Picture this: your organization needs to create a multi-year contract covering critical components for its manufacturing process. Because of the technical nature of those components, management requests that the team creating the contract be led by procurement but also include engineering, R&D, and finance. Each of the people involved will have different priorities, even though all agree on what they want the end result to be. How do you present a united front at the negotiation table?
What would you do?
This is not an unusual scenario - typically, there will be multiple stakeholders involved in a negotiation, each with their own agenda. For example, in a manufacturing organization, engineering may be focused on functionality (features, etc.) while other stakeholders may be more concerned with supply continuity and/or total cost of ownership.
Before going into the negotiation, the team will need to decide which factors will be weighted most heavily. It is also vital to determine whose role is it to communicate with potential suppliers. This will ensure that there is not an unofficial back channel between suppliers and people who are not primary decision makers.
So, what do you do to get to that point? The answer is prep, prep and more prep! The preparation stage is almost more important than the negotiation itself, as it will solve (or avoid) many of the issues that could otherwise arise. In addition to discussing priorities in advance, preparation should also include talking through the negotiation process and possible scenarios. Setting the ground rules regarding any unexpected issues or disagreements is important, in order to ensure that your organization presents a united front to the supplier. Team discord at the negotiation table can lead to the supplier either using it to their advantage, or hesitating to sign on as they don’t know if your organization truly has its act together.
In order to make sure your team is aligned, consider establishing roles using a RACI matrix: who’s Responsible, who’s Accountable, who needs to be Consulted, and who needs to be Informed. Everyone involved must understand where their responsibilities ultimately lay. In addition, agree upon ground rules that make sense to everyone – not just rules for the sake of rules. Everyone within the RACI matrix needs to understand that they are working as a team, and that once a team decision is made it is set – no one should pull a “Groundhog Day” at the negotiation table!
That said, disagreements are bound to come up within the team during negotiations – and that’s where the power of ‘caucus’ comes into play. The caucus is a planned or unplanned break in negotiations, and it gives the team an opportunity to discuss its strategy, tactics or progress in private before proceeding. The caucus should be deployed immediately in cases of disagreement, confusion, or misunderstanding within the negotiating team. If negotiations aren’t going well, the caucus can be used to break up the flow, giving your team the opportunity to regroup and speak with one another. It’s important to make the caucus a built-in part of the negotiation process from the beginning, so that calling a caucus does not send a signal of discord to the other side of the table.
The ability to influence and persuade people and to compromise effectively is most important in organizations where empowerment, shared control, and individual and team commitment are the prevailing management philosophy. In the supply management arena, managing relationships with key internal stakeholders and suppliers is a continuing process of influencing, persuading, and resolving conflicts.
Portions of this article were sourced from CPSM® Foundation of Supply Management, Second Edition (Janet M. Hartley, Ph.D., Institute for Supply Management®, 2014) and CPSM® Leadership in Supply Management, Second Edition (Lisa M. Ellram, Ph.D., Institute for Supply Management®, 2014), which are part of the ISM® Professional Series, used in ISM®’s Certified Professional in Supply Management® (CPSM®) program.
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