Contract negotiations are often perceived as a task best left to lawyers. However, the truth is that the most effective approach to negotiation is a collaborative one. By requesting input and involvement from key stakeholders across departments, attorneys are much more likely to achieve their clients' desired outcomes. Not convinced? Here are 7 reasons why contract negotiations are more successful when approached as a team sport.
1. Holistic Understanding of Business Needs
Lawyers bring legal expertise, but stakeholders from various departments provide insights into the operational needs of the business. Sales teams understand customer expectations; finance teams manage budgets; operations teams can foresee implementation challenges, risk managers...well, they understand and manage risk; and information security professionals oversee the processing and safeguarding of critical data. When these perspectives are given due consideration during the negotiation process, the resulting contract is more likely to align with the company's overall business strategy and meet expected outcomes for the business.
2. Comprehensive Risk Management
While lawyers are trained to identify legal risks, other stakeholders can pinpoint business-specific risks such as operational, financial, and reputational issues. For instance, a supply chain manager might highlight potential logistical issues, while a finance manager can assess financial exposures. This comprehensive risk assessment leads to more robust and well-rounded contracts.
3. Enhanced Negotiation Positioning
A united front during negotiations demonstrates to the counterparty that your organization is cohesive and serious. When stakeholders collaborate and present a unified position, it strengthens the company's negotiating positioning. It also demonstrates that all aspects of the contract have been thoroughly considered, making it more difficult for a counterparty to push through one-sided or detrimental terms, and providing an opportunity to substantiate your positions, leading to smoother and more effective negotiation.
4. Faster Decision-Making
When key stakeholders are involved from the beginning, decision-making is expedited and often results in quicker and smoother negotiations. Questions can be answered quickly, and approvals can be obtained without delays. This reduces the back-and-forth often associated with contract negotiations and speeds up the overall contracting process, enabling quicker project kick-offs, faster receipt of cash-flow, and replenished resources which can be used to pursue the next deal.
5. Improved Communication and Transparency
Involving multiple stakeholders fosters transparency, leading to overall improved communication, not only with respect to the four corners of the contract, but also, the deal and its impact on the company. When each department understands how the contract will affect their area of responsibility, misunderstandings and misaligned expectations are less likely to occur. Regular updates and discussions keep everyone informed, ensuring that all parties are on the same page throughout the negotiation process, and that they fully understand what was sold and what needs to be delivered.
6. Tailored and Practical Agreements
Stakeholders bring practical insights that ensure contracts are not only legally sound but also operationally feasible. For example, an IT manager can provide critical insight into the specific service level agreements (SLAs) that are achievable and beneficial for the company's technology infrastructure. This input helps to ensure that contracts are realistic and tailored to the company's actual needs and abilities to execute.
7. Post-Execution Success
The effectiveness of a contract extends far beyond the moment it is signed. What happens after the ink dries is far more important to the overall success of the deal. Implementation of a new contract requires the involvement of those who negotiated it, as well as those who are impacted by it. If impacted stakeholders are brought into the negotiation process, they are more likely to understand the contract's nuances and can ensure its terms are adhered to during execution. This continuity helps in achieving desired outcomes and building trust within the organization.
Contract negotiation is far more than a legal exercise; it is a deeply strategic business function that requires the collective wisdom and involvement of key stakeholders. By treating contract negotiation as a team sport, organizations can craft agreements that are legally sound, strategically aligned, and practically executable, leading to greater overall success.
It will make your lawyer happy too!
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