4.2 Framework Agreement

In this lecture, I will talk about framework agreements, why they’re important, and what they should contain. Far too often, negotiators enter a negotiated, a negotiation meeting with only a small amount of information about the counterpart, your organization, the market conditions, and the competition. Many negotiators enter a negotiation meeting with only a lowest or highest possible price number from their own organizations. They have no specific outcome goals, no information about additional options to add to their agreement, and no information about what their counterpart’s position might be. This is a big mistake. Perhaps you’ve heard the quote from the famous baseball player and coach Yogi Berra. If you don’t know where you’re going, you’ll end up somewhere else. This quote is an absolute truth when it comes to negotiation. Having no goals is akin to handing over the control of the conversation and the negotiation to your counterpart. If you have no goals, you have very little power. You don’t know which questions to ask. You don’t know if you’re making progress or even if you’ve been successful when it’s over. You must have a set of goals for your negotiation other than getting the best deal possible. This is probably the goal of most negotiators, but they haven’t defined what the best deal actually is, then there is no way to know if you’ve actually achieved it. Therefore, at the beginning of the negotiation process, you should develop a framework agreement. Think of your framework agreement as the bullseye on a target you are aiming at. The framework agreement is the ultimate agreement you could achieve that is realistic. As you do your research, develop your questions, and explore options with your counterpart, you are doing so in order to move toward your goal, the framework agreement. Achievable, realisted, achievable, realistic, these words might sound familiar to many of you with respect to goals because many organizations develop smart goals for initiatives such as negotiated agreements. A framework agreement is a written document that details the goal or goals of your negotiation, and it is for your own use only. A smart goal is specific, measurable, achievable, realistic, and time bound. All of these smart goal components should be in your framework agreement. You should be specific about the final price, what is included, and the terms of the agreement. By including these specifics, you will be able to measure your final agreement against your framework agreement to evaluate the results. These specifics must be achievable and that you know your organization can support what you’ve written and that the counterpart’s organization is likely to be able to afford and accomplish what you’ve written. The goals must also be realistic. Are your delivery terms realistic given your current turnaround capabilities? Are your expectations of your counterpart realistic in terms of their position in their market, their internal capabilities, and costs? And finally, have you defined the various time parameters in terms of start date, length of contact, and change requirements? Your framework agreement should include the primary subject or issue at hand, and all the negotiated variables and options that you want to go with it. For example, if you’re negotiating a service contract, be sure to include the price you are hoping to charge or pay for the service, for the payment terms, the delivery terms, the duration of the contract, and what deet, and the details of what is included in the service. Finally, the framework agreement is a document that you write for your own in-house purposes which defines the agreement you would like to have if you achieve your goal. It is your best possible outcome agreements or your target, and it is not designed for sharing with your counterpart. It might, however, be the basis for the agreement you eventually finalize. As you progress through your negotiations, you will find that there will need to be changes made to the framework agreement. This is fine and to be expected. Just be sure to make those changes to your framework agreement. Remember, if you move a target but keep aiming at the original location, you are very unlikely to hit it. You need to have an updated framework agreement to use it as a guide. In this lecture, I explain the framework agreement. I explain the framework agreement and its importance for providing direction to you as you plan, research, generate questions, and consider options. Write your framework agreement as a very detailed smart goal, being sure that it is specific, measurable, achievable, realistic, and time bound.