Negotiation Skills for Contracts and Commercial Managers Training Course

Introduction

Ensuring the outcome of the negotiation is legally binding

• Legal protection
  • Exercise – Co-op v ILC (International Computers Limited now part of Fujitsu)
  • Creating a legally binding contract – LILAC
  • Legality (including Bribery Act, Competition Act, Unfair Contract Terms Act, Misrepresentation / Duress)
  • Intent
  • Legal capacity v Power of attorney
  • Agreement (Offer & Acceptance, battle of the forms. Invitation to treat v offer. Letter of Intent. Authority to proceed)
  • Consideration, legal value (FOC offerings / project reviews and amendments to scope)

• What, and why, are we negotiating
  • Understanding the relationship between implied term and express terms in Contract law
  • Shape and form of a contract
  • Implied terms (statute, Acts of Parliament)
  • Express terms (negotiated terms agreed verbally, in writing or by conduct)

• Understanding the starting position in statute (Implied terms) and how, and why, Express terms amend or deviate from the Implied terms. Focus of the ‘why’ being:
  • Clarity - removing ‘one size fits all’ subjective, ambiguous elements of implied terms, i.e. acceptance criteria revised from ‘satisfactory quality’ to quantitative measurements, e.g. KPI’s /service levels etc
  • Implications of the ‘Reasonable’ rule in English contract law
  • Meaning of ‘best endeavours’ and ‘reasonable endeavours’
  • Importance of using the ‘Definitions’ section in the contract

• Proactive risk management – allocating ownership of contractual promises and liability if contract is breached / contractual promise broken.
  • Placing risk with party best able to manage it
  • Monetary compensation v practical solutions / remedies e.g. ‘solutions not problems’,
  • Plan Bs / contingency plans to move the project forward. Avoid litigation
  • Take advantage of stronger bargaining position to reduce own liability / risk exposure
  • Transparency to enable effective Supply Chain Management (SCM)
  • Relationship management: ‘win-win’ for long term gains. Realising opportunities
  • Exercise – Review of sample Express term clauses

Preparing for the negotiation

• Negotiation is two fold: content and process. Step 1: content
  • Greenhalgh Negotiation model – Preparation, Relationship, Information gathering, Information using, Closing, Implementing the Agreement

• Understanding your strategy – objectives / goals
  • Establishing the drivers influencing you:
  • Company policy / mission
  • Relationship (with other party) or Task (achieving the best outcome for you)
  • Win/Win v Win/Lose. Carter’s pie theory: increasing pie size or getting largest slice.
  • Time v Quality v Price (Slack, Chambers & Johnson’s Iron Triangle)
  • Attitude to risk: risk minimisation or sharing risk. Risk Management Strategies: 4T’s (Tolerate; Transfer; Terminate; Treat)
  • Methodology for determining priorities: MIL, Must have; Intent to have; Like to have
  • Methodology for cost v benefit analysis of amount of time and effort give to negotiation reflecting the criticality of the outcome: Kraljic matrix – leverage; strategic; non-critical; bottleneck
  • Exercise – Price v Scope or Risk
  • Exercise - Preparing your MIL
  • Exercise – Drafting potential settlement zones. 4T’s

Determining your bargaining position

• Different theories / methodologies, same logic:
  • Determining the bargaining power of each of the negotiating parties.
    • Difference sources of power: Reward; Coercive; Expert; Informational; Referent; Legitimate
    • “BRA”: Best Realistic Alternative / “BATNA”: Best Alternative To a Negotiated Agreement
    • Porter’s 5 Force: Bargaining power of suppliers; of buyers; threat of new entrants; threat of substitutes; industry rivalry
    • Porter’s Generic Strategies for Competitive Advantage model: cost leadership; cost focus; differentiation; differentiation focus.
    • Steel & Court’s Supplier Preferencing model – Development; Core Business; Nuisance; Exploitable. Attractiveness of buyer’s organisation and value of buyer’s business to the supplier
    • SWOT analysis: Strengths; Weaknesses; Opportunities; Threats
    • Cox’s Power and Dependency matrix
  • Exercise – Porter’s Generic Strategies

Undertaking the negotiation

• Negotiation is two-fold: content and process. Step 2: process
  • Greenhalgh Negotiation model – Preparation, Relationship, Information gathering, Information using, Closing, Implementing the Agreement
  • Aligning your negotiation style and tactics to your bargaining position and strategy

Negotiation style

• Exercise – negotiation questionnaire identifying delegates default style
• Different theories, same message:
  • 6 styles theory: Acceptance, Compromise, Threat, Emotion, Bargain, Logic.
  • Cooperative (bargaining & logic) v Competitive (threats).
  • 3 C’s: Compromise, Compete, Collaborate 
  • 3 types – Assertive (aggressive), Accommodator (relationship oriented), Analyst (conflict avoidant)
  • Thomas–Kilmann dual concern model: Competing, Accommodating, Avoiding, Compromising or Collaborate.
  • Constructive v Destructive
  • Push (exerting power) / Pull (persuasion) influences during a negotiation
  • Rational compromise
• Consciously selecting an appropriate style to achieve objectives
• Exercise – ‘Push’ / ‘Pull’ and ‘Constructive’ / ‘Destructive’ approaches

Negotiation tactics

• Confidence v arrogance
• Honest and trust, more than just rapport. Relationship values and drivers. Avoiding getting trapped in the ‘vicious circle of blame’
• Acknowledgement of past interactions – good or bad
• ‘Framing’ the negotiations
• Opening the negotiation / effective listening & asking questions, gaining insight
• Exchange of information / being aware of your own disclosures
• Getting a reply: ‘rephrasing / reframing’ the same question
• Use of empathy for ‘win-win’ and/or to encourage disclosure of information
• Ury & Fisher’s - ‘Getting to Yes’: separating people from the problem; focusing on interest rather than position (Not what but why, reasons behind stance); generating options; focus on objectives
• Body language
• Silence tactic – using it / diffusing it
• Breaking deadlock and moving negotiations forward
• Exercise – Effective questioning

Approach and environment to reflect objectives and maximise desired outcome

• Timing
• Mode / venue
• Environment
• Atmosphere
• Attendees

 

Structuring negotiations and good ‘housekeeping’

• Establishing power of attorney of attendees
• Ensuring confidentiality
• Keeping negotiation open until formal written agreement signed
• Focus – use of agenda: pros and cons
• Summarising and capturing the agreement accurately

Final questions