Author: Tim Cummins
If the reason for negotiation is to reach an agreement that delivers mutual benefit, it is quite clear that many of today's business-to-business negotiations fail to achieve their purpose.
IACCM has released this year's report of the most negotiated terms, providing insight from more than 2,100 organizations. Participants confirm the steady shift of business towards services, reflected in substantial growth of outcome, performance and solutions contracts.
This movement is evident in the terms that negotiators consider most important:
However, this understanding of importance does not translate to a shift in the terms that are most negotiated, which remain dominated by issues around risk allocation and the consequence of failure. Limits of liability, Indemnities, Termination and Warranties occupy four of the top six positions.
There is some diversity in the most negotiated topics based on legal system and industry – for example, battles over risk transfer are noticeably greater in Common Law jurisdictions, whereas countries operating under Islamic Law tend to be far more focused on financial issues and Civil Law regimes appear more concerned about clarity of responsibilities and intent. The research therefore illustrates the importance of negotiators understanding the issues that drive particular industries or cultures and taking these into account as they draft and negotiate agreements.
Is there room for optimism?
The results do not point to any dramatic shift in the traditional priorities for negotiators and indicate that many interactions remain power-based, rather than seekiing mutual benefit. Participants continue to see 'the other side' as the main obstacle to change and show limited signs of seeking to alter the conversation.
However, IACCM knows from its work with members that change is happening. New technologies are a major (though not the only) factor in enabling a different approach, streamlining dataflows, supporting analytics and simplifying communication. Automation has the benefit of lacking emotion and takes issues of trust and tradition out of the equation. There is a growing divide between those organizations which are making technology investments and those that are not. Quite simply, without automation, a supplier becomes difficult to do business with.
In this year's report, IACCM highlights four steps that organizations should take to shift the negotiation agenda and enable focus on value and benefits. These are:
Perhaps the most important message is that change is starting to happen; the agenda is shifting and the pace shows clear signs of acceleratiing. So the key message is: Stop listenting to people who say that change isn't possible – don't get left behind.
This year's report on the Most Negotiated Terms can be accessed on the IACCM website