We all likely know how to achieve best practices in negotiations. You want to come to the best possible solution for both sides—win/win, and you already know your goals and timeline, you’re familiar with the contract you want, and you know how to play well in any situation. That, unfortunately, isn’t enough. Let’s look back to see if you’re coming to the table well enough prepared as an individual and key player to undertake negotiations.
The Chartered Institute of Procurement & Supply (CIPS) has established seven stages in a purchasing contract negotiation process:
- Preparation
- Opening
- Testing
- Proposing
- Bargaining
- Agreement
- Closure
However, I’m challenging you to stay on Step 1 a bit longer. Let’s begin by considering: As a procurement pro, what are your strengths, and where do you need to learn or implement more advanced negotiation methods? For example, how are your communication skills? How well do you understand (and utilize) industry-based technology? How patient are you? Do you look at the process as having two winners or just one? Are you aware of the going price for better service, and can you articulate it without offending? Do you know where a deal is no longer a reasonable deal for you? And, how skilled are you in coming up with alternatives when required?
If you are lacking or unsure in any of the questions mentioned above, there is a wealth of classes, courses, workshops, etc., that target this industry. And, if you want to address the other six processes effectively, in-depth preparation will make a considerable difference in negotiation success. Once you can comfortably answer the questions, looking outward towards the actual deal is important. What are the goals and objectives of this negotiation? What are the budget limitations involved? Are you comfortable that you know everything you need to regarding this supplier? If not, what are specific questions you need to ask at the beginning of the process? In this case, what is as important as price? And finally, what information must I gather and supply for an informed decision to be made?
You don’t know where you can go until you understand who you are…
Years ago, when I was working in the high-tech PR field, we often used a SWOT analysis to evaluate a client company’s strengths, weaknesses, opportunities, and threats. When we dive deeper into performing a SWOT analysis, we can take a broader look at each component. Strengths and weaknesses, for example, include relationships, expertise, and reputation that can be internally controlled. Opportunities and threats tend to be external elements you can’t control, including customer requirements, regulations, trends in the marketplace, and the realities of competition.
Not only was a SWOT analysis valuable for marketing/PR, but it can also be a great tool for negotiation—helping you figure out where you are now as a company and setting goals. It can clarify your value proposition, look honestly at best/worst-case possibilities, and develop a plan to conduct your side of the negotiations.
Translating the analysis tool for negotiation begins with research into the entities involved, challenges, interests, and timeline. From this, perform a SWOT analysis first of your company (and be honest here); when you look at the vital information in each of the four categories, it should be possible to define a strategy that you can adopt and the tactics you’ll use to meet the strategy and achieve your goals. In a proverbial nutshell:
- Strengths are your differentiator. They include reputation, network, skills, etc.
- Weaknesses are your potential limitations including size, location, a short history, etc.
- Opportunities are external factors that yield a favorable condition—trends, regulations, etc.
- Threats, also external may be competition, economics, changes in legislation, etc.
What Else to Know
If you’re making the process personal, you’re missing out. Making it personal results in negativity and defensiveness—throwing a damper on the process. Instead, be flexible with the process and know each situation is different. That doesn’t mean you won’t achieve your goals; it means you may need to shift the approach.
One of the most valuable training classes I’ve ever taken involved selling intangibles to clients. We already had mastered what we needed to know about what we were selling. The training concentrated on the ability to observe and read the room. This may be great in person, but you can even do it on Zoom with some practice. Another gem was understanding when to talk and when to be quiet. For example, silence on your part opens the door for more information from the other party.
And, when the negotiation is finished and an agreement is on the table, one of the most important lessons I learned was that whoever speaks first loses. When we stop talking when there’s nothing more to say that’s important, it prompts a response and a decision by the other party—or continued discussion regarding where they are still hung up.
Ultimately, true negotiation in procurement coming from real preparation allows everyone to win. Make sure you’ve prepared yourself to enable that to happen.
