What negotiation skills does procurement need TODAY?
Listen daaahlings, let me tell you a little something about negotiating. Talking about money is so… GAUCHE. No no no, that won’t do at all. Today, enlightened procurement professionals collaborate. We innovate. We partner. We strategize. I do for you… you do for me… we have a relationship. No ugliness, no shoving. After all, there is no need to stoop to talking about dollars and cents. We have people for that. Right? Yes, well, have your people call my people: we’ll do lunch.
We can’t say that procurement no longer needs strong negotiating skills just because many spend categories are now being managed in a more relational way. Making that assertion demonstrates a fundamental lack of understanding about what it means to negotiate. Negotiation is a phase, not an action. There are a myriad of skills required to be an effective negotiator, and they are different for each set of circumstances.
It is easy to get hung up on stereotypes of negotiation. I bang my shoe on the table and yell, you walk out. You lay down an ultimatum and I defer to ‘the boss’ for approval. We both play hardball and walk away with a signed contract but bad feelings. These are tactics. Negative tactics. Today’s procurement professionals do not need to learn a stony glare or the best shoe banging technique. But that does not mean we are through with negotiation. We just need to reconsider what it means and how we execute the related tasks.
In her recent Forces article on Procurement Departments Negotiating ‘Too Aggressively’, Kate Vitasek points out that although we are being told to collaborate and create value, procurement teams are negotiating as aggressively as ever, in many cases, putting suppliers in a horribly tight spot. Our tactics are pushing us out of alignment with the objectives of the enterprise – exactly the opposite of what we profess to want to do.
And poor Jon Hansen, he made such reasonable points about the need to be open and honest in our dealings with suppliers that no one even posted vitriolic comments on his blog (although it’s never too late…). In his discussion of a recent post on how relationships should be applied rather than leveraged in a negotiation, he points out: “…it is no wonder why negotiation is viewed as an adversarial process in which there are winners and losers. It also explains why so many initiatives (or business dealings) continue to fail miserably, in terms of achieving a true collaborative win-win outcome.”
In the guest audio I featured in this week's procurement podcast on Blog Talk Radio, Kevin Lecompte of The Gap Partnership (negotiation specialists that provide counseling, training, and advice) acknowledges procurement’s current organizational challenges and the negotiation activity we must engage in. He opens with a statement about procurement's need to balance expectations of us with our own ambition. Right out of the gate, he hits on realized savings vs. created value. It would seem that the two can not live side by side in peace, because which ever objective (and associated negotiation approach) is dominant is inextricably liked to our identity. In Lecompte’s discussion of this balance, he focuses on internal stakeholder management. If our ambition is great enough to propel us beyond savings alone as an objective, we need to change the expectations of us by bringing them into alignment with our ambition. In other words, we need to negotiate internally as well as externally - yet another new demand on our skills.
A relationship, whether commercial or personal, can not be based on tactics. Such put on behaviors conceal duplicity and weaken the strength of the foundation under the parties. But this also should not imply that we need to start ‘hugging it out’ rather than negotiating. In most cases where relational procurement is the right approach, the stakes are usually high. Otherwise, a more traditional approach would be fine.
So what are the negotiating skills procurement needs to have to be successful today?
- Listening – not to leverage information, but to understand
- Creativity – to come up with alternate approaches that benefit buyer and supplier
- Stamina – to maintain clarity and momentum for the long haul
- Optimism – to resist the approach to revert to secretive, one sided tactics
- Observation – to see potential in the face of complexity
And all of the above must be based on a solid analytical understanding of demand, cost drivers, value potential. If the spend being managed is truly eligible for relational management, there is too much on the line to be duplicitous or to conceal the facts. There still must be high expectations and accountability, but they must be mutual and based on full visibility and understanding rather than games and tactics. Even in innovation or collaboration oriented procurement, we still need negotiation stills. They may look a little different than what we learned in business school or training workshops, but they are critical nonetheless.
Agree? Disagree? Join the discussion by commenting below or on Twitter: @BuyersMeetPoint.
I would imagine underneath each commercial agreement is "math". Both buyer and seller seeking commercial opportunity of some sort ,and the sharing of the inherent risk. In today's transportation and logistics space the service agreements have become onerous and lopsided. It is hard to do the math when taking a calculated risk when the liability exposure is unlimited or so large as to make the math incalculable. It is an industry where procurement buys logistics and transportation services as a commodity - like basic office supplies, yet demands service performance akin to a strategic partner. This gap between "buying a cheap car with the features and benefits of a Mercedes" is bridged by forcing the service provider to agree to an aggressive penalty and liability loaded service agreement. To date it has not been a bridge to far, yet every expanse has it limits.
It is important to know how to negotiate properly. You provided a great list of skills that are needed. Thanks for sharing!