Contracts are the backbone of any business transaction, but negotiating and finalizing them can be a frustrating and time-consuming experience. However, adopting a fair and balanced approach to contracting can help streamline your processes, reduce inefficiencies, and lead to better relationships. In this article, we've explored how the WorldCC Contracting Principles can help you take the pain out of contracting and negotiation. By implementing these Principles, you can negotiate and finalize contracts more efficiently and effectively, giving you and many others in your organization more time to focus on other ways to grow your business. It will also result in a more mutually beneficial relationship with the party on the other side of the table.
Without a fair, market-based approach, the contracting process can be challenging for both parties. Here are some of the unintended issues that can arise:
- Unnecessary conflict: By proposing one-sided terms or taking hard-line positions during negotiations, distrust and resentment will result when collaboration and partnership should be the rule of the day.
- Inefficiencies: Spending unnecessary time negotiating terms takes away valuable time from people across multiple departments – time that could be better spent going after other business or meeting key business objectives. Also, the faster a deal gets done, the sooner the benefits will flow in. Often, present-day benefits outweigh hypothetical risks far in the future.
- Lack of consistency: Lengthy negotiations lead to multiple, widely differing contracts with either customers or suppliers. This can wreak havoc on the operations side of the organization as teams need to adapt to diverse requirements, processes, and risks. These can lead to missteps, which can hurt financially or in establishing long-term relationships.
Adopting a more balanced, consistent approach to contracting and negotiation offers a number of benefits, including:
- Improved speed to contract: Getting to a middle ground faster will help streamline the negotiation and contracting process, reducing the time and effort required to finalize agreements.
- Cost savings: Savings not only come from faster contracting processes (less legal and related resources) but also are reflected throughout the contract life cycle as lower risk profiles and fewer one-off requirements can help organizations save money through standardized operations and larger economies of scale and scope.
- Better competitive positioning: A fair and balanced approach on the sell side opens the door to more receptive customers. On the buy side, it opens the door to more vendors wanting to sell to you at more advantageous prices. Parties want to deal with entities that are easy to do business with and who don't push them into harsh terms. Less onerous terms reduce the risk of disputes and the loss of anticipated contract value.
The WorldCC Contracting Principles offer a framework for simplifying the contracting and negotiation process. These Principles cover 22 key contract clauses, dealing with governance, risk management, performance management, and more. By adopting these Principles when drafting your standard templates and negotiating, you can accelerate your contracting and negotiation processes and achieve better outcomes.
You may adopt these Principles in their entirety or select the ones that are consistent with your organization's risk tolerance and with standards in your industry, and that can maximize the benefits to you. There were specifically drafted to be fair and balanced and to shortcut getting to "Yes" on frequently negotiated terms. This also means that the business team can focus on the more important aspects of the deal: the technical elements and the commercials. Regardless of which Principles you choose to adopt, what's important is to instil collaboration, fairness, and balance in your contracting processes.
Implementing the WorldCC Contracting Principles is a step-by-step process. The first step is to identify the most relevant principles to your organization. This will entail getting all of the relevant organizations – Legal, Sales, Procurement, Finance, Operations, etc. – on the same page regarding changes to your contract standards and negotiating strategy. This entails understanding your risk profile so you know what is critical to your success and what is low risk and not worth the time and effort to fight over one-sided terms. Lay out the benefits alongside the costs, and the benefits of using the Principles will be readily apparent.
Once you have your framework and internal contracting strategy in place, it's time to embed the Principles into your contracting processes. This involves creating templates, checklists, and playbooks that reflect the WorldCC Contracting Principles, ensuring consistency and standardization. Finally, you'll want to continuously monitor and improve your contracting and negotiation processes to ensure they remain aligned with the WorldCC Contracting Principles and achieve the desired results for your organization.
In today's fast-paced business environment, where speed and efficient use of scarce resources are more important than ever, having a "principled" approach to contracting and negotiation is essential. By using the WorldCC Contracting Principles, you can follow best practices and standards, reduce risk, improve communication, and ultimately achieve better business for you and your partners. So why not take the pain out of contracting and negotiation and adopt a leading-edge approach today? WorldCC has resources to help you.