Reaching Better Agreements During Contract Negotiations

Posted on 05/01/2013 in Sales Negotiation Skills

Negotiation training has never lost its importance and relevance.  STAR’s Negotiation Skills Workshop is one of our oldest and most popular workshops.

Because negotiation skills are so crucial in today’s turbulent business climate, we will address some special considerations that occur during contract negotiations.  Contract negotiation can be especially challenging, and requires some extra attention in both the planning and execution phases of a negotiation.   Listed below are four critical areas that will help you reach better agreements during contract negotiations.

Four Critical Areas for Contract Negotiations

1. Contract negotiations are more complex.  Many negotiations are fairly straightforward and only have one or two critical issues, but contract negotiation almost always involves multiple issues. As such, you must analyze the other side’s multiple issues and consider questions such as the following:
  • Which of their issues are most crucial (their "must haves”)?  
  • Why is this issue important to them?
  • What are some alternative ways that we could address that issue?

The answers to these and similar questions will help you to brainstorm some alternatives and improve your ability to give and get concessions. 

2. Always assess the BATNA for both sides.  The acronym BATNA ("Best Alternative To a Negotiated Agreement”) was first popularized in the book Getting To Yes by Fisher and Ury, and is especially relevant during contract negotiation. Before you start the contract negotiation, you need to answer these two questions:

  • First, if we don’t reach an agreement with the other side, what other alternatives do we have?
  • Second, if the other side doesn’t reach a deal with us, what other alternatives do they have? 

The answers to these two questions determine who has the power in a negotiation, and affect your overall strategy and approach.

3. Increased use of negotiation tactics can and will be used during contract negotiation.  Negotiation tactics commonly used in contract negotiations are "caucus”, "change the negotiator” and "good guy/bad guy”.  For example, the good guy/bad guy tactic can occur in a team negotiation when one person acts tough and unreasonable and their partner acts more conciliatory.  Remember, if the other side is using this on you, neither side is really the good guy.  You can react by walking out, protesting, ignoring the bad guy, or using your own bad guy.  Humor can sometimes work ("Hey, I know what you're doing...I saw it on TV.") 

In STAR’s negotiation workshop we spend a lot of time learning how to use and respond to negotiation tactics. If you are interested in learning more about the most common negotiation tactics, please access one of our free sessions 'What Do The Best Negotiators Do?' on our Sales Negotiation Skills Online Training page

4. Team negotiations are more likely to be relevant in contract negotiations. This presents some additional opportunities and challenges.  A well prepared and functioning negotiation team will always do a better job of negotiation than a single individual.  However, it requires greater skill and effort to form and negotiate effectively as a team.  Important questions include:

  • Who should be on your team?  
  • Who will lead the team, during both the planning and execution stages?
  • Overall, how can you take advantage of each person’s strengths?
Thorough preparation is the key to walking away with a better agreement during complex contract negotiations. Achieving success during contract negotiations requires the use of effective planning strategies. Dealing with the additional obstacles of tactics and counter-tactics is difficult, but when handled well, can help build better relationships with customers. Finally, teams require special planning and attention.  A group of people thrown together is not a team and will not benefit a contract negotiation without careful planning and attention.  

Please visit our Sales Workshops page to learn more about us.  Also visit our Negotiating for Success workshop page and the Giving and Getting Concessions when Negotiating Sales Meeting Kit page