Contract Negotiations: How To Avoid Negotiation Peaks? Part 3
𝗩𝗲𝗻𝗱𝗼𝗿 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀
Picture the moment of buying new software, finalizing the lease on that dream workspace or formalizing your agreement with the new accountant via engagement letters. These are not just signatures or digital approvals of external contractual terms, they are important business decisions. Welcome to the world of vendor contracts!
Building on our previous discussion how to negotiate your 𝘰𝘸𝘯 𝘤𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 like customer contracts (Part 2), let’s focus now on contract of other parties.
𝗦𝘁𝗮𝗿𝘁𝗶𝗻𝗴 𝗽𝗼𝗶𝗻𝘁
One key principle we always advocate for: be cautious and hesitant to approve external template vendor contracts (referred to as Customer Paper) replacing your own template customer contract. Even though it is advised that large companies have their own template vendor contract for their vendors, only approve the use of such templates in exceptional and pre-approved cases. This will not only prevent delays, protect your business interests but also streamlines the negotiation process.
𝗠𝗮𝗶𝗻 𝗶𝗻𝘃𝗼𝗹𝘃𝗲𝗱 𝘁𝗲𝗮𝗺𝘀
𝟭. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁:
Roles:
· Strategic direction
· Alignment other teams. ´If the Sales Team wants to buy this software tool, let’s involve Procurement, Finance and IT to check the suitability of the tool´.
· Final decision
* Best practice:
– Keep overview of vendors to align with company’s objectives.
– Work on communication between teams, especially for large vendor contracts.
𝟮. 𝗣𝗿𝗼𝗰𝘂𝗿𝗲𝗺𝗲𝗻𝘁: Acting as the bridge between your company and the external vendors, having the overview and responsibility for all vendor contracts.
Roles:
· Budget & Pricing; Assess value and benefits of vendor contracts.
· Relationship building and primary vendor point of contact
· Negotiating contracts.
· Contract compliance with company policies/procedures
* Best practice:
– Inform all teams early of anticipated engagements with vendors.
– Keep the management updated with vendor list
– Involve the legal team 𝗲𝗮𝗿𝗹𝘆 (avoid end of quarter requests) to review contracts with clear timelines.
𝟯. 𝗟𝗲𝗴𝗮𝗹.
Roles:
· Review, advice and negotiate contracts
· Streamline process
· For large companies: create vendor templates
· Create questionnaire for all vendors (create with Compliance / Data Security Team)
* Best practice:
– Create a vendor questionnaire
– Stay proactive (not reactive) to avoid review of vendor contracts in peak periods
– Improve communication between legal, procurement and other teams to avoid delays and last minute reviews.
Prioritize vendor contracts for Quarter start periods. handling contracts based on $value and potential impact.
How To Avoid Peaks in Negotiation Cycles by Improving Team Collaboration
1. Introduction
Working towards an optimized negotiation process is not only a legal matter but requires effective collaboration between various teams. In my experience, the teams highlighted below have the most important role in negotiation cycles.
The general rule to involve all teams in your contract template creation and contract negotiations will always apply. As Legal is in the middle of these processes, we have written this series from the point of view of the Legal department.
Let’s dig deeper into the roles of the different teams involved in negotiating your own contracts.
2. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁
Next to a focus on the strategic vision of the company, the management will encourage teams to sign as many customer contracts as possible. It will especially crucial for the management to have a seamless process with minimal involvement from management, except where agreed.
Main roles
In contract negotiation, the roles of the company’s management will be:
- · Strategic Vision
- · Risk Management
- · Stakeholder Alignment
- · Escalations / final decisions
Best practice: Establish a robust structure that defines Management’s role and involvement in decision-making processes. Explore and discuss refinement of contract processes and agree on key priorities.
3. Commercial Team
With this we mean for example Sales & Account Managers, Business Development Managers, Partnership Teams. As a sprinter nearing the finish line, the Commercial Team will race to close deals at the end of each quarter. Smoother processes will mean better results so Commercial Teams are usually more than willing to work towards improvements.
Main Roles:
In contract negotiation, the roles of the company’s commercial team will be:
- · Overall Overview and Responsibility for customer contracts
- · Relationship building / primary point of contact
- · Getting the deal done
- · Stakeholder Alignment
Early involvement and cooperation with other teams is imperative for Sales to avoid bottlenecks & peaks. In the cooperation with Legal, focus on (i) Setting Priorities, (ii) Contract Template Training and (iii) when & how to involve Legal.
4. 𝗟𝗲𝗴𝗮𝗹
In contract negotiations, the legal team navigates all legal advice and negotiations from a strategic point of view, with a goal to improve processes and reduce risks for the company.
Main roles:
In contract negotiation, the roles of the company’s legal team will be:
- · Contract Advice, Negotiation and Drafting
- · Risk Management of the company
- · Creation of contract templates / playbooks and contract process improvement
Best practice: Legal shines in drafting, advising and negotiation of contracts. Do not create gridlocks by making them the point person for each negotiation. Strategize with Sales when Legal should step in, which should mainly be for large or strategic customer contracts.
Conclusion
By carefully dividing roles and collaborating closely between teams, we are able to work on improving contract & negotiation processes. This also includes working better together to avoid end-of-quarter spikes before the holidays.
In our other articles about this topic, see 1, 2, 3 and 4 we dive deeper on the ways to improve the communication and collaboration between these teams.
Contract Negotiatons: How to Avoid Negotiation Peaks? Part 1
Negotiating commercial contracts is always a daunting task, but is particularly complicated at the end of Quarter. We have written a series of tips on how to avoid these negotiation peaks, using my experience gained on this topic since 2004, as I have found that now a great time to start preparing for the end of Q3 and especially for the highest peak of the year (end of Q4).
If we all embrace the goal of reaching a steady negotiation rhythm, we are able to unlock benefits like improved decision making, streamlined processes, more joy at work and stronger relationships. Replace rushed contract negotiations & discussions with a strategic plan that allows for efficient and optimal contract negotiations.
As Commercial Contracting Experts, we focus on the following two scenario’s:
Scenario 1: negotiating your own contracts with buyers of your Products & Services: Customer Contracts.
-Teams involved: Sales, Account Management, Legal, Finance, Management, etc.
Scenario 1: negotiating contract of other companies to buy their products: Vendor & Supplier Contracts.
-Teams involved: Procurement, Finance, Facility, IT, Legal, Management, etc.
Top 10 common Commercial Contracts
– Confidentiality Agreement (NDA)
– Order Form
– Master Services Agreement (MSA)
– General Terms & Conditions (GT&C)
– License Agreement
– Framework Agreement
– Partner Agreement (Reseller, Distribution, Incentive Agreement)
– Service Level Agreements (SLA)
– Statement of Work (SOW)
– Data Privacy Agreement (DPA)
First Tip: start your preparation & planning and list your priorities now.
Are the teams your work with aware that the contracts you are working on need to be signed soon – particulary before end of Q3 or Q4??
Contact your team members this week to inform them of any upcoming contract negotiations.
Four Critical Factors: The following four Critical Factors will prepare you to work towards a steady negotiation cycle:
1. Early Preparation, Planning and Prioritization
2. Communication & Cooperation
3. Standard Templates & Procedures.
4. Implement Legal Tech & Digital Solutions
Bonus: specific actions for the last weeks of each quarter.
In the next posts in this series we will provide you with the specifics of the four Critical Factors and share practical tips for the teams involved, especially Legal, Sales, Procurement and Management.
How to roll-out a new Contract Template #6 – Meetings
Introduction
Last but not least! Here is part 6 and last part of my tips on how to roll-out a new Contract Template as an Expert.
Once you have sent out the new templates, these next steps are most important to ensure that the team will really use the templates. In this part of the series ‘How to roll-out a new Contract Template #6 – Meetings’ we focus on meetings and training sessions you should set up with your team.
How to roll-out a new Contract Template #6 – Meetings
𝗧𝗮𝗸𝗲 𝘁𝗵𝗲𝘀𝗲 𝗳𝗼𝗹𝗹𝗼𝘄-𝘂𝗽 𝗮𝗰𝘁𝗶𝗼𝗻𝘀 𝗮𝗳𝘁𝗲𝗿 𝗿𝗼𝗹𝗹𝗶𝗻𝗴 𝗼𝘂𝘁 𝘆𝗼𝘂𝗿 𝗻𝗲𝘄 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗧𝗲𝗺𝗽𝗹𝗮𝘁𝗲
By following these last steps when sending out contract templates, you can optimize the contract management at your company. Consequently, this will create a more efficient and effective working environment with less discussions about the templates. If you train the teams well and empower them sufficiently you will also see that the negotiation process will run much smoother.
𝗦𝗲𝗽𝗮𝗿𝗮𝘁𝗲 𝗺𝗲𝗲𝘁𝗶𝗻𝗴𝘀 𝘄𝗶𝘁𝗵 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁
Address and discuss the goals of the new Contract Template and raise specific concerns and considerations, engaging key stakeholders individually.
Full team meetings:
Provide comprehensive explanations of new templates/policies, emphasizing their purpose, benefits, and alignment with company goals.
𝗧𝗿𝗮𝗶𝗻𝗶𝗻𝗴 𝘀𝗲𝘀𝘀𝗶𝗼𝗻𝘀
Train and empower colleagues with the necessary skills and knowledge to implement the contract templates effectively.
Centralized document access
Establish a user-friendly location for all internal standards, guiding team members to easily find necessary documentation.
𝗥𝗲𝗴𝘂𝗹𝗮𝗿 𝗺𝗼𝗻𝗶𝘁𝗼𝗿𝗶𝗻𝗴
Check awareness, adherence, and effectiveness of procedures, identifying areas for improvement and ensuring compliance.
Support and guidance:
Offer ongoing support to help guide your colleagues by proposing one on one meetings and training sessions.
𝗙𝗲𝗲𝗱𝗯𝗮𝗰𝗸 𝗳𝗼𝗿 𝗶𝗺𝗽𝗿𝗼𝘃𝗲𝗺𝗲𝗻𝘁:
Create opportunities for feedback to drive future enhancements. Actively ask your team members for feedback in the training sessions and meetings mentioned above.
Conclusion
As legal professionals, we play a vital role to improve compliance, efficiency and risk mitigation. By implementing these tips, we create a more productive and legally sound workplace with the ultimate goal: more fun at work and driving success for the company. Most importantly, when doing so, we work together with the other teams and we do not only dictate what they should do.
Easier said, this way:
- You will waste less time in trying to (i) find the right template or (ii) figure out how to use it or who to involve when you have issues
- Your colleagues at the Legal department will have more time to dive deeper into your legal issues and have more time to negotiate and advise you from a legal and strategic point of view
- The other teams of the company will feel more involved- it will be very hard for your colleagues to say that they do not know where to find the Contract Templates (sound familiar?)
- Your Contracts will be signed quicker!
To see the other parts in this series, go to: bit.ly/amstlegal-blogs
Communicating Your New Contract Template to All Team Members
As part 5 of my tips on how to roll-out a new Contract Template as an Expert, the following:
! 𝗚𝗲𝘁 𝗘𝘃𝗲𝗿𝘆𝗼𝗻𝗲 𝗼𝗻 𝗕𝗼𝗮𝗿𝗱: 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗻𝗴 𝗬𝗼𝘂𝗿 𝗡𝗲𝘄 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗧𝗲𝗺𝗽𝗹𝗮𝘁𝗲 𝘁𝗼 𝗔𝗹𝗹 𝗧𝗲𝗮𝗺 𝗠𝗲𝗺𝗯𝗲𝗿𝘀
Once your template is final, approved internally and previous tips are followed, send out your New Template / Procedure using a communication method that is tailored to your company.
Do not use a single communication method (e.g. only providing the template via e-mail). This will significantly decrease the use of the New Template.
When rolling out a new contract template in your company, it is important to use multiple channels of communication to ensure that team members are informed and understand how to use it. It is recommended to combine the following communication methods:
* Your company’s intranet or internal portal
* Collaboration software like Slack or Microsoft Teams
* Email
* Kick-off meetings/trainings
This combination will help to increase the visibility of the new Contract Template and provide team members with the opportunity to ask questions and address any concerns.
Remember that clear communication is key to the successful implementation of a new contract template.
𝗣𝗿𝗼-𝘁𝗶𝗽: In case of new Contract Templates or Legal Procedures, it is advised to cascade the communication as follows:
* First to each Head of the Commercial Team / Regional Leader who can share/discuss it with their team and reiterate the importance of the new Contract Template/Procedure
* Legal Team sends it to the Commercial Team
* For particularly important messages set up separate meetings between Legal Team members and Commercial Team members
To avoid the common issue that team members are not able to find the e-mail or other communication that you used sending out the new template, follow one of my previous tips: create one central location for all your templates.
𝗪𝗵𝗮𝘁 𝘄𝗲 𝗵𝗮𝘃𝗲 𝗹𝗲𝗮𝗿𝗻𝗲𝗱 𝗳𝗿𝗼𝗺 𝗽𝗿𝗲𝘃𝗶𝗼𝘂𝘀 𝗽𝗼𝘀𝘁𝘀 𝗶𝗻 𝘁𝗵𝗶𝘀 𝘀𝗲𝗿𝗶𝗲𝘀:
– The top-down approach does not work
– Team members need to know the critical components for the use of the new Contract Templates: the Why, How, When and Benefits
– Create and follow a strategic communication and follow-up plan (the Communication Plan):
– Step 1: Identify Relevant Users and Teams
– Step 2: Notify / Pre-inform the team about the upcoming new template
– Step 3: Make sure to cover all 10 points of the Checklist
𝘛𝘩𝘪𝘴 𝘱𝘰𝘴𝘵 𝘰𝘧 𝘱𝘢𝘳𝘵 𝘰𝘧 𝘮𝘺 𝘭𝘢𝘴𝘵 𝘵𝘪𝘱 (𝘯𝘳. 10) 𝘰𝘯 ‘𝘏𝘰𝘸 𝘵𝘰 𝘐𝘮𝘱𝘳𝘰𝘷𝘦 𝘺𝘰𝘶𝘳 𝘉𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 𝘣𝘺 𝘊𝘳𝘦𝘢𝘵𝘪𝘯𝘨 𝘎𝘳𝘦𝘢𝘵 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵 𝘛𝘦𝘮𝘱𝘭𝘢𝘵𝘦𝘴’.
How to Roll-Out your New Contract Template: 10 point Checklist
This is part 4 of my tips how to Roll-Out your New Contract Template as an Expert.
𝗪𝗵𝗮𝘁 𝘄𝗲 𝗵𝗮𝘃𝗲 𝗹𝗲𝗮𝗿𝗻𝗲𝗱 𝗳𝗿𝗼𝗺 𝗽𝗿𝗲𝘃𝗶𝗼𝘂𝘀 𝗽𝗼𝘀𝘁𝘀 𝗶𝗻 𝘁𝗵𝗶𝘀 𝘀𝗲𝗿𝗶𝗲𝘀:
* The top-down approach does not work
* Focus on the Why, How, When and Benefits
* Make a Communication Plan
* Identify Relevant Users and Teams
* Notify / Pre-inform the team about the upcoming new template
𝗡𝗲𝘅𝘁 𝘁𝗶𝗽: 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗖𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁
See below a non-exhaustive checklist of the items that I would recommend to include in your message When rolling out & communicating the new Contract Template.
-𝗦𝘂𝗯𝗷𝗲𝗰𝘁 𝗟𝗶𝗻𝗲: Use a clear subject line that communicates the purpose of the email, such as “New Contract Template – [Add name relevant document] – Please Review and Adopt.”
-𝗜𝗻𝘁𝗿𝗼𝗱𝘂𝗰𝘁𝗶𝗼𝗻 (𝗪𝗵𝘆): Start with a brief introduction that outlines the importance of adopting the new contract template.
-𝗕𝗲𝗻𝗲𝗳𝗶𝘁𝘀: Provide an overview of the key features and benefits of the new contract template, highlighting how it will help streamline processes, reduce risks, and improve efficiency.
-𝗛𝗼𝘄: Add instructions on how to use the new contract template, including where to find it, how to fill it out, and any specific requirements to be aware of.
-𝗧𝗶𝗺𝗲𝗹𝗶𝗻𝗲: Clearly communicate the timeline for adoption of the new contract template.
-𝗧𝗿𝗮𝗶𝗻𝗶𝗻𝗴 𝗮𝗻𝗱 𝘀𝘂𝗽𝗽𝗼𝗿𝘁: Include information on any training or support that will be available to help team members adopt and use the new contract template effectively.
-𝗣𝗼𝗶𝗻𝘁 𝗼𝗳 𝗖𝗼𝗻𝘁𝗮𝗰𝘁: Provide a point of contact for questions or concerns regarding the new contract template (e.g. a project manager or legal representative).
-𝗔𝗰𝘁𝗶𝗼𝗻: End the message with a clear call to action, such as “Please review and adopt the new contract template by 2026, and let us know if you have any questions or concerns.”
-𝗢𝗽𝘁𝗶𝗼𝗻𝗮𝗹 – 𝗟𝗲𝗴𝗮𝗹: highlight any legal requirements, regulations or policies that must be adhered to, in order to ensure compliance and mitigate legal risks.
-𝗢𝗽𝘁𝗶𝗼𝗻𝗮𝗹 – 𝗧𝗲𝗮𝗺 𝗦𝗽𝗲𝗰𝗶𝗳𝗶𝗰𝘀: mention important specific information or operational set-up details for certain teams.
Tip 8: Consistent terms & definitions in your documents
Make sure that you use the same terms and definitions in your contracts and other important documents. It is also advised to follow the same rule for commercial documents like pitches / offers and even your website.
Why is this Important?
There are many reasons why consistent use of terms in your organization and definitions in your documents. To name a few:
- 1. Consistent use of most used terms in your organization improve efficiency as you will not have to think & have meetings which term or what definition to use.
- 2. It helps everyone understand what is meant exactly by a certain term that you use in your company.
- 2. To create the best possible customer experience.
- 3. To avoid any misunderstanding on what service or product the customer has purchased from you exactly, and under which conditions.
- 4. In case of commercial discussions (and even litigation) about a term in the contract for whatever reason: e.g. exact services purchased (and under which conditions), the price for the service, termination possibilities, volume commitments, compliance and system requirements, etc.
Examples
For a typical SaaS/Software company this means that the same terms/definitions should be used for the following documents (depending on the contractual set-up):
- General Terms and Conditions
- Product Specific terms
- End User License Agreement
- Customer Contract / Master Ordering Agreement
- Order Form / SOW (Statement of Work)
- Annexes likes the Data Processing Addendum (DPA), Data Security Addendum and the Pricing Annex
- Disclaimer on the website
About AMST Legal
At AMST Legal, we provide advice how to improve your (legal) processes and contract templates. Helping you to make sense of all your standard contracts and templates and improving them is part of that. Contact us at lowa@amstlegal.com or book a meeting here for help with your legal (compliance) framework.
Tip 7 – All Contract Standards & Templates in One Place
Create a Central Repository
Remember to store all your (contract) templates in one central place to make sure that everyone is (i) able to find the correct templates quickly and (ii) using the correct template.
Sounds very straight forward, but in reality I rarely see companies that store all templates in one central place easily accessible for all involved team members.
Storing all contract templates in one central place is challenging for most companies, but especially in case of:
- fast-growing companies
- mergers/acquisitions
- activities in multiple countries
- large groups with many subsidiaries or a complicated corporate structure
- contracts in different languages
- involvement of different departments (Account Management, Sales, Partnerships, Sales Operations, …)
What is the Best Way to Make Templates Easily Accessible?
Best options are:
- (a) fully/partly automate your contract creation and be strict that this is the only way that contracts can be generated. This way the relevant, most up to date and correct Contract Template is used and all templates are stored in one spot as you should only be able to use this automated system; and
- (b) create a central place (usually an internal website or – less ideal – a shared folder).
Crucial Step
Give training – at the start of employment and regularly thereafter – to your employees to make sure they know where the contract templates are located and how to correctly use these templates.
About AMST Legal
At AMST Legal, we provide advice how to improve your (legal) processes and contract templates. Helping you to make sense of all your standard contracts and templates and where to store them for easy access to the team is part of that. Contact us at lowa@amstlegal.com or book a meeting here for help with your legal (compliance) framework.
Tip 6: When making your specific contract, start with the correct template
Introduction
Previously in the series “How to improve contract templates”, we emphasized knowing the content of your contract templates. See the full article here: https://amstlegal.com/tip-5-review-the-contents-of-your-templates/. Now we’re zooming in on perhaps the most common issue with contract templates: How the templates are used daily. Because even with all the technology available to automate contract creation, most contracts are still created in word processing software such as MS Word. The templates are often saved in unstructured ways too. Additionally, the people that use the template contracts on a daily basis for a specific customer contract do not always use the correct template, i.e. the latest version, when making a new contract. While simultaneously doing that without using contract automation, unexpected risks can show up later on. Keep reading to learn what risks you could be facing, and how you can manage them.
When making a specific contract, start with the correct template
Why is it so important to start with the correct template?
Naturally, it sounds very convenient to use a contract of another client or the contract template that you have been using for years when making a new contract. However, this is the biggest risk associated with contract creation for companies that do not use contract automation. More time and money will need to be spent on the (re)negotiation of the contract and/or potential mistakes or claims in the future because your contract did not fit with the client or the specific situation. Using the correct template can be a step on the way to minimize encounters with these risks.
How do you minimize this risk?
So how do you avoid the risks connected to not using the correct template? There are many options to minimize those risks. However, we have found from experience that the two best ways to minimize these risks are:
- Fully/partly automate your contract creation and be strict that this is the only way that contracts can be generated; and
- Create a central place (usually an internal website) to store the contract templates, and give your employees regular training.
Unfortunately, the first tip can take some time to set up and requires recources for it to fully work. The pros outweigh that though, so don’t fear the power of technology when making contracts. For the second tip to fully work, we advise to provide training to the employees regularly. For example at the start of the employment followed by regular consistent training after that. This is our standpoint because you want your employees to know where the templates are located and how to use them.
Another tip that could be conjoined with the other two is to make sure that the importance of this is discussed regularly in your team or during company meetings.
Conclusion
To sum up this article, it can make a major difference on the aftermath of your contracts whether the correct template is used or not. Therefore we do advice to invest in good templates and good training for the employees. Doing this will make your contracting process much easier. If you feel like this is something that you would benefit from, contact us at AMST Legal for further personalized advice.
About AMST Legal
At AMST Legal, we provide advice how to improve your (legal) processes and contract templates. Helping you to make sense of all your standard contracts and templates and where to start drafting or using these standards is part of that. Contact us at lowa@amstlegal.com or book a meeting here for help with your legal (compliance) framework.
