Peter Cochrane's Blog: Time to thrash out a new deal on contract negotiations

Existing methods are Dickensian...

An overhaul of Dickensian sales and contract negotiation processes is long overdue

An overhaul of Dickensian sales and contract negotiation processes is long overduePhoto: Shutterstock

Written on BA954 flying London to Munich and dispatched to a day later from a coffee shop via a free wi-fi service at 19Mbps.

All my working life I have seen reorganisations, technology transitions, political and social change, wars, conflicts and economic crises occur with a grinding regularity.

Each time some celestial ratchet seems to go click. So don't think for a moment that life will return to the way it was when we reach the far side of the present economic crisis. Change really is here to stay.

Chaos and frantic change have become the norm. But it all seems to speeding up, with people coming and going and the concept of a corporate memory rapidly becoming a thing of the past. History is repeated and the lessons learnt are now lost one generation after another. Will it ever slow down? It seems very unlikely.

Email bounce-backs on individual and group shots have always occurred, but I now see about 20 per cent or more of them. Searching for these people on LinkedIn, Facebook et al nearly always reveals that they have moved on to new companies, changed career direction, returned to education, or started their own operations.

A recent alert message from one social network revealed that 551 people had started something new in the past 12 months. That figure suggests a lot of churn, and as far I can estimate managers now average about two and a half years in each job, while staff members do about five years.

One of the consequences of this turnover is that there is now a real risk that the person with the power to sign off a deal will decide to resign, retire, move on or get fired during the negotiation process. This instability is devastating for a project because it usually means resetting the clock and starting again.

The only solution seems to be a long overdue overhaul of negotiation and sales processes, which appear to have originated from the Dickensian era.

One big problem with companies is that they have a process, and that one process is used for deals big and small. So the overhead is almost a constant, no matter what is being done.

Of course, cynics observe that the smaller the deal the longer the negotiation, while the mega-deals go through quickly and largely uncontested and without due attention to the fine detail.

This state of affairs needs to change. Ideally, a gradation of process between petty cash and the full-blown multi-million deal would produce significant gains in corporate efficiency.

In fact, it really needs automating, with people taken out of the loop. After all, this approach has already occurred in a lot of the accounting, finance, and compliance areas, so why not in deal closure?

In one recent deal, we saw the cost of negotiation and agreement exceed 40 per cent of the contract price, and I was left wondering if there might not be an upper limit. It would have been more efficacious to toss a coin or throw a dice.