Only negotiate what matters using a simple risk heatmap
(plus: free workshop!)
When I started as a lawyer back in 2008, I never really gave my contract negotiation approach much thought. I worked at a large law firm and we pretty much pushed on everything.
We felt quite good about it too - ‘look at how diligent we are!’
But I now know: clients hate it.
Unlike the law firm, the client’s goal isn’t to be entangled in legal negotiations. They want to do a deal!
Buy a product, service, company. Whatever. That’s their goal. They just want to do it in a legally safe way without too much delay.
That means that the lawyer’s job is to limit their work to the riskiest bits. So only focus on:
potential issues with a high cost if they go wrong, even if infrequent; and
potential issues with a lower cost if they go wrong - but only if they are frequent!
Everything else should be left alone, as it’s probably not worth delaying the deal over and paying lawyers for.
However, lawyers are often still trained to focus on all issues (especially if they started their career at a large law firm).
Solution: a contract playbook that provides commercially sound guardrails for the entire team. What will we fight for, and what won’t we fight for.
But how to decide which is which?
Risk Heatmap
I like to use the below heatmap template. You can fill it in together with your team in a quick workshop for each contract type you want to create a playbook for.
(Side note: the workshop participation itself will train your team to be more commercial as lawyers. It really cements the notion that there are different risk profiles to different clauses).
The example is filled in for buying a SaaS tool (so a vendor contract).
Pink sticky notes are the “thing that could go wrong”, and the yellow sticky note shows in which clause this could be addressed.
For each issue I forced myself to think, what would be the $$$ damage if this risk materialises? And how often does this happen?
E.g. a litigation matter based on a standard SaaS tool is very unlikely but would carry significant cost. Versus missing an auto-renewal of a tool you’re not using: much lower cost but much much more likely.
What to put in the playbook: you could consider covering only issues that are in orange or red boxes and simply accepting everything else.
Want to learn how to run a workshop like that? Join me in one!
UPDATE: I've now scheduled the workshop for 9 August 2023. Sign-up to join here.
During the live workshop:
we’ll work through the Risk Matrix for a contract type in a collaborative way.
I’ll also show you the moving parts to the workshop, so you’ll feel confident running it for your own team as well
Hope to see you there!
Daniel