Timing Example: Negotiators should strive to align global contracting with positive market signals to garner the best results. Yet, in many corporations market signals take a back seat to annual corporate project(s), which commonly dictate agreement timing, execution period, terms, opportunity valuation, contract length and cutover commitment.
To solve speed and timing issues, it is vital that negotiators increase market understanding, global contracting cultures and are allocated adequate time to negotiate the contract. Partners need time to create flexible global agreements with mechanisms that allow them to stand the test of time. To gain market leadership, agreements must build in mechanisms that adjust to future, unknown market opportunities, which take time.
Lack of Funding
If all of this sounds expensive in terms of investment, time and human resources, it is. Significant expertise and resources are required to create solid global agreements. The cost of entering and sustaining agreements are rarely identified in both dollars and human resources hours prior to entering the agreement, despite the fact that costs can quickly run from 3 to 7 percent of contract value.
In order to drive value from a global agreement, a company must make sure its negotiation team has the appropriate resources and experience (or access to it). Build funding for market, financial and legal research, site visits and translators into the negotiation budgets. A negotiation team limited to part-time project status and a budget that only covers conference calls and e-mail communications will create a "part-time" global agreement that reflects its lack of resources.
Likewise, a partner's budget for supporting a global agreement is critical. Negotiators must intimately understand their partners' investment capacity (dollars and human resource hours), as well as their applicable experience and prior success.
Agreements start, not finish, with a signed contract. Poor cutover is the No. 1 cause of global agreement failure and disappointment. Cutover is the period of great change that occurs between signing the contract and full contract implementation. The best-written contracts can be undone instantly with poor or absent cutover planning. Unfortunately, cutover costs occur before agreement rewards are realized, and funding sourcing solutions with delayed savings potential is difficult for most companies.
To avoid this, negotiators must evaluate all negotiated agreements in terms of total cost, which factors in cutover and start up costs, and includes hard and soft savings such as cost savings to market, cost containment, ability to change and current employee skill set. The negotiation team must secure resource support from senior management before recommending any solution. No solution can be chosen if the company cannot continuously support its cost or resource commitment doing so ensures failure.
In addition, the negotiation team should include members of the cutover and implementation team. Cutover and implementation are better supported when the professionals, challenged with implementing the agreement, are included in creating the contract.
Susan A. Hahn, founder, Niche Markets International, over the past 10 years has assisted clients from Fortune 200 companies and emerging companies in developing countries to create and negotiate global agreements.