Contract negotiations are often complicated processes that can take several weeks or months to finalize.
The responsibility of the negotiator is to not only engage with his or her counterpart on the other side of the table, but to also oversee and manage the overall process.
While this may sound simple and intuitive, a closer look at all of the roles and responsibilities of a negotiator shows just how complex the management of a negotiation can be.
More importantly, not giving each of these distinct roles its due diligence and attention could be the difference between a mutually beneficial negotiation that mitigates risk and a lopsided negotiation that benefits one party while setting up the other for failure.
When representing my clients in a negotiation, I typically wear a few different hats.
This is the obvious one. The role and responsibilities are fairly well defined. My job is to understand the requirements of the business and negotiate the most favourable outcome while mitigating as much risk as I can in the contract.
All lawyers are negotiators but not all negotiators are lawyers. I’m not a lawyer, but I’ve been negotiating for almost 20 years so I know my way around the legal terms and conditions of a contract. That doesn’t mean I don’t need a lawyer on the team, but part of my job is to know our lawyer’s threshold of acceptability and negotiate terms as close to that threshold without going over it.
Two of the most important business terms in a contract, for both sides, is a description of what goods and/or services are being transacted, and for how much. Because of their importance, a lot of focus is given to making sure the “what” and “how much” in a contract is well defined. But there are other aspects of the agreement that also require some level of financial analysis such as payment terms, taxes and delivery fees.
The Decision Maker
A good negotiator takes the time to really understand the business requirements before getting into a negotiation. Because as much as we try to put structure around our negotiating strategy, there will always be unstructured moments when one party puts something on the table and the other party needs to make a decision. There have been times, during a meal or a round of golf, when my counterpart has casually offered up or conceded a key point in a contract and I’ve found myself having to make a quick decision on behalf of the business
The Project Manager
As a negotiator, I’ve often found myself at odds with project managers. Some times they even become my nemesis in negotiations. Gantt charts, timelines and status updates define their world. But contract negotiations are hard to manage on a Gantt chart because I don’t know if it’ll take 4 hours, 4 days or 4 weeks to agree on Warranty language or an Indemnity clause. However, the reality is that project managers are there to make sure things are moving forward on time and on budget, and since they can’t sit in on every negotiation, I often find myself taking on that responsibility.
This is probably the most overlooked and challenging role I’ve had to assume in a negotiation. It’s also the reason why I believe a good administrative staff is the backbone of any successful business. Even simple contract negotiations involve a lot of paperwork exchanging hands. In addition to several iterations of the contract draft circulating internally and back and forth between parties, there are also emails, meeting minutes, term sheets, schedules, addendums and other miscellaneous notes that need to be tracked and summarized
So all of this begs the obvious question: How does one person handle all of these responsibilities?
The short answer is that in most cases they shouldn’t, at least not directly.
Good negotiators are also good delegators. They have a keen sense of their strengths and weaknesses, and will move other resources in and out of their negotiations as the need arises.
When I’m working on a deal with a strong emphasis on protecting my client’s Intellectual Property, I’ll lean a little more heavily on our lawyer to help negotiate key legal terms and conditions.
Similarly, if my client’s business requirements seem high-level or somewhat undefined (which happens a lot) I’ll make sure to involve a decision maker from the business in key discussions with our counter-parts.
What hats do you wear as a negotiator? Which ones do you find most challenging?
Are there cost savings hiding in your Procurement Process?