Aligning Legal and Business in Contract Negotiations With Nandita Murthy

Made with speech-to-text software, so a few words may be off.

0:00You're listening to the Contract Heroes Podcast, your one-stop shop for all things contract management. And now here are your hosts, Marc and Pepe. Hello everyone, and welcome to another episode of Contract Heroes. Today, joining us from Daylight Solutions is the senior director of contracts, Nandita Murthy. Now, let's get into the episode. Well, Nandita, thank you so much for joining us today. We're really excited to be chatting with you. We've got a, a bit of a, a, a different topic than some of the other ones we've been doing recently. So, really excited to, to dive on in, but before we do that, and Pepe gives us a bit of an understanding what we're gonna be chatting about, we'd love if you could tell the listeners just a, a bit more about yourself and, and your background and how you found your way to the podcast today. Okay. Well, thanks for having me. My name is Nandita Murthy. I am currently a senior director of contracts at a company based out of San Diego, California. I would say San Diego is my hometown. Been here for a while.

1:02I've been in... I've been a, a, a profe- in the industry of professional contracts for a very long time. I started off my career in, uh, legal. I worked for a firm in San Diego doing mostly business litigation with a little bit of employment litigation, and then I transitioned into a small business that was starting out, wanted to get into government contracting, but didn't have the foundations. So they brought me on board, initially as a consultant, and then I ended up being full-time as their in-house counsel, managing both implementing some new policies, procedures, putting together the baseline templates for contracts and for subcontracts. And from there, I moved on to larger businesses, and I've worked for two large businesses for the p- past about seven years, mostly in production and research and development, both in the defense industry and life sciences. So that's... So I've been a contracts professional now for quite a long time, both in government and private industry, commercial.

2:07That is great, Nandita, and we actually, the main focus for this conversation will be, like, how to align legal and business. We just recently have a podcast, like few weeks ago, where we were talking about on how the data that is inside the contracts is not just for the legal team, you know? You know, it's like contracts are not owned by legal, but how CFOs or people more in the business side can use that data to make better business de- decisions, right? We, we... Which is, like, the whole car- core foundation of legal operations. So Nandita, let's kick off with what would you say is, like, the biggest challenges there, like how you can align, you know, uh, objectives between legal and the business team during that contract negotiation? So that's part of my job, is I work with cross-functional teams all the time.

3:04So you have an input in every single department, whether it's supply chain, whether it's the production operations team, and then also the executive team. But most of my work is focused on what the sales department or business development folks bring to the table, right? 'Cause that's the whole part of the business acumen of any business, is trying to get more business in for business continuity, new opportunities, sales. So I've always said there's this constant challenge between trying to meet the business objective, and yet achieving the legal objectives. And there's always... Initially, it's always a, "Oh, we're never gonna, we're never gonna find the fine line. We're never gonna come to the medium that's required in order to close this deal," but there always is. So I think what the challenge is, you need to, when you first get a contract, 'cause obviously the contract is gonna have sufficient data, and it's going to be a living document, it's going to be referred to over and over again by the executives or anybody in the sales team, so you wanna make sure that everything is in the four corners of this document that's going to become, uh, historical data for the company.

4:17So in order to achieve that, it- one of the first things you need to do initially off the bat, whoever brings you the contract, and typically in this case, I'll, as an example I'll give you a salesperson brings you a contract, you have to dissect the sales. You have to ask them who, what, when, where, and why. Like, "Why are you giving me this contract? What's the context behind it? What are you trying to achieve? What's the company trying to achieve? Is this part of the company's strategic plan? Is this part of the sales, uh, goal, or is this just a one-off that you're trying to, you know, s- close right now for future business, whether that future is, like, in the next year or next five years?" So I think really understanding the story or the context behind the actual contract is the first thing any legal professional, contracts professional needs to do before they dive into, "All right, what are some of the legal challenges to this particular contract that's being presented or one that I need to develop so that it's digestible to the other party and we can close this in the amount of time that I'm given to close the deal?" Right, and that would be amazing, right? If companies could, like, focus more on that instead of focusing in other terms.

5:26We have brought this, uh, in, in a lot of other episodes, like this research by the World Commerce and Contracting of the most negotiated term. They do this annually or biannually, I can't remember, but I got, like, one from last year where a lot of... Well, the most negotiated term is, like, limitation of liability for unification, liquidated damages, intellectual property. You know, like, a lot of the terms that... Okay, they, they are important. I, I'm not saying that they're not, but you know, like, it's way more important to talk about more, like, scope and goals, price, the delivery, the service level, and how you can, like, think about in the longer term, like, how you can keep that commercial relationship, either if you're on the buy side or in the sell side. But- A lot of the legal, we, we are trained, right? Like, you gotta focus on what, you know, what, what's, like, the highest risk, and always take one side. Always, like, we feel like we need to protect the interest of our customers instead of, well, customers or if, if you're working as an in-house.

6:27But instead of we're thinking about, like, the, the long-term vision on how... Because everybody wants to have, like, great vendors or, or great customers. You just, like, need to put the contract, like, the guardrails on how you can make business flow. You know, the number one objective, whether you're on the contract side or on the sales side, is putting the best interest of the company first. Obviously, the sales team wants to bring this contract to you because they think, "Oh, well, this is gonna keep people employed." But you're looking at it, well, there's so much... Yeah, and the money, right? But you're looking at it from a contracts professional's, uh, aspect, or legal, saying, "Well, this is actually gonna shut down the company, 'cause the risk is so large. Is this something that we really want to enter into? Is this actually really putting the best interest of the business first?" And when you're working between these teams, how do you make sense of this, right? How do you get these teams to align on, on their objectives and goals to kinda try and, I guess, right, streamline this process? So every time a team comes to me, it's always rushed. "I gotta get this done.

7:28I gotta get..." You know, "You have one day to do this." No, I don't have one day to do this. I need more time than that. So let's sit down, let's have a conversation, let's have an understanding, and really, do you really need this in one day? Because this is not going to happen. What exactly, uh, what are you trying to achieve? Like, what, why does this need to close today? So I think it really is just communication that just needs to occur. It needs to be either over the phone, via video chat, or in person even, just so both sides get an understanding that, you know, there's challenges to this agreement, or there's challenges to making this sale, so what can we do to come to an understanding, and try to meet the expectations of the other side as well, and try to close this? Sorry, I was on mute. No, yeah, and one other thing that, that we have been dis- dis- discussing in some recent episodes is, like, you know, how do you make this communication better, you know? Like, between the sales team, procurement team, with the legal team during the ne- ne- negotiation of the contracts. We've been talking a lot about playbooks since couple y- of years ago.

8:35Right now, there are some, like, contract lifecycle management softwares that are also adopting AI tools to help them to build those playbooks. But playbooks, you know, they need a lot of work, and there's a lot of, you know, preparation and a lot of homework to make them... Not perfectly, they're... I, I don't think they're gonna ever become perfect. But besides playbook, do you think there's any other recommendations where, how can legal teams and the business team com- communicate between themselves, like, to focus more on the business needs instead of more into the legal ones? CLM is a life-changer for any contract professional, because now you have the historical data in a database. You pull those recor- reports, you pull those records, and you have objective data to present to, yeah, whoever's trying to close, uh, trying to sell the deal, right? You show them, "Hey, this is the past history. This is some of the industries that we've worked with in the past, which is very similar to the industry that you're pursuing now. Look at how we did. Look at how, at the end of the day, look how this contract closed.

9:40You know, what, did it bear well for the company, or did it not? Was there, uh, was there issues throughout the, the contract lifecycle where we had to go back to the customer, for example, and ask for modifications because this was really hurting our sales?" Or, it was such a game buster that, you know, you go f- you go for it. Ha- Here is some data, take it back to your customer, or let's try to come up with a contract that's similar to what was successful in the past. So I think the life cycle management tool, whatever tool the individual uses, allows you to do that more quickly and more effectively, and I think that is the kind of data that you need to present to who you're working with internally, in any cross-functional aspect. Yeah, and I, I think whether, whatever it is, right? I think it, it, whether it's AI, whether it's a CLM, whatever type of tools you're using to help you, uh, the end goal, right, should be streamlining and, and making things better. And, and I think that's always important to take a look at, because, you know, if you over-engineer something or you're using broken processes, that's only going to, to slow things down. Yeah, that's correct.

10:45And I think anytime you have objective data, I think that's what's gonna help you get to what you're trying to achieve. Let's talk about in these negotiations, and having, you know, one, right, I think when you're starting this process, having a template that you're working from that is mutually agreeable, I, I think that's a, you know, a huge, a huge step in the right direction to help, obviously, speed things up. But what role does flexibility play in, in these types of negotiations, and, and how can you make it a level playing field for both sides so that you are able to, to agree to something maybe a little bit, you know, quicker than, than not? Yeah. So I'm sure you guys have heard this through other folks that you've interviewed. Coming from outside counsel and going into in-house position or into a contracts professional is very different, right? Outside, if you're an outside counsel work- for a firm where you're representing a client, you're very bounded by law and regulation and case studies. But when you're in-house, you have to get a little creative.

11:42Be creative in a way where you're still meeting legal objectives, you're still staying within the bounds of what's right and what's wrong. But I think there are ways that you can get creative, and that's where the flexibility comes in. You kinda need to put on a little bit of a thinking hat as a contracts professional and saying, "Okay, what can I do to mitigate some of this risk? Can I change the terms of the limitation of liability?" I mean, you brought that up earlier, Ray. I think that's a big one. Or, can I put terms in there that would deter the other party from breaching this agreement? 'Cause that's the last thing you wanna do, is you wanna allow, you know, you don't want anybody to breach the agreement. You wanna kind of make it airtight, 'cause nobody wants to get into any sort of dispute or any sort of lawsuit. So I think there are methods that's worked for us, whether it's being creative with the financial terms, payment terms, for example, IP, intellectual property. You know, what can we do? What's one of the effects of a termination, or what's one of the effects of a breach of an agreement?

12:40Does that mean that we retain all rights to any intellectual property that was developed or, or modified during the course of this contract, even though it didn't come to full completion? But these kind of egregious terms really serves as a final deterrent from a non-breaching, from a party to not breach the agreement. Right. And we've seen some customers that, you know, they're, they're using the data that they now they have on their CLM, especially on this, right? How they can tweak their standard terms and conditions on their contracts to put some middle ground there. You know, like, there are things that... Unlimited liability, man, nobody's going to agree with that. It's just like put something that is reasonable so you don't have to be weeks negotiating some of that term. Have you ever, like, worked with your team, and, and if so, can you give us, like, some, some real advice, I mean, real case examples where you have worked with your team on how you can also, like, let's say, refresh those contract templates so you can be something in the middle ground before starting the negotiation process?

13:47Because I think that might save a lot of time. Yeah, exactly. Well, first of all, one size doesn't always fit all. It'd be nice to have that, right? You need to have, like, some sort of a playbook to start off as some sort of a baseline, and you have your foundation. But in every single contract, I can tell you that doesn't always fly. There's always something that gets negotiated out. I mean, that's why I have a job. That's why most of us in the contracts field have a job, because that, that is bound to happen. I think as far as real life is, is concerned, so this actually happened recently. First of all, you definitely need to build a rapport with your team. You need to earn their trust. I think once you earn their trust, it's easier to kind of get your message across to them. Uh, we're talking internally. I'm not even talking about external customers. I mean, that's a whole different aspect, where you need to build their trust as well. But you have to start off with building the rapport with your internal team. They need to feel comfortable with you. They know that you're on the same side as them. Because a lot of times they come to you and in their mind they're going, "Oh, she's not gonna approve this. This is gonna be a fight." And it's not. It really isn't.

14:50I always assure them, "Hey, I'm on your team. We're in this together, so let's come up with a way that we think the other side's going to accept. What is it? What do you think is really gonna make them tick? What is their biggest showstopper?" And w- we, so we have to do our due diligence before we even present any sort of contract to the other side. And by doing that due diligence, by doing that, like we're kind of thinking about, all right... And granted, you know, not, we never have this much time. Like, time is always our worst enemy, right? But even if you do a little bit of prep work, 15, 20 minutes, whatever it is, it goes a long ways, because you can kind of start thinking as to what they are going to come back with. What are the red lines that they're gonna come back with? And is that g- are they gonna be acceptable? 'Cause a lot of times you can, based on, you know, the size of the company, who you're dealing with. Is this the first time that you're, this is a first time engagement on this business deal, or have you engaged with them before?

15:43There's so many factors that you can really think about before presenting a contract to them, and at that point you can already do a lot of the tailoring before sending it out to them. So I think the due diligence, planning with your team members before you send it out, is key. And in your experience, like, what type of, like, playbooks do you think are easier for the business department to understand and how to use them while doing negotiation processes? Like, because we've seen, like, really long versions that are, like, super detailed and some others a lot more like, you know, short versions. Like, in, in your experience, do, do you have any, like, the gold version for playbooks, or something that have been working better in your, in your experience? I think the two biggest playbook provisions that have done well for us are payment terms, whether they're done in installments. I mean, we're... I come from an industry where it's all production and hardware, right?

16:42It's probably different for SAS contracts or software contracts. But for us, what works is financial terms, and then also intellectual property. Intellectual property is huge in our industry. It's huge. And I think the easiest way to make that mutually agreed upon is you say, "Hey, you know what's mine is mine coming to this contract, and what's yours is yours. And during the duration of this contract, whatever you guys develop on your own, whatever you modify on your own to your intellectual property stays with you. Whatever we develop, whatever we modify, stays with us." And those terms are always acceptable. It's fair. And, you know, I'm not looking to take their intellectual property. I'm not looking to use this contract simply as a vehicle to figure out what they're developing, what their research is entailing. That's not the point of this, the point of any business deal. So I think those kind of terms where you say, "You know what? You keep yours, we keep ours, and let's move forward and try to come up with some common ground," those, they always work. Great tips. Great tips.

17:41I think, Nindy, I think there was a lot of great takeaways in this conversation. But thank you so much for joining us. This was a, a fantastic episode. We hope all of our listeners thought the takeaways were as good as I did. But really appreciate you coming on and, and joining us. Great. Thank you so much for having me. I appreciate it. Absolutely, and thanks everybody- Thanks... for listening to another episode of The Contract Heroes. This episode of The Contract Heroes is sponsored by Koho Consulting. Koho helps organizations of all shapes and sizes find, implement, and manage their chosen CLM tool. Whether your project is buy or sell side led, Koho can help you navigate the waters of the CLM space to make sure that you're getting a product that's going to fit like a glove years to come. If you'd like to learn more about Koho, visit their website at C-O-H-O consulting dot com.