What kind of negotiator are you? Do you enter a negotiation determined to meet a particular target and beat down the supplier until you reach it? Do you believe all the supplier’s promises of added value and warnings that the market forces are against you, and give many concessions to reach an agreement?
Different types of negotiation require different approaches. However, the definition of a negotiation is a discussion intended to reach an agreement, which in turn means harmony of opinion. ‘Harmony’ doesn’t come from bullying people into submission or letting someone use you as a doormat – either of these will lead to resentment and a breakdown in relations sooner or later. This is summed up by Stephen Covey’s fourth Habit of Highly Effective People1: Think Win/Win.
Buyers and suppliers are not islands: they are bound in a relationship like two sides of a coin. They cannot exist without each other and should therefore regard each other with respect. Supplier Relationship Management is all about building and maintaining this relationship and recognising that it should be interdependent. By combining ideas, abilities and sometimes resources, we can create something better than keeping them to ourselves. One plus one can often make more than two. So why jeopardise this potential to work together and achieve a better outcome by letting resentment creep in?
Win / Win
The probability of Win/Win outcome can be increased by adopting another of Covey’s Habits: Seek first to understand, then to be understood. This involves finding out the needs and wants of the other party before issuing your own demands.
The benefits of this approach were recently demonstrated in one of our team negotiations. Some may have gone into the negotiation meeting demanding an immediate cost reduction of a certain amount, threatening the supplier with the withdrawal of one of their major contracts. However, this tactical method would have done nothing to promote the interdependent relationship necessary for gaining good service and value – the cost may have gone down, but resentment at the heavyhanded methods would have weakened their commitment to giving any more than the minimum required.
Instead, our negotiators explored the present circumstances of the supplier and discovered the valid financial reasons underlying their reluctance to reduce their rates. In recognising these, we were able to put forward a plan that met our client’s needs in terms of immediate cost reductions while providing the supplier with a longer-term contract that would allow them more flexibility with their bank and therefore ease their financial situation.
This also shows how an NLP (Neurolinguistic Programming) technique can be used in Procurement. A method called ‘chunking’ breaks up decisions and goals into bits.2 The bits can be smaller (specific) or bigger (general) and we can chunk up from specific to general or down from general to specific. For example, if you went into a negotiation asking for the supply of engines, this would be too general and you would need to chunk down in order to ensure that you were buying the required diesel engines rather than petrol engines. By chunking up to find more general aims of negotiations, you may find previously unrecognised common objectives that inspire more creative solutions.
In the case of our negotiation above, the impasse of ‘we need an immediate cost reduction’ versus ‘we can’t afford to reduce our costs’ was sidestepped by chunking up to find that both parties needed the contract to continue into the longer term and that they could find a financial compromise based on varying the rates over several years. This is the principle of looking at interests not positions, as proposed by Fisher and Ury.3
So next time you’re preparing for a negotiation, bear in mind Covey’s advice: look for a Win/Win solution to oil the cogs of a sound interdependent buyer–supplier relationship, aim to understand the interests of the other party and then help them to understand yours, and be flexible enough to look for a creative solution.
1Covey SR (2004) The 7 Habits of Highly Effective People: powerful lessons in personal change. Simon & Schuster, London.
2O’Connor J and Seymour J (1990) Introducing NLP: psychological skills for understanding and influencing people. HarperElement, London.
3Fisher R, Ury W and Patton B (1991) Getting to Yes: negotiating an agreement without giving in, 2nd edn. Penguin Books, New York, NY.