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IACCM Issues Report On Most Negotiated Terms

May 26, 2010

The focus of negotiation in 2009 / early 2010 swung towards greater risk aversion, according to IACCM’s worldwide survey of contract negotiators. There were strong pressures on financial terms and issues such as the right to terminate. Tough economic conditions meant that the amount of negotiation increased – and ironically, many buyers saw this greater contact with their suppliers as indicative of ‘greater collaboration’. This view that was not shared by their suppliers, many of whom felt bruised by the unilatral imposition of new terms for established agreements.

 The experience of the last year has not altered the belief in the professional negotiation community that the agenda should shift towards terms and conditions that represent greater cooperation and improved clarity and governance. However, the survey results show that once more we are making little progress, partly due to our perception of ‘resistance by the other side’ and partly because of the difficulty of altering internal stakeholder positions. The interpretation at IACCM is that few contracts / legal / commercial groups are championing change at either an organizational or deal-based level. Changes can be made, but only by either a more strategic view, or as a result of improved negotiation planning. Either of these demands a focused change initiative and the garnering of senior management support – which evidence suggests would often be met with open arms.

 WHAT MIGHT YOU DO WITH THESE RESULTS?

 IACCM comments that its experience is that many senior executives are enthusiastic about greater levels of cooperation with key customers and suppliers and would welcome improvements in contracting. Some IACCM members use this annual report to focus internal discussion on the benefits to be achieved by changing the focus of negotiation and the shifts that this would require in internal organization and management. Many of these members turn to IACCM for additional input on the best way to address these changes and also to describe the improvements and value that they generate.

The detailed results are also used by many to assist in a strategic review of their current terms and conditions. They compare external experiences (as set out in this report) with their internal results. They also look at ways to reduce the frequency of repetitive negotiation issues since these can result in reduced cycle times, improved financial returns and greater ‘ease of doing business’. However, while such initiaitvves are worthwhile, it must be remembered that external benchmarks of this type only allow improvement relative to external norms; they will not in themselves prove transformational. At times of great change, such as we are currrently experiencing, organizations should undertake a much more holistic review of their contract and commercial strategies, to determine the opportunity that could arise from innovative terms and offerings, rather than simply marginal improvements relative to the competiton and their own past.

 IACCM’s report on ‘The Most Negotiated Terms’ is available to members at no charge.

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