Negotiating a Contract: How to Waste Less Time and Get Better Deals - Page 2

Rob Enderle

 

Assuring Compliance

 

It amazes me how many deals are done without provisions to assure and monitor compliance. You have needs that likely include timelines. Make sure milestones and penalties for missing them are built into the agreement. Identify the methods that will be used to assure this compliance. Otherwise, all you have as a defense is to sue for breach of contract. That won't go well, particularly if the milestones aren't spelled out. Make sure there are intermediate remedies that don't require you to put the entire contract at risk. Also, those remedies will be easier to achieve if they are within your control, like paying or providing less.

 

 

Make sure there are exit clauses with penalties for non-compliance. It is no fun to have to pay two vendors for the same stuff. If the vendor you contracted with can't perform, make sure you've designed a way to bring in another and have the first vendor pay for the problem. Make sure the conditions that will terminate the contract for both sides unilaterally are spelled out.


 

I'm a big fan of arbitration and mediation clauses. I prefer binding arbitration as the less expensive path, but anything that gets the sides together and avoids litigation, which often results from avoidable misunderstandings, is a good protection for both parties.

 

Try to avoid deals where the other side has a short-term commitment that ends before the related project is complete. Often, particularly in IT, solutions are sold that can take years to implement, yet the vendor hands them off as a package as if you were buying a ham. No wonder most of these solutions are never implemented. Systems management tools tend to top this list. Make sure their financial and personal involvement doesn't end when they get the money, but when you get it working.

 

Penalties and incentives should be in most every agreement. Most folks forget the incentive part. There often are benefits that can be shared for performing early (and if they are early, they sure as heck can't be late). Sometimes thinking through both the carrot and the stick approach can be an effective way to drive to agreement and assure the agreed-upon outcome.

 

Know your escalation path: In doing a lot of problem resolution between vendors and IT departments, one of the most common issues is that neither side knows how to escalate. People change jobs, can become ill, priorities can change and either side can feel abandoned. Often this can be fixed with a simple phone call, if you know who to call. One thing to remember is that these escalation paths tend to change as well (recall that in the BP disaster, one of the top names on the response plan was a dead guy). You may want to institutionalize revisiting this escalation path at least annually.

 

Executing with Confidence

 

Practice: Negotiation is a skill. Some might be better than others initially, but, like sports, people improve dramatically with practice. If you are going to do this, do it regularly. Negotiate every chance you get and pick teams to support you that do it regularly. Negotiation is a contact sport. The more experienced you are, the better able you are to survive.

 

Don't be afraid to ask for advice: Others have negotiated similar deals, often with the same people. Find out what works and what doesn't. Ask for advice about how to craft the engagement. Ask your legal team for help.

 

Use a specialist: It amazes me every year the number of people who will screw up a million-dollar deal to save a few thousand dollars by not engaging a qualified attorney or negotiator. You wouldn't get heart surgery from an engineer, yet people seem to have no problem sending in an engineer who has never negotiated before as a lead negotiator. Like doctors, attorneys have specialties. Make sure your team is experienced.

 

Play your cards: If you have an advantage, play it. There is nothing wrong with having an advantage, and you don't get credit for leaving cards in your hand once the deal is done. Now, there may be a reason to play that card later in the game, but if you have a strong hand, there's little point in extending the negotiation excessively. Some people seem to think there is something unfair about using an advantage. Hopefully, those people are not on your side.

 

Avoid alcohol: Like driving, negotiation should be done while sober. It is a practice in some parts of the world to mix negotiations and alcohol. Teams that have a high tolerance for it often prefer this, for obvious reasons. I don't even think the other side should be allowed to drink because they can then argue they forgot what they agreed to or weren't in their right minds and reverse concessions.

 

Time: Make sure you have enough time. Being under a time constraint that the other side doesn't share puts too much pressure on you. Add a couple of extra days to your trip or make them come to you so that they, not you, have any time pressure. If you feel you have all the time in the world, then any time pressure is on them. If they want to waste it, you aren't put at a disadvantage.

 

 

Closing the Deal

 

When your goals are reached, you are done. Move to agreement, get it signed and exit. This is also good advice for gambling because the odds of going too long favor the house. Often, folks feel the need to push for extra concessions and don't recognize that this may cause the entire negotiation to go south. There is a natural tendency to believe that more could be achieved, which will occur regardless of where you exit. If you've done your homework correctly, you should know when to close and move to getting things signed. Don't get greedy.

 

Once done, don't put off getting things signed. In fact, push for rapid closure. I've seen weeks of negotiations wasted because of an unplanned death, illness, job change, organizational change, and once, even a change in the weather. Until it is signed by both sides, it isn't done. I prefer to have the other side sign first so I don't have to explain to the executive on my side any problem that occurs on the other side.

 

Share credit: I'm amazed at the number of times I've seen a deal go south because one side decides to brag about how they outsmarted the other (and used words like screwed.") If the other side feels they did a good job, they are more likely to get behind the result. If they feel cheated, they are more likely to seek a "round two" that could include killing the agreement. Let them look good in front of their bosses because you might have to face them across the table again.

 

Finally, don't dawdle. Get your part of this done quickly. I'm not saying don't be thorough, but time is your enemy. If you waste it, you'll find that timelines are harder to meet and when they aren't met, you'll float to the top of the blame list.


Wrapping Up

 

Negotiation needn't be frightening; it can actually be a lot of fun. I've seen folks leave the table as friends for life. But like any skill, you have to become competent at it, learn the tools, and one more thing: Realize that it is just a job, not a long-lasting statement on your ability to pound opponents into the sand.

 

Don't set unreasonable expectations or have others set them for you. If the other side has all the cards, that's life, but don't expect them to fold or be upset if they don't. If the other side plays better than you, it happens. Learn from the experience and you will be more likely to do better the next time.

 

In the end, life is one big negotiation. You might as well learn how to do it well and enjoy it.

 

Three books worth reading are "Getting to Yes," "Bargaining for Advantage," and "Influence." If you are more into why things work, you might prefer "Bargaining for Advantage." If you just want a primer, the first provides that. Steve Jobs lives the last book (and, from time to time, I do as well).



Add Comment      Leave a comment on this blog post
Sep 17, 2010 1:33 AM Anthony Lee Anthony Lee  says:

Great refresher for us C's in business.  I learned and re-learned a few tips that will help give me a little more leverage as well as a few good books that were recommended that are now on my list to read.  Thanks for the heads up and good article.

Reply
Sep 17, 2010 1:39 AM Rob Enderle Rob Enderle  says: in response to Anthony Lee

Welcome thanks for the note!

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Jun 11, 2013 5:27 AM Contract Negotiation Contract Negotiation  says:
Excellent information!! I really like this post and thanks for sharing. Reply

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