Flexing the negotiation muscle

Flexing the negotiation muscle
Every businessperson prides him or herself on being able to negotiate well. Very few do. As in-house counsel, you are in the best position to improve your company’s approach to negotiations. Blast the myth that in-house counsel simply “paper the deals” — we don’t (at least not if we’re doing our jobs well). So what do you need to do to move the negotiation skills bar upward in your organization?
Make sure you have the skills.

To be a good negotiator you have to develop a skill set. Just being a lawyer doesn’t make you a good negotiator. Being a good negotiator involves being able to see the whole picture, being able to lead a team, having good communication skills to communicate internally and across the table (including a keen awareness of the personalities on the other side of the table and what is motivating their behaviour — recognizing that the other negotiating team members each have different things at stake as they sit at the negotiating table), an ability to make decisions and judgment calls on the fly, and an ability to push to close the deal.

There’s a lot to learn. If you don’t have the skills, focus on getting them by taking courses focusing on different aspects of the negotiating process.

Push your company and your colleagues to view each negotiation as a project.

In my experience, many companies take an ad hoc approach to negotiation. Even significant contracts for millions of dollars may be approached in a disorganized fashion. One common example is negotiating price without negotiating other terms of the agreement that have a direct commercial value or increase risk. It is folly to fix a price without understanding the commercial value/risk of an endeavour; one of the key drivers of price should be the other costs of offering/buying the product or service, or entering into the transaction.

A significant first step to getting your organization to view the transaction holistically is to get them to see that contract negotiation and implementation is a project that requires planning and resources like any other in the organization and in many cases is equally important. Getting the powers that be to think about the contract as a project will go a long way to ensuring that other necessary pieces fall into place.

Establish a process that works for your organization.

Large companies like IBM have teams that just do deals. Their negotiators are sophisticated and well trained to negotiate deals. Most of us don’t have the luxury of calling in our negotiating team for a transaction and, in my experience, using outside counsel as lead negotiator for commercial transactions rarely makes sense because most of the negotiation will require an intimate knowledge of the company’s business. However, every company will benefit from having a contract negotiation process designed to fit the company.

Negotiating a good deal for your company involves: identifying the strategic importance of the deal and the objectives which must be achieved to fulfil that strategy; putting together and leading the right team of people to complete the negotiations; and conducting the negotiation itself. Do you have the right people, are you agreed on the approach to the negotiations, do you have a mechanism for communicating the evolving positions on the deal, do you have a mechanism for ensuring that you are keeping your eye on the big picture? Have you identified what’s really important to the company and what’s less important and why? The process does not have to be sophisticated, but the basics must be covered.

Identify the right team.

If you’ve been with the company a long time and know the business really well, you’ll be in a position to judge what your company can and cannot do or agree to. You may need less cross-functional support if you know the business well. However, there are several reasons for having a small team representing those aspects of the organization most affected by the new agreement:

1. They are in the best position to understand current processes and understand what’s involved to change those processes to accommodate the terms of a new agreement.

2. If they are at the table and understand firsthand the motivation of the other party, they are in the best position to be creative and solve the problem: “No, we can’t do it that way, but I understand what you need and we can do it this way. . . .”

3. They are in a better position to assess the risks inherent in agreeing to certain terms.

4. By being part of the negotiations, they understand what is required when it comes time to implement the contract and ensure adherence to its terms. Having those most affected at the negotiating table lessens the risk that the contract will be negotiated and forgotten until a breach causes a problem down the road. It also means there’s less of a need to communicate the contract terms after the fact.

Train your team.

Although being part of a contract negotiating or implementation team is often an additional responsibility, my experience is that many people enjoy it. It is an opportunity to work on a cross-functional team and is a great company team-building exercise as it promotes an understanding of the company and the roles of others within the organization. Participants have the chance to make a different kind of contribution to the organization, to step outside of a role within a discrete functional area, to consider the agreement from the whole company perspective, and to develop new skills.

It makes sense to select certain individuals from the organization to participate in negotiations training so that over time their contribution to negotiations can become more sophisticated, more creative, and more valuable.

Improving the negotiations process will result in better deals as agreements become more reflective of what your company can realistically offer and accept, a better understanding of those deals inside your organization, and a lower risk of contract breach. It’s one way in which in-house counsel are uniquely positioned to make a substantive and valuable contribution to our organizations.

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