Corporates focus on building the business and financial acumen of the sellers to talk the language of money, KPIs and results with clients. However legal knowledge of the sales teams is limited by the level of orientation their organization imparts and the degree of compliance expected from them.
Typically, contract negotiation in a sales cycle is determined by the size and type of buyer and seller organizations, their industries, compliance requirements etc. During my stint with the Consulting division of an IT services major- I had the privilege of working with Government, Public sector undertakings, MNCs, Indian conglomerates, SMEs etc. Based on the experience of serving clients with diverse background, I am pleased to share some nuggets which could be useful to Sales Managers and their executives.
Contracting Game Starts Early
Sales professionals serving Government and public sector undertakings (PSU) generally have greater legal orientation compared to their counterparts selling to enterprise segment. This is because the pursuit in public sector starts with the tender/ Request for Proposal (RFP) with exhaustive legal terms and conditions apart from the techno commercial specifications. In the tenders, devil is in the details and a comprehensive review of the same by Legal team is mandated in large organizations. Successful sales professionals’ “speck” the legal terms as well to be baked in the tender by mapping the client. They ensure some of the must-have clauses are incorporated and get draconian clauses removed or diluted prior to the RFP release. This helps in taking a favorable “Bid” decision internally as against “No bid” because of penal clauses.
Even if unfavorable clauses are incorporated in the RFP, they subtly raise it at pre-bid stage and try to get an acceptable solution. Sellers are fully aware that the leeway to get the terms relaxed post price bid opening is limited and could open a pandora’s box. While the Legal executives in the seller organization could review the RFP/draft contract- it is the seller’s responsibility to explain the scope, deliverables, risk and mitigation in a clear manner so that reasonable requests for amendment are made to the buyer.
I remember an incident from my days as a Project Manager for an Electronic tendering service project to a Government Housing Corporation in Chennai, two decades ago. The salesperson had not differentiated a pilot service and a full-fledged implementation to the client before picking the order. What followed was an ordeal with client demanding over 100% customization to suit the needs of the organization. I was caught between the demanding client and disgusted software team. One day, I mustered courage and told the client SPOC, all their requirements can be met when they go for a full implementation and not in a proof of concept. For this, the client retorted -“The proposal submitted by your company is vague, if we demand, you even need to cut your head”. How this client was managed, and project was completed is reserved for another article, but the bottom line is contractual goof-ups have a long-term and costly implication.
In private sector, the situation is manageable to a great extent. Sellers who map the Procurement, Contracts and Legal functions in buyer organization are in a better position to expedite the contracting process with mutually acceptable terms.
Sellers serving clients in specific verticals need to be well-versed in the regulations pertaining to the industry segment. A sales manager to Government segment is expected to know the Transparency in Public Procurement Act pertaining to the state, Central Vigilance Commission (CVC) guidelines, General Financial regulations (GFR) etc. Similarly, a seller to BFSI industry needs to understand the procurement rules mandated by Central Bank, Insurance regulator etc.
In case of MNCs and Global Capability Centers (GCC) the writ of the parent company or the Headquarters located overseas prevails. Their local offices would have restricted powers pertaining to terms and conditions. Sellers managing global accounts should be in a comfortable position to engage with global and local legal teams.
Negotiating a contract
A “Win-Win” situation in contracting is an ideal state, with each side trying to protect its interest. The most pragmatic approach to contracting is to work towards a “ mutually acceptable” solution where no one loses. True, it is easier said than done. The ability to “ influence” is more important in contracting than trying to be smart. Sellers need to be clear on the “Gives and Gets” to strike a solution.
Some clients might adopt a “My way or highway” approach at the contracting stage. Sellers should understand the behaviors manifested by buyers and adopt a style suited to the person/ situation. Human to Human connection is the key to break the dead locks in contracting. It is this aspect which prevents Bots from replacing sellers as on date.
I remember winning a contract is an Urban Local Body in India for eGovernance consulting services. The contract had hilarious terms like workmen shall wear Personal protective equipment (PPE) at all times, Contractor shall clean the premises after completing the work daily etc. When I discussed it with the concerned Officer, he acknowledged that the clauses are not applicable, and some are archaic but still insisted on signing as it is. Taking a top-down approach helped in this case, though significant time was required to access the top brass.
Cartel Vs Collective action.
Laws forbid cartelization by sellers. But I had seen collective action delivering. For example, industry body like NASSCOM represents to the Ministry of Information Technology in India to modify some of the generic laws to suit the industry. Organizations like World Bank, Asian Development Bank etc. which fund projects have issued draft contracts tailored to suit supplies and services of various types. It is not a bad idea for sellers to collectively represent changes to terms and conditions to the buyer in a transparent manner.
Mastering common contractual clauses.
One of the issue sales manager grapples with is the level of contractual knowledge the sellers are supposed to possess. The role of the legal counsel here is to become a business partner and provide the necessary orientation to the sales team. Sharing of a comprehensive check list of acceptable and unacceptable clauses, and explaining the same to sellers with examples/ scenarios will help them. I had found a case study method to after the contractual orientation session to be powerful. A real RFP/contract can be discussed by the sales team with facilitation by the legal counsel to interpret the learnings.
Frankly, gaining contractual knowledge for a sales team is not a big deal. The lengthy sentences, Victorian English, jargons etc. can be easily mastered with an aptitude to learn and excel. Once the basic knowledge is acquired, sellers need to exhibit their influencing skills to convince the client to get the desired outcomes. In summary, here is a quick checklist for sellers to sign up winning contracts.
- KYC- Know your client in detail.
- Know the industry requirements, regulations etc. pertaining to the client.
- Negotiate an acceptable contract.
- Take collective action where required.
- Equip yourself with basic legal knowledge.