Five Strategies To Strengthen Your Contract Negotiations
This article was originally featured on Attorney at Work.
Contract negotiations consist of far more than bringing two parties together to achieve a mutual agreement. The way your business conducts itself during legal negotiations demonstrates how you balance your internal interests with your desire for partnership. Your approach can have a significant impact on the quality of your future business relationships.
Even more, in today’s tight economy, there is a greater focus on organizational efficiency, realizing savings across business units and mitigating risks–goals that can be achieved through an informed negotiation strategy.
Common missteps during the negotiation process include mismanagement of expectations, holding unnecessary hardline positions and contributing to negotiation fatigue. How can you overcome these pitfalls and move your contract forward? These five strategies can transform your bargaining power in contract discussions and increase your ability to deliver ideal results. Also helpful: they provide a framework to spot early warning signs that it may be best to walk away from a deal.
1. Manage expectations using contract data
Manually reviewing thousands of contracts to understand the broader view of your organization’s commitments, liabilities and terms is time-consuming, expensive and error-prone. Contract management systems with artificial intelligence (AI) and natural language processing significantly speed up the process by enabling you to search the entire contract portfolio for specific clauses or phrases in just a few minutes.
Gaining a historical understanding of past agreements can inform your future approach to negotiations. With the ability to search and find specific provisions and stipulations within existing documents and auto-populating dashboards, contract management AI builds your awareness of the company’s historical clauses. You can also access data that reveals your most common compromise positions that may be more likely to close your deal and identify language that can lead to pushback and delays. Responding to redlines with your generally accepted compromise positions (or revamping your clause library to incorporate them) can help you move the negotiation forward quickly and maintain goodwill in your negotiations.
2. Recognize the motivation behind your contract
Determine the stakeholders and reasoning for this product or partnership. Ask yourself: does executing this agreement add efficiency to your business model? Will it streamline an operational function? Will it empower your team to do more with less? Businesses often focus on getting a contract executed quickly, but you should also keep an eye on which business factors are driving this contract forward and uncover the terms that are important to each of your stakeholders.
Defining the deal’s value to your company, the risk tolerance, available resources, and historical precedents are all important to ascertain your introductory and fallback positions. This awareness establishes an early understanding within your team of when it is time to walk away.
3. Create your best first draft
Once you set objectives and expectations, you can create your best first draft. By using natural language processing on your current contract database, AI helps you generate precisely tailored templates in line with existing provisions. The technology enables you to identify the best language for the current context based on precedent, and provides you with real-time insights on what language is and isn’t helping close your deal.
As generative AI matures, you will be able to leverage large language models as a tool to more efficiently draft, redline, and negotiate nuanced, industry and deal-specific contracts.
4. Avoid unnecessary rounds
Stringent reliance on a pre-set playbook or overly-broad templates can overcomplicate your negotiations. AI assists in this process by identifying and assisting in the removal of irrelevant provisions and language. Why waste ten negotiation rounds on terms when the specific use case doesn’t call for those clauses?
This AI functionality empowers you to stand firm, backed by historical data, when it comes to positions that are hardline requirements and compromise on provisions that are not relevant to the specific contract or where you have identified a previously approved fallback position.
5. Be a good partner
Powerful negotiation has evolved from a stringent, no-compromise style to a more collaborative and partnership-focused approach. Businesses, partners, and customers are increasingly interested in forging a relationship with an organization that feels aligned with their values and is willing to come to the table.
Gone are the days of locked, uneditable PDF versions of agreements and a complete unwillingness to discuss contract terms. Taking an inflexible approach to contract negotiations is more likely to lead to the breakdown of a relationship than the execution of a foolproof contract. Your flexibility, fluidity and ability to react quickly (with AI-informed fallback provisions) ensures your bargaining power and trust from your counterparty that will ultimately lead to a well-balanced contract and a bulletproof relationship.
Use these strategies to nurture successful and efficient negotiations that demonstrate your value and commitment to your company’s goals and economic health.
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