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Brand Strategy Agency Culture Buyer Psychology

Why you need to get a grip on contract variation negotiations

By Mike Lander, Founder & CEO

Piscari

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January 19, 2023 | 6 min read

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We’ve all been there when the client keeps saying: “There’s just a few more things I need, I don’t think it’s in the contract, but could you do me a solid on this one, please, just this once?”

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Introducing good governance, templates and processes, reduces anxiety, improves relationships and delivers better outcomes

In this month’s Ask the Negotiator, I’m going to cover three questions:

  • Why you can’t afford to leave the SoW to rot in the virtual contracts’ draw

  • How better governance leads to better client relationships

  • How to manage these request, maintain your team’s sanity, and make money

Why you can’t afford to leave the contract SoW to rot in the draw

There are three big reasons why the SoW is such a key document for any client-vendor relationship:

  • The SoW was written to capture what needs to be done, by who, when, and how to measure it - it's the foundation stone of any buyer-supplier commercial relationship.

  • Budget holders need to demonstrate the business value of what they're buying, so they can secure next year's budget, to do more great work.

  • Procurement are tasked with not just negotiating the contract, they also need to ensure that the contractual relationship is being managed in-line with expectations.

A common agency challenge, surprisingly, is how to ensure all team members understand what you’re contractually on the hook for. With agency and client churn rates, comes the challenge of onboarding new team members (on both sides) to align around the SoW.

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How better governance leads to better client relationships

Better governance (i.e. the way we control and oversee the direction of something) removes anxiety of the unknown and the un-managed. Reducing anxiety improves the quality of our relationships, it’s as simple as that.

Robust variation processes and templates (which is all part of good governance) provides more certainty, and reduces risk – for all parties.

So, although received wisdom is that “governance kills creativity”, my experience is that, it’s the fundamental enabler of better relationships and more valuable outcomes for everyone.

How to manage requests, maintain your sanity, and make money

Here’s my three key tips to managing and negotiating variation requests:

  • When you start delivery on a new client, or, if you’re the newly appointed account director, set-up a meeting with your client counterparty lead. In the session, review the SoW, confirm any variations to date, check-in on the SLAs/targets and address any unresolved issues (especially important if you’ve inherited an account). This ensures clarity about what is expected, what’s in-scope/out-of-scope, and what are the targets. It will also flush-out what was intended, but not contracted!

  • Then, work with your client to ensure you have a clear, mutually agreed, template for variation control and associated governance (download Piscari’s Variation Control Template).

  • Then, set-up Quarterly Business Reviews (QBRs) if you haven’t already, to keep track of progress, variations, and targets. This would include reviewing Variations raised, approved and rejected in the quarter.

Conclusions

Client and agency driven changes are a fact of life, and absolutely necessary if we’re going to learn and adapt in a rapidly changing market. But that doesn’t mean it needs to be chaotic, in fact, it’s the opposite!

Introducing good governance, templates and processes, reduces anxiety, improves relationships and delivers better outcomes. It won’t kill your creativity, it make you stronger and more profitable – on both sides.

If you want to take a deeper dive into this topic, there’s a blog here, or drop me a line at mike@piscari.com

Mike Lander is the CEO and founder of Piscari. We work with agency leaders to improve their negotiation skills and provide insights into how procurement professionals work.

Brand Strategy Agency Culture Buyer Psychology

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