Preparing effectively for a negotiation
"Preparation is 90% of success in Negotiations"
Preparation is 90% of success in Negotiations, is this correct? Yes it absolutely is!
Let’s get this right – Sales people have been trained in negotiation, body language and closing a sale for many years. Most of a private sector companies training budget is spent on training sales people, so why should we in procurement think that when they arrive at a negotiation that they are not prepared, of course they are! They may look comfortable, in full control of their body language and relaxed, talking about football and holidays but do not think for one second that they are not ready to negotiate, if they weren’t ready, they wouldn’t be here!
We need to prepare and plan for a 100% ready sales person to be sat opposite us every time!
Fail to Prepare, Prepare to Fail
So what should we be doing…?
There are many things that we should be doing, so let’s commence with fully understanding our demand / volume. We need to speak with our Sales & Marketing team to understand their opportunities and forecast going forwards. If it is due to increase this year by up to 20%, this gives us leverage, we need to use this leverage to obtain the optimum terms. What has our spend been on an annual basis over the last three years? Has it continually increased, if so, we have leverage? Has it reduced, if so, we can prepare an argument to support / mitigate this?
How are they currently performing? How is their On Time In Full (OTIF) performance? Do they have any quality issues? These are things that we need to know as they can be used in the meeting. If the Supplier has performed excellently, over a period of time, and they are a strategic partner, congratulate and thank them for this, it doesn’t have to be negative!
If you are not aware and haven’t planned appropriately then you will not be able to use this information as you won’t have it. If you ask a Supplier how their quality performance is, they will test your preparation and say ‘Excellent, best in the industry.’ If you haven’t prepared then ‘Excellent’ on this day is correct.
Moving on, we need to ensure that we are fully aware of all developments in the market place. For this we can use the timeless business tools, STEEPLE, Porters 5 Forces and the Supply Positioning and Supplier Preferencing models.
Utilising Porters 5 Forces will advise you, for your commodity of what is currently going on in your Micro Industry climate. Remember, in negotiations, as a Buyer we are looking at the Opportunity of a New Entrant, or the Opportunity of a Substitute. A New Entrant could provide us with an alternative option / solution, which will significantly move the balance of power in a negotiation, especially if the product was unique. Suddenly here you have a BATNA, Best Alternative to a Negotiated Agreement and the dynamics of the negotiation will change dramatically.
The opportunity of a Substitute could bring a completely different way of making the procurement. Think strategically here, you may even cancel the negotiation if you become aware of a better, more efficient way of doing something.
STEEPLE – will provide you with an understanding of the macro external environment beyond your industry / category. Having an awareness of these factors will help you to mitigate /minimise risk for your organisation and may also unlock an area where you may be able to gain competitive advantage, e.g. new legislation which when enforced will disrupt the market and from your research and early awareness you are able to work with a supply partner to be first to market with a new offer. Right now STEEPLE factors such as a potential No-Deal Brexit and Coronavirus are huge influences on future demand / volumes and availability and only the strategic thinkers and planners will come through this unscathed, or even in better shape.
We need to understand the importance of the negotiation to our organisation and have a perspective on how we feel the Supplier see’s us. We can ascertain this through the effective use of the Supply Positioning and Supplier Preferencing models.
If the product / service is ‘Strategic’ for us, does the Supplier see us as ‘Core’ for them? They should, but do they? If not, how are we going to approach this during the negotiation?
If it is ‘Leverage’ for us, the Supplier should always have a healthy competitive fear, is this the case? These are just few of the many questions that the application of these models to your negotiation will pose.
Who and how many people are they bringing? What roles do they have? What is the lead negotiation like? Who do we need at the meeting? Many, many questions relating to forming the appropriate negotiating team.
Every member of their team is coming for a reason, to give them leverage. If someone from Engineering or I.T, attends, we need to have the equivalent person there. Ideally our expert will be better than theirs, this will give you leverage. If their MD is coming, you will need to respond accordingly. You may choose to have your MD attend, or you may not, but plan this decision and know why it has been made, do not be surprised by the attendance of someone that you did not know was coming.
From an understanding of the scale of the meeting, you need to plan our resources accordingly. This is an obvious, simple stage that is often overlooked. You need to book an appropriate room for the meeting, reflecting the numbers of people attending. You can go for the Boardroom or the ‘Chiller’, (story coming in the Podcast relating to this article), depending on the circumstances. Again, is it tea and biscuits, (chocolate even!), on arrival, followed by lunch with the MD, or is it a drink only?
Now the key one, getting the tech right! The last thing you need in the meeting is for the Supplier to not be able to present as they can’t get online on your site, or the projector isn’t working, we’ve all been there! Plan this in advance and have a member of IT available should anything go wrong in your meeting. Further to this, as previously mentioned, you need the right people in the meeting and the right information.
There are many other aspects of preparation that we could go through here, e.g. the planned use of emotion, tactics and other soft skills, many of which have been covered in the previous article and podcast entitled, ‘Behavioural Skills in Negotiation’, however one last tool that I would recommend using in your preparation is the MIL tool developed by (Kennedy).
It is critical that you ensure that all negotiation variables are identified and prioritised. An internal meeting is required with all affected stakeholders to the negotiation, using a flipchart, or currently a digital whiteboard, to note down every possible negotiation variable that is relevant to the meeting.
Once identified, the variables need to be prioritised, which is where the Must, Intend and Like (MIL) model comes in. Here you will identify the variables that you must achieve, e.g. Jurisdiction in an international negotiation and mark them ‘Must’ on the whiteboard. You would then identify and mark the variables that you intend to achieve, as ‘Intend’ and finally the variables that you would like to achieve as ‘Like.’ You have now ensured that all negotiation variables have been identified and you have objectively prioritised them, with your stakeholders securing their ‘buy-in’, which will make you extremely well prepared for the negotiation, knowing what you can trade with to achieve what you need, which will also make you look particularly flexible in the meeting. This is a reflection of excellent preparation.
Further to this, following the meeting, you can now objectively assess and review the negotiation effectively, i.e. you obtained all of your ‘Musts’, most of your ‘Intends’ and even some of your ‘Likes’, this negotiation went really well.
These are some of the many aspects of effectively preparing for a negotiation.
This article was written by Gary Tinsley FCIPS, BA (Hons), DTLLS, Co Founder of SR Strategic Sourcing Ltd.
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