities to

simplify internal processes and external interactions. Machine-based alignment of
interests can assist negotiations, for example by automated analysis of preferences or
through ‘optioneering’.
7. Governance is the electricity of the relationship – power up! Review your governance.
Negotiations can be hamstrung by inflexible decision-making mechanisms. This can mean
that the people in the room are disempowered and their ability to establish the core
commercial deal and its subsequent contractual details is seriously undermined. This can
cause frustration, suspicion and confusion. Effective governance will ensure that both
parties will be able to clarify stakeholder needs and represent them successfully.
8. Stay focused – use facilitators to stay on track: Relationships are hard. Agreeing to
approach contract negotiations using a collaborative process is a great first step. Sticking
to the process is a real challenge - and it is often a sensible commercial decision to bring
an external independent facilitator to provide structure and help the parties stay focused.

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TRANSCRIPT

COMMERCIAL AWARENESS FOR BETTER BUSINESS OUTCOMES

MODULE: CONTRACT NEGOTIATIONS

Effective Organizational Approach to Contract Negotiations

To be successful, negotiation must be organizationally integrated and operate within a

What is your role?

● Clarity of Scope and Goals

Transforming the Organizational Approach to Contract Negotiations

6. Bring on the robots Advances in technology are providing exciting opportunities to

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