Academics have long debated whether negotiation is an art or science. If you’ve ever negotiated a contract with a customer, partner or supplier, you’ll recall them pushing-back on certain terms saying things like “What exactly does this point mean”, or “We can’t agree to this” or “We’ll have to send this to our lawyer”. What follows is a time-consuming process of exchanging terms back-and-forth in an effort to reach agreement. While negotiations may appear unique to a person or situation, they are often just highly repetitive tasks run in isolation across your company. Creating a standard playbook for business users to follow will save loads of time in wasteful negotiations and increase their ability to keep up with high volumes of contracts.
Compounded over tens or hundreds of deals there is measurable decrease in cycle times and increase in volume of signed deals
When a customer takes the time to disagree with your terms, what they’re actually offering is valuable feedback. Their questions and objections are a form of market intelligence telling you which parts of your product, service or terms are not well understood or need to be adjusted. When the same responses appear again and again, there is good proof your terms may fall outside of an acceptable standard. While the natural response in a negotiation is to defend these terms and avoid making changes to the contract, taking the time to act on this intelligence can actually shorten the time it takes to reach agreement, with the added benefit of gaining a deeper understanding of the individual or business you’re serving.
Case in point:
Mick Sheehy is General Counsel for Australia’s largest telco, Telstra. Mick identified that he had the equivalent of 3 lawyers who were solely reviewing and negotiating NDAs at any point in time. While NDAs serve a valuable purpose to document when and how confidential information can be exchanged, his team concluded these were recurring, low-risk contracts that shouldn’t require extensive effort from lawyers to negotiate. The team decided to revisit the NDA process. They used feedback from negotiations to simplify the terms and applied automation to streamline the approval and signature process. The end result was a decrease in the effort and cycle time to complete NDAs and increase in client satisfaction as a result of the new automated process. By acting on market intelligence and applying automation, Telstra eliminated 6,500 hours of low-value, NDA-related work across their legal group. According to Mick: “This is just the start. We intend to build more automated, self-service tools to realise these benefits in other contracts and transactions.”
Step 1: Start by asking… “Why is this a problem?”
In the same way entrepreneurs continually seek feedback on how solutions address a market need, companies should treat contracts as tools to address their customers’ needs. By asking “Why is this a problem?” and identifying the reasons behind a question or objection, you will begin to understand which terms or conditions are problematic for customers and tweak your contract and negotiation strategy accordingly. This feedback will reveal:
- a lack of understanding around what certain terms mean, or
- desired limits around obligations or exchanges of value, or
- perceived risks in planned or theoretical scenarios
Validate this feedback with a handful of lead negotiators to understand how they respond to these situations. Listen for cues like “I often have to explain this point over the phone” or “This point is usually changed to X” or “We always have to involve legal on this one”. Mark each of the points that are clarified or negotiated in your contract, including the reasons from customers and typical responses from negotiators. Patterns will begin to emerge and the least understood and most negotiated points in a contract will suddenly become visible.
You’ve just created a data-driven contract based on real customer insights that will guide you on where and how to reduce effort and cycle times in deals.
Step 2: Create a playbook to guide negotiations.
Great companies have crystal clear mission statements that determine a company’s direction and provide a template for decision-making. A high volume contracting process should be no different. By documenting your set of best practices, you can guide your team’s direction and empower them to make the right decisions. So, armed with your brand new, data-driven contract from step 1 you can now begin:
- introducing simpler wording to clarify lesser understood points
- defining ranges of values so teams have room to negotiate on highly negotiated points
- defining fall-back positions so teams can accommodate feedback without needing to involve legal
You’ve likely already defined these values and positions in previous negotiations, so you can extract these from a handful of previously signed contracts or have your team document deviations as they go along. By collecting these best practices in one place, you’ll have just created an incredibly powerful tool for your business — a playbook to guide negotiations.
If you’d prefer an automated approach, contracting automation platforms like synergist.io allow you to create playbooks as you go and intelligently guide business users through negotiations in real-time. This will involve moving users away from Word to a simpler, cloud-based platform but when compounded over tens or hundreds of deals there will is a measurable decrease in cycle time and increase in volume of signed contracts.
Step 3: Empower your team to get deals done.
As your business grows, your reliance on contracts and the people responsible for executing those contracts increases. Resources will be stretched thin as they struggle to keep up with demand. You can anticipate these challenges by providing simple and straight-forward guidance to business users on how to successfully navigate negotiations. Using your freshly minted playbook include guidance around:
- Why a point is typically negotiated
- What fall-back positions are available and the risk they carry (low, medium, high)
- When to offer an alternative and, optionally, if approval is required to do so
Take the time to educate business users on your best practices and empower them negotiate where necessary, within safe boundaries and using fall-back positions that have been pre-approved by legal. Once your playbook is adopted, you will see legal’s involvement in recurring contracts reduce and they’ll have more time to focus on high value transactions. Business users will become autonomous and have the freedom to take deals safely through to close. Customers, suppliers and partners will be satisfied as their needs are truly understood.
With the daily barrage of operational work, it’s difficult to set aside time to re-think processes that have existed a certain way longer than anyone cares to remember. You could even argue “Contracts are still being signed so why should we change our approach?”
Well, if putting customers first is a genuine priority and doing more with less is something you’re being asked to deliver on, it may just be the right thing to do.
Based on our experience doing this for dozens of customers, we’re putting together a detailed guide to help your company manage high volumes of deals by automating contracts.
Download directly your free copy here.