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In navigating today’s turbulent business environment, open and collaborative relationships are increasingly essential. This is a point recognized by many executives and endorsed by more than 80% of contract negotiators. Yet our recent global study reveals a startling truth: most companies remain stuck in an outdated, adversarial approach to deal-making. This conflict-oriented mindset not only hampers innovation and growth but also leaves significant value on the table.

So, why are we stuck, and how do we make the shift?

Businesses must fundamentally reimagine their approach to contract negotiation, moving from a mindset of conflict prevention to one of collaborative value creation. This shift isn’t about being “nicer” in negotiations; it’s about unlocking hidden potential, driving innovation, and creating sustainable, mutually beneficial relationships. And part of that is getting better at selecting partners we trust.

Our comprehensive study of the most-negotiated terms, surveying 937 organizations worldwide, and representing both multinational corporations and small-to-medium enterprises (SMEs), paints a clear picture of the current state of contract negotiations:

• Misaligned priorities: The top five most negotiated terms (limitation of liability, price changes, indemnification, termination, and payment options) focus primarily on risk mitigation and worst-case scenarios. The primary message they send is: “I don’t trust you.”
• Disconnect between negotiation and reality: While companies spend considerable time haggling over legal protections and penalties, the most common sources of disagreement during contract execution are practical issues like pricing, scope, and delivery.
• Power imbalances: Negotiations are driven by power. Fifty-seven percent of negotiators say they regularly encounter situations where the counter party is a non-negotiator, aiming only to impose their template terms, regardless of suitability. The power imbalance is particularly acute in large-small business relationships, where 88% of SMEs report facing inflexibility from larger partners, and only 34% of large firms recognize SMEs’ strategic importance. This dynamic isn’t just ostensibly unfair; it’s increasingly unsustainable in an economy where agility and innovation drive competitive advantage.
• Missed opportunities: This failure to engage on “the things that matter” means that important conversations are missed. Only 16% of negotiators believe that they focus on the right topics, and only 39% believe that their contracts contribute to successful business outcomes.
• Misunderstanding of risk: The legal/financial stranglehold over contracting continues to prioritize mitigation (the false assumption that risk can be controlled with contractual terms) over meaningful risk management (a broader approach of understanding, monitoring, and actively addressing risks throughout the relationship).

This adversarial approach to negotiation comes at a significant cost:

• Wasted resources: Companies spend inordinate amounts of time and money negotiating terms that rarely come into play, neglecting the operational details that truly drive success and influence cost and value.
• Stifled innovation: When negotiations focus on risk mitigation and the imposition of standards, they leave little room for exploring creative solutions or novel partnership structures.
• Damaged relationships: The entire approach to bidding and negotiation typically generates an atmosphere of competition rather than cooperation. It’s an environment where transparency and openness are notable by their absence — and where contracts are divisive, rather than unifying.
• Missed value: By focusing on protecting their own interests, organizations often overlook opportunities for mutual gain and value creation.

A New Framework for Collaborative Contracting

These findings reveal the importance of new thinking in business contracting and an escape from the “mitigation mindset.” Our research identifies three interconnected strategies that characterize successful collaborative contracting:

Leading organizations are shifting from risk transfer to value creation.

This means focusing on terms that directly impact operational success and creating integrated negotiation teams that bring together commercial, legal, and operational perspectives.

Success requires aligning negotiation priorities with operational realities.

Organizations achieving this alignment prioritize practical terms that impact day-to-day operations and create frameworks for handling scope changes and delivery challenges. Those making this shift report significantly fewer disputes and stronger partnerships.

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