Negotiating Effectively
Negotiations happen in your everyday life as you interact with other people and organizations. As supply chain professionals, we are the designated representative to help our organizations effectively negotiate to achieve our business goals. It is on our shoulders to come to a negotiated agreement between our organizations and the supplier community. Your organization will get what you negotiate so you must be on the top of your game in this process.
“Negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two people/parties involved in negotiation process.
Negotiation is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise.”(1)
There are many tactics and strategies readily available on the market. I leverage the methodology from Vantage Partners Seven-Element and Karrass Effective Negotiating models. I would recommend both if you are looking for skills and tactics. This article represents some tools and tips I have learned along my journey to help you become for effective in your negotiations.
TIP 1: Effective Preparation
The cornerstone of negotiations strategy is defining the range of solutions that are acceptable. This requires preparation and creativity. Your preparation should include identifying your interests, their interests, options, and alternatives. My experience is I can always use a bit more time to prepare for effective negotiations but I have a framework to lean on to quickly get me ready.
I translate the preparation into an excel workbook listing the key issues, Least acceptable option, most desired option and ranges of other options. Express goal of this is to improve the outcome and strengthen my leverage/improve my BATNA.
TIP 2: Make the First Draft Count
I have found that leading with our standard templates speeds up the internal approval process and clears barriers to acceptance by our internal team. Often times the supplier has unique and important terms in their agreement they would like to start with. Use your judgment on which approach gets you to the end game better.
I have found that a little effort up front in requesting the proposal and documents, reconciling the differences with our agreements and policies helps quickly frame in the scope of work. Spending the time framing in all the concepts of the agreement first and then negotiating the terms of those is the best strategy for a timely solution. I have seen way too many agreements that go for weeks and weeks with each negotiating introducing additional concepts that then force the team to backup and
reconsider other items that might have been done. It is better to identify all up front and work to agreement after that.
TIP 3: Set Right Environment and Tone
There are several techniques and tactics that people use. I believe the most effective are win win tactics where both organizations come to mutual understanding and face the problem together. Working together to achieve a larger opportunity typically favors both sides and encourages partnering behavior you will want for the next interaction.
Start negotiations meetings by establishing the negotiation teams and roles. Review with your internal team the preparation and objectives as well as align in your strategy and approach. Effective
negotiations with suppliers also start with an initial meeting to kick off the project. Keeping your business owners engaged and clear on their role enables you to work better as a team.
- Start with identifying the team (internal and supplier) and only invite those people - Lead with goals and objectives
- Ensure you are the point of contact for all communication - Setup process and framework for the negotiations together
- Setup and manage the venue, time, issues, and discussion in the meeting
TIP5: Use the Back Door
I typically setup weekly calls with just the supplier representative (not the negotiating team) where we review the open issues, next steps. It provides a forum to get feedback on the status of issues raised as well as back channel the concerns and perceptions of your team. This helps provide options and enlists the supplier rep to advocate for your solution in their organization. It also provides pressure on the supplier team to make the negotiation a priority. You can also discover gems like who the approvers are on the supplier side and how to access them.
TIP6: Leverage Technology
There is no substitution for face to face negotiations but it is not practical to have every negotiation face to face. I do face to face negotiations to kick off the project if practical and if there are key issues that are not reaching agreement. Here are my suggestions on technologies and appropriate use:
- Webex: Great tool to provide the virtual face to face experience. I typically show the agreement
in question for all to follow along. I have also been successful at crafting suggested language, imbedding comments, highlighting questions all live. Very effective way to accelerate
agreement. Need to start the conference 10 min ahead of time and inform team in the invite to verify connection prior to meeting.
- Video conference: great tool to provide the simulated face to face experience. Need to setup
the line 15 min in advance and have test run if you can with supplier. Much richer experience than conference call.
- Conference Call: conference calls are great way to touch base, to be effective, everyone needs
copies of the agreement and documents. You should establish at the beginning of the call who is managing the draft of the agreement. Close out the call indicating next steps.
- eContracting Tools: use your tools to manage draft documents and feedback. Email and word
are powerful tools but you can enhance the experience by collaborating with a tool that does document management for you.
I am sure you have additional insights. Please feel free to send them my way. Good luck and may the negotiations ever be in your favor.
Richard Bagley
About the author: Richard currently oversees the sourcing of software, services, equipment and
products used to deliver industry leading healthcare at Intermountain Healthcare. His key responsibility is to manage a team of 22 sourcing managers to deliver in excess of $42 M in sustainable savings annually. He also leads major supply chain initiatives like our procurement transformation efforts.
Prior to joining Intermountain, Richard served as a program manager and small systems architect for Siemens. He has also served as a senior software engineer for 3M Health Information Systems where he helped develop HELP and HELP2 systems in use at Intermountain Healthcare.
He is a graduate from the University of Utah while serving in the Utah National Guard as a
commissioned Military Intelligence officer. He also has a master’s degree in business administration from the University of Phoenix where he has taught information system courses part time. He is a published author and presenter at national conferences for BORCON (2001) and AHRMM (2013, 2012).
References:
1. "Negotiation." Wikipedia. Wikimedia Foundation, 12 Jan. 2013. Web. 5 Dec. 2013. <http://en.wikipedia.org/wiki/Negotiation>
