The team of three for contract negotiations

The value of team negotiation

In procurement talks with vendors, a team-based negotiation approach offers clear advantages over solo negotiation.

Team negotiations offer several benefits:

• By their nature, teams have the advantage of bringing a diverse skill set to the negotiating table.
• People feel less stressed and competitive when part of a team and more empowered than solo negotiators.
• Teams foster information-sharing and discussion about priorities and issues, which of course individuals cannot do.
• Seasoned teams with members who work well together can effectively leverage that cohesiveness.

We recommend a team of three. Conventional wisdom would state that a lawyer be one of the three, and that could be an option. However, our team of three involves the following roles:

1. Someone from the line of business or other “user” representative. The business unit representative ensures functional business requirements are met, offering guidance regarding future needs and considerations.
2. Someone from procurement responsible for the purchasing and vendor management process.
3. An outside expert and consultant, like someone from LAC’s spend management group.

The outside expert brings relevant experience and knowledge that extends beyond the organization’s own walls, serving as an objective bridge between you and the vendor.

Let’s explore further into the benefits and synergies of this team negotiation approach.

Form your team at an early stage to positively impact negotiations

Negotiation teams should be assembled at an early stage, because the start of the process can have the greatest impact on results. Advance preparation is an important investment as it gives ample time to review contracts and spend data, assess current needs and consider new options that may be more appropriate and valuable. And if the purchase involves a formal request-for-proposal (RFP), it’s critical that requirements are correctly spelled out.

Time and information actually will generate greater creativity and flexibility during negotiations, not less. A good rule-of-thumb for important negotiations is that teams should spend about twice as much time preparing as they do in actual negotiation talks.

Negotiation requires diverse skills and perspectives

Team negotiation encompasses a wide range of skills, experiences and viewpoints that are highly valuable, but only if those individual capabilities are closely coordinated. Along with the three representatives we recommend for the team, a number of important negotiation functions should also be considered. For example:

• Negotiation session chair to manage the time flow of the negotiation to ensure coverage of every agenda item, manage time spent on each topic and schedule breaks and adjournments if needed.
• Legal advisers should work to prepare the documents and make sure that your organization’s preferred approach to contract provisions appears in any finalized agreement and to ensure all contractual requirements are satisfied.
• Risk advisers analyze risks such as the adequacy of the prospective vendor’s relevant insurance coverage.

Negotiation has evolved from an individual to team sport

Sourcing, procurement and vendor management have become increasingly complex in recent years. Consequently, negotiation skills have become more important and have moved from what had previously been thought of as a solo effort to one that is team-based. This perspective is supported by Hal Movius and Lawrence Susskind, academics and executives at the Consensus Building Institute who made the case for negotiation as an enterprise competency in their book Built to Win.

According to Elizabeth Mannix, a professor of management at Cornell University’s Johnson Graduate School of Management, team-based negotiation can be especially valuable in certain negotiation circumstances that:

• Are particularly complex and demand a broad range of knowledge.
• Offer the potential for creative or integrative solutions.
• Represent a wide range of diverse interests.
• Need to demonstrate strength and seriousness.

Key takeaways

For successful vendor negotiations, build a team of three:

1. Business unit representative
2. Procurement
3. Outside consultant for external knowledge and guidance

Outside consultants such as LAC Group can offer added value to all of the various roles and perspectives discussed here. Vendor negotiations and contracts are something we specialize in, and even if we’re not involved in the final negotiation, we can add value with support for advance preparation and practice sessions.

For some spend categories, such as library services and business, market and competitive intelligence research we also have in-depth understanding of user and business unit needs in those areas and can provide valuable advice.

LAC Group are not lawyers and do not give legal advice, but we’ve done enough contracts to be familiar with the most common legal considerations, which can also save time and money on the legal review process.