Tag Archives: negotiation tips

Shifting the Balance of Power when Negotiating

Sometimes it’s hard to shift the balance of power in long-term relationships. But 10 negotiation experts have some tips on how to do this.

balance of power
Photo by Loic Leray on Unsplash

This article was based on research conducted by Conti Advanced Business Learning (www.cabl.ch), a Swiss training company that specialises in Negotiation & Influencing training.

The relentless assessment and recognition of “who’s got the power in this discussion” plays a vital role in the success of your negotiations. In a roundtable discussion featuring 10 senior Sales and Procurement experts, we explored a number of strategies that aid in tilting the scales in your favour. The six key dimensions we singled out are investigated below:

1. Having the mindset to create leverage

As Laurence Perot, Head of Global Supply Chain Procurement at Logitech, highlights, “we need to create leverage if there is none.” She explains that an effective way to do this is by working at different levels throughout the organisation.

“In my past experience in Logitech, we needed to negotiate a contract with a much larger company however they did not want to have a contract in place. To counter this, we worked internally with our R&D team that had a close collaboration with the supplier. Then we got the approval from the CPO and the Executive Team to our strategy: “No contract, no new designs”.

The supplier was reluctant at first, however, after consulting the R&D and executive teams at Logitech, finally took us seriously and we could agree a contract within two months.”

2. Building Alternatives

It was consensus among the procurement and sales professionals during the roundtable that the balance of power in negotiations shifts when there are alternatives.

Giuseppe Conti, Founder of Conti Advanced Business Learning, added that ‘moving to performance specs or removing a technological barrier may help us to enlarge our portfolio of alternatives.”.

Joerg Steinhaeuser, Vice President Global Sourcing at General Mills, added that “sometimes negotiators use bluffing, but going down the road of bluffing can significantly and negatively damage the trust between the two parties.

Building real alternatives is always much better although you may not need to completely implement your BATNA if you are aligned well internally.” Fundamentally speaking, lasting relationships with liars and bluffers is not possible and long-term business relationships fail when there is no trust.

3. Effective Preparation

Regina Roos, Sales Transformation Manager at Marketing & Innovation Group, emphasises how preparation and bringing a “can do” attitude when negotiating can make all the difference.

Salespeople usually take much more time for preparation than Procurement people and tend to have a better knowledge of the market. Francesco Lucchetta, Procurement Director EMEAI at Pentair, adds that preparation includes choosing the right supplier.

For instance, “do we have some power with this supplier over the total business? Can we choose not to give them future business that is attractive to them?” It is easy to focus on keeping the business momentum moving forward but if you overlook the future implications of your decision, the gains today may be overcome by the loses tomorrow.

4. Exploiting the Power of Emotions

Daniele Giorgi, Director of Procurement at Ferring, recalls a past negotiation with a supplier much bigger than his company while working in Pharma in a single source supply situation. He then talked about the impact this project would have on the patient and on families, colleagues, friends or other members of society like themselves.

“Using the emotional side and talking about “how we can help couples have babies” is a more powerful argument than dry facts.” Our counterparts have the same set of human needs that we do, and connecting with them on a human level will strengthen your ongoing working relationship.

5. Using a Fear of Loss

As Ifti Ahmed, Managing Partner, Titanium-Partners explains, “the fear of loss is significantly more motivational to get someone to move from their position. If the other party feels that they will lose something valuable, they are more likely to move in the direction you want.”

This echoes Kahneman & Tversky research outlined in their 1979 book Prospect Theory: An analysis of decision under risk. They go into detail about how people are more likely to take a risk to avoid a loss than they are to take a risk for an equivalent gain.

Conversely, in a long-term partnership or relations, we should also take into account the impact that this has on the relationship and the trust between the two parties.

6. Penetrating the Other Party’s Organisation

As Marco Martelli, Vice President Procurement at Tetra Pak, underlines “Negotiation is a power game. If you sell, you try to understand how to penetrate the other organisation. You try to understand the structure, the decision makers, and more specifically, you play on the lack of internal alignment. The ideal goal is to sell to Engineering and get the bill to be paid by Procurement.”

Giuseppe Conti adds that the effective Seller is able to differentiate himself via innovation/technology/business model/branding so that the buyer’s organisation wants to buy only from them.

These answers were collected by Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning (www.cabl.ch), a consulting firm that specialises in negotiation & influencing. This article is part of a series aimed at collecting real-life negotiation experiences from Procurement executives. Explore other negotiation topics on the Conti Advanced Business Learning YouTube Channel or visit the website, www.cabl.ch.

7 Negotiation Tricks Procurement Professionals Must Know – Best of the Blog 2019

Every procurement professional has a special bag of tricks for a negotiation – let’s see if you recognise these seven tips from experts in the field…

negotiation tricks
Photo by Kaique Rocha from Pexels

This article was written by Giuseppe Conti and first published in April.

The benefits of countless hours of negotiation experiences is that you know what you should be doing more of and what to stop doing. We discover the key traits and tools that make us perform better and are better armed for our next negotiation.

Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning interviewed seven procurement leaders to find out their favourite negotiation trick that played a key part in their business success.

1. Making the first proposal right away

I like to come to the negotiation table well prepared and well-aware of the market alternatives. Making the first proposal allows me to anchor conditions to a level close to the bottom of the market offer, immediately reducing the amplitude of the BATNA of my counterpart. Then I try to improve the conditions that are more valuable for me by making and requesting mutual concessions.

Francesco Lucchetta, Director Strategic Supply – Pentair

2. Preparation, Target, Value

I make sure I follow these three steps at the starting point in any negotiation where I am leading. The first is undoubtedly being well prepared. Secondly, to have a clear understanding of the desired outcome with a predefined “target range”, and thirdly, to fully understand the “value” of the business in the context of the potential suppliers being considered.

Les Ball, Chief Procurement Officer, ABB Motors and Generators

3. Profile your counterpart

Understand whom you face before negotiating! I use initial negotiation meetings to pique the interest the person I’m negotiating with – letting them discover all the potential benefits of working with my company. Then I encourage the speaker to talk as much as possible whilst showing genuine interest in their activities. I try to understand the way they work, their objectives and challenges. Having key objectives clearly in mind, I can better understand where our common interests are and how to shape the deal accordingly. From this moment onwards, I consider it the precise point where the negotiation starts.

Olivier Cachat Chief Procurement Officer, IWG

4. Asking yourself the right questions

It depends on the scenario but for mepersonally, negotiation always starts from knowing your position versus the market. You need to ask yourself ‘what you need to achieve’ and ‘what is the nature of the parties and the cultures you are engaging with’. Nothing beats preparation and being able to explain ‘what you need, why you need it and what is in it for the other party’. My go-to-guide for knowing the best methods in discussions are those from ‘Getting to Yes’ and its methods of principle negotiation. Be firm on your expectations, be open how to get there.

Jon Hatfield, Director Global Supply Management, PPG

5. Do your homework!

Preparation is the essence of a successful negotiation. Knowing your targets, your limits, and your BATNA is extremely important however it is useless if you fail to understand the other party. Put yourself in their shoes to know what they are looking for and how they would conduct research about your company. Do they really need your business? Are they looking for volume, for margin, for market share or for a combination of these? With these insights you will be able to drive and steer the negotiation to your preferences.

Christophe Schmitt, Head of Strategic Supplies, Omya

6. Make them love your vision and strategy

My preferred technique is to make the strategy attractive to the supplier and develop a common vision. Once the supplier is onboard, you can design an agreement in a very favourable direction.

Fabrice Hurel, Director Global Indirect Sourcing, Emerson

7. Questions, Questions, Questions

Asking questions, particularly the ones carefully prepared for in advance. I recall a negotiation with a professional services provider where the negotiation lasted for 3.5 hours. They started the negotiation feeling very confident about winning the business. After two hours of thought-provoking questions, they decided to substantially reduce their prices and ambitions. At the end, we reached a satisfactory agreement for both parties (good for them, great for us!)

Giuseppe Conti, Founder and Managing Partner, Conti Advanced Business Learning

The answers were collected by Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning (www.cabl.ch), a consulting firm that specialises in negotiation & influencing. This article is part of a series aimed at collecting real-life negotiation experiences from Procurement executives.

7 Negotiation Tricks Procurement Professionals Must Know

Every procurement professional has a special bag of tricks when negotiating– let’s see if you recognise these seven tips from experts in the field…

By Lia Koltyrina/ Shutterstock

The benefits of countless hours of negotiation experiences is that you know what you should be doing more of and what to stop doing. We discover the key traits and tools that make us perform better and are better armed for our next negotiation.

Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning interviewed seven procurement leaders to find out their favourite negotiation trick that played a key part in their business success.

1. Making the first proposal right away

I like to come to the negotiation table well prepared and well-aware of the market alternatives. Making the first proposal allows me to anchor conditions to a level close to the bottom of the market offer, immediately reducing the amplitude of the BATNA of my counterpart. Then I try to improve the conditions that are more valuable for me by making and requesting mutual concessions.

Francesco Lucchetta, Director Strategic Supply – Pentair

2. Preparation, Target, Value

I make sure I follow these three steps at the starting point in any negotiation where I am leading. The first is undoubtedly being well prepared. Secondly, to have a clear understanding of the desired outcome with a predefined “target range”, and thirdly, to fully understand the “value” of the business in the context of the potential suppliers being considered.

Les Ball, Chief Procurement Officer, ABB Motors and Generators

3. Profile your counterpart

Understand whom you face before negotiating! I use initial negotiation meetings to pique the interest the person I’m negotiating with – letting them discover all the potential benefits of working with my company. Then I encourage the speaker to talk as much as possible whilst showing genuine interest in their activities. I try to understand the way they work, their objectives and challenges. Having key objectives clearly in mind, I can better understand where our common interests are and how to shape the deal accordingly. From this moment onwards, I consider it the precise point where the negotiation starts.

Olivier Cachat Chief Procurement Officer, IWG

4. Asking yourself the right questions

It depends on the scenario but for mepersonally, negotiation always starts from knowing your position versus the market. You need to ask yourself ‘what you need to achieve’ and ‘what is the nature of the parties and the cultures you are engaging with’. Nothing beats preparation and being able to explain ‘what you need, why you need it and what is in it for the other party’. My go-to-guide for knowing the best methods in discussions are those from ‘Getting to Yes’ and its methods of principle negotiation. Be firm on your expectations, be open how to get there.

Jon Hatfield, Director Global Supply Management, PPG

5. Do your homework!

Preparation is the essence of a successful negotiation. Knowing your targets, your limits, and your BATNA is extremely important however it is useless if you fail to understand the other party. Put yourself in their shoes to know what they are looking for and how they would conduct research about your company. Do they really need your business? Are they looking for volume, for margin, for market share or for a combination of these? With these insights you will be able to drive and steer the negotiation to your preferences.

Christophe Schmitt, Head of Strategic Supplies, Omya

6. Make them love your vision and strategy

My preferred technique is to make the strategy attractive to the supplier and develop a common vision. Once the supplier is onboard, you can design an agreement in a very favourable direction.

Fabrice Hurel, Director Global Indirect Sourcing, Emerson

7. Questions, Questions, Questions

Asking questions, particularly the ones carefully prepared for in advance. I recall a negotiation with a professional services provider where the negotiation lasted for 3.5 hours. They started the negotiation feeling very confident about winning the business. After two hours of thought-provoking questions, they decided to substantially reduce their prices and ambitions. At the end, we reached a satisfactory agreement for both parties (good for them, great for us!)

Giuseppe Conti, Founder and Managing Partner, Conti Advanced Business Learning

The following answers were collected by Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning (www.cabl.ch), a consulting firm that specialises in negotiation & influencing. This article is part of a series aimed at collecting real-life negotiation experiences from Procurement executives.

Check out Part One of this series: Seven Negotiation Fails We’ve All Experienced

7 Supplier Negotiation Fails We’ve All Experienced

Every procurement professional knows that supplier negotiations aren’t always plain sailing – and we’re sure you’ll relate to these seven scenarios.

By Oleksii Sidorov/ Shutterstock

It’s happened to even the best negotiators.  Leaving a negotiation with less than desired results might even be called a rite of passage for procurement professionals. It’s frustrating and time consuming but there are learnings to gain from every disappointing negotiation.

Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning, interviewed seven procurement leaders to find out their most notable negotiation fails.

1. Pushing too hard

Using competition to push your advantage and lock it into a contract can be counterproductive. I recall a negotiation performed for a global IT project, during which we closed what looked like a great deal secured by a complete and detailed contract. Once the project began, the vendor quickly started to lose money. Having no leverage and way out from the contract, he eventually decided to stop the project. Ultimately, to continue our working relationship, we had to sit down together, find solutions and find fair compromises to make the project a success. Olivier Cachat, Chief Procurement Officer, IWG

2. Internal alignment

Involving executive leadership into a critical negotiation can be a very powerful ‘tool’, when done in a very concerted way. Our main objective was to secure supply for this material and ideally get a price concession when allocating more volume to this supplier. We briefed the President of our BU and explained the situation. We also explained in much detail that anything beyond a three per cent price reduction is very unlikely and that this supplier would rather threaten us to stop supply. While the first part of the actual negotiation was going well, our president decided to our complete surprise to become very aggressive with our supplier by threatening him to move to a different supplier if they would not reduce pricing by at least -15 per cent. Not only was that very insulting to our supplier, but it was also a complete bluff and our supplier knew that we were not able to move away within any reasonable/manageable timeframe. As a consequence, our supplier stood up and left the meeting, stating that we have one week to think about his offer to raise pricing by +5 per cent as they would otherwise stop supplying us. It took me two months to ‘repair’ the relationship and to convince them to continue supplying us at a flat price. Furthermore, I had to make additional concessions which we would not have made if our colleague would have stayed with our plan. Matthias Manegold, Head of Global Indirect Procurement, Liberty Global

3. Clarity on agreed terms

Make sure the final terms of a negotiation are clear for both parties. I had the surprise, for a new supply agreement (over 35M Euro), to discover that we were not aligned regarding the product specifications. Our yearly demand had been multiplied by 10 and obviously, during the negotiation, the supplier did not dare confess not having the capacity to deliver our needs. We needed to rediscuss and revaluate this challenge and find a way forward to solve the issue. It demonstrates the importance of always re-confirming the terms you reached.  Christophe Schmitt, Head of Strategic Supplies, Omya

4. Safety in small numbers

At times I have walked into a room and seen more than ten people around the table. In such a situation, it is very unlikely that any significant flexibility will be shown during the following hours. By nature, most people will not want to lose ground in public. As a general guide, I find the best agreements are made in smaller meetings with participants who have been briefed in advance. Unless related to celebrations, nobody likes surprises!Jon Hatfield, Director Global Supply Management, PPG

5. Stubborn suppliers

Sometimes even if you have evidence that you could get a better price for same quality the supplier will not move. This can happen especially in the Pharma world where changing supplier is time, money, and resource consuming. I also think this behaviour by the incumbent supplier is wrong. Ultimately pressure on prices will prevail and the new cheaper supplier will be a better fit. Romain Roulette, EMEA Procurement Director, Bausch Health

6. Changing protocol

Overcoming counter-productive pre-existing relationships of suppliers can derail negotiations. My corporation acquired a company that had strong links with the local supply base. The local suppliers were working with this company for decades and had developed ineffective habits that were hard to change. When we requested the existing supply base to apply standard requirements, we were confronted with resistance and opposition from these suppliers. A few negotiations went well, however we had to change all of the other suppliers. Francesco Lucchetta, Director Strategic Supply, Pentair

7. Lack of alternatives

It was a single source supply situation. Over ten years ago, I was renegotiating an IT outsourcing agreement that was expiring. Benchmarking data indicated that our prices were well above market. On the other side, the supplier knew that we had no other alternatives and they enjoyed a strong relationship with the CIO. In spite of our efforts, we only received a very minor price decrease. The next step was to start developing an alternative supplier to be in a stronger position at the next contract renewal. Giuseppe Conti, Founder and Managing Partner, Conti Advanced Business Learning

These responses were collected by Giuseppe Conti, Founder and Managing Partner of Conti Advanced Business Learning (www.cabl.ch), a consulting firm that specialises in negotiation & influencing. This article is part of a series

6 Ways To Prevent A Negotiation Blow Up

There’s no denying that negotiations can be tough. And the best thing you can do to lessen the tension and prevent a negotiation blow up is to be prepared…

Palms are sweaty, knees weak, arms are heavy…

No, it’s not the start of an Eminem song… (well, it is, but that’s not what we’re getting at!)

You’re preparing for a big negotiation with a group of key suppliers and you’re already anticipating a disastrous outcome.

Perhaps you already know the people you’re dealing with are difficult to work with, or you’ve heard about their reputation.

Or maybe you know your own negotiation skills leave a lot to be desired when it comes to crisis management.

Whatever the reason, there’s no denying that negotiations can be tough. And the best thing you can do to lessen the tension and prevent a negotiation blow up is to be prepared.

We joined a recent Negotiation Roundtable organized by CABL (Conti Advanced Business Learning), a firm that specialises in Negotiation & Influencing, on the topic of Emotions and Negotiation. We wanted to hear advice from a number of procurement and sales leaders on how to keep your negotiations sweet.

Giuseppe Conti, the founder of CABL, led the conversation by discussing how emotions can influence decision making during negotiations and the ways to increase effectiveness when this factor is taken into account.

  1. Practice mindfulness

If you enter into your negotiation like a coiled spring, chances are the spring won’t stay coiled for long. The calmer you are the calmer you’re likely to remain for the duration of the meeting.

Olga Guerous, VP Commercial – Mars,  recalled a confrontation she experienced early on in her career. A particularly difficult supplier, who’s emotions were “all over the place” became so angry that he was forced to “leave the room midway through a negotiation and remained in the corridor for fifteen minutes in order to calm down.

“He came back and apologised but the situation wasn’t redeemable and he didn’t get what he wanted. Losing his temper made him lose any power and control he had in the negotiation. Having full control of your emotions is a key benefit in negotiations.”

Paul André, Director Reduced Risk Commercial Supply – JTI agreed, recommending, low breathing and mindfulness to help create a barrier to your emotions.

  1. Practice what you’re going to say

If you’re nervous or apprehensive about an impending negotiation, there’s nothing wrong with rehearsing in advance, to ensure you come across as intended.

Regina Roos, VP &  Sales Segment Leader Mineral and Mining – Schneider Electric,  said: “In the morning in front of the mirror I smile and practice some conversations, particularly ones that help you respond to people that are angry.

“When you are talking you can’t see yourself.  When you look in the mirror you can practice your facial expressions so it is not ironic or sarcastic. I call it ‘the mascara moment’.”

Francesco Lucchetta, Director EMEAI Supply – Pentair, agreed asserting the ” importance of making people aware of emotions without showing them, making an effort to keep the exchange respectful and controlled”

  1. Be physically prepared

Regina Roos recalled working with a procurement leader who took a very unique approach to managing his negotiations. At the beginning of every meeting and regularly throughout he would direct participants to the bathrooms.

“The need to take a break, to go to the toilet can create problems and impact on emotions during a negotiation. It’s good to take a minute, recharge your batteries and re-enter the discussion with a fresh perspective.”

Olga Guerous agreed in the importance of taking regular breaks throughout the negotiation process, even if it’s simply a break in the current conversation.  “It’s a powerful technique, when emotions are running high, to completely deviate from that topic, particularly if you believe you are going to have minimal success. Switch to a less contentious discussion and return to the difficult point later, whether it’s in a few minutes or a few hours.”

  1. Prepare to be confident

Preparation before a negotiation is crucial to help regulate emotions because it gives you the confidence to calmly assert your position and communicate your key points.

Ifti Ahmed, Managing Partner – Titanium Partners, argued that the most important way to control emotions is through self-confidence. “Confidence comes from preparation. If you’re prepared – you’re confident. If you think you’re going to win – you’re confident. If you think you’re going to lose – that’s when the emotions come into it.

If it helps you, don’t be ashamed of preparing everything you have to say in writing and sticking to that script.

  1. Plan your stand-up routine

There’s nothing like a touch of light humour to diffuse an escalating argument. Alessandra Silvano, Global Category Director CAPEX & MRO – Carlsberg, explained that his favourite way to blow out tension during negotiations is to crack a joke.

“Of course it has to be tactful, considered and culturally appropriate but it can be a useful and powerful way to break the tension.  Be sure you are not offending anyone and perhaps keep it exclusively to jokes about yourself!”

  1. Pick your venue wisely

Location-choice can make or break the success of your negotiation. If you want to ensure all participants remain civil, calm and professional there’s nothing like a neutral or public space to guarantee best behaviour.

“I’m a very emotional person and I find it difficult to process,” said Alessandra. “The venue of the negotiation has a big impact for me. I try to pick a relaxing, informal setting, such as a dinner. In an office environment it’s easy to get angry. In a nice restaurant I’m more relaxed and it’s easier to joke around and control emotions.”

Five Best Negotiation Scenes In Film And TV

How much can you learn about negotiation by sitting on the couch watching movies? Plenty.

Shutterstock/ Fer Gregory

Want to become a better negotiator? You could diligently read up on the subject or attend some negotiation training courses, but for the couch potatoes amongst us, you might just learn more by watching some of your favourite films.

Negotiation scenes come in many varieties in film. Often they’re in the form of a hard sell (think Leonardo DiCaprio selling dodgy stocks in The Wolf of Wall Street), or a hostage situation (Tom Hanks negotiating for his freedom in Captain Phillips) or other life-threatening situations such as Mel Gibson trying to talk a suicidal man down from a ledge in Lethal Weapon.

But when it comes down to the nuts and bolts of haggling, the following five scenes give illuminating examples of how to win – or lose – in a high-stakes negotiation.

 

  1. Sticking to your final offer – Nightcrawler (2014)

Jake Gyllenhaal’s character Lou is trying to sell a video of a crime scene to Nina, a TV news manager. Watch for:

  • Lou being willing to haggle down to a certain level, after which he refuses to budge.
  • The power shift in the negotiation from Nina to Lou (aided in part by Lou’s creepy intensity).
  • Lou throwing in a number of extra conditions when he knows he has Nina beaten.
  • Best line: “When I say that a particular number is my lowest price, that’s my lowest price, and you can be assured that I arrived at whatever that number is very carefully.”

 

  1. Doing your homework before a negotiation: True Grit (2010)

In this Coen Brothers film, 14-year-old Mattie Ross (played by Hailee Steinfeld) shows what horse-trading is all about – literally. In order to raise money to hire a Deputy U.S. Marshal to help her track down her father’s killer, she approaches an auctioneer named Stonehill with two demands – that he buys back the ponies he sold he father, and that he pays her $300 for a horse stolen from his stable. At first, Stonehill laughs in dismissal, but Ross’s perseverance and detailed knowledge of the relevant law wears him down until he yields to her demands – plus a little bit more. Watch for:

  • The moment Stonehill mentions the valuation of the horse and hence kicks off the haggling process.
  • Mattie’s threatening to walk out on the negotiation and go to the law, causing Stonehill to adjust his offer in panic.
  • Best line: “I do not entertain hypotheticals – the world as it is is vexing enough.”

 

  1. Negotiating across cultures – Snatch (2000)

Warning: strong language.

When boxing promoter “Turkish” and his partner Tommy approach Irish Traveller “One Punch” Mickey O’Neil to ask him to participate in a fight, the prospect seems simple enough. The only problem is, Mickey (played by Brad Pitt) has an almost unintelligible accent. His price is the purchase of a fancy caravan “for me Ma”, and then proceeds to list off all the features he wants included in the deal … while Turkish and Tommy can’t understand a thing. Watch for:

  • Mickey’s impossible-to-understand list of caravan features. The video clip below includes subtitles, but cinema audiences had no such assistance when this film was released.
  • The bewilderment on Turkish and Tommy’s faces as they realise they don’t know what they’ve actually agreed to. The cultural barrier between the Irish Travellers and the other characters in the film is a running theme that goes far beyond the tricky accent.
  • Best line: “Did you understand a single word of what he just said?”

 

  1. Coercion – Ocean’s 11 (2001)

“Frank”, played by the late Bernie Mac, has been tasked with sourcing the transport needed for the team to undertake the crime of the century. The dealer names his best offer, and Frank appears to accept. So far, everything seems to be going smoothly … until the handshake. Frank extends the grip to a full 60 seconds, apparently crushing the car dealer’s hand while chatting amiably the whole time. The car dealer, desperately uncomfortable and in pain, abruptly drops his price before freeing his hand. Watch for:

  • The range of emotions playing over the car dealer’s face as he realises he can’t free his hand.
  • Frank’s feigned surprise and gratitude when the dealer drops his price.
  • Best line: “If you were willing to pay cash, I’d be willing to drop that down to seven-SIX-teen each.”

 

  1. The power of silence: 30 Rock (TV series 2006-13)

By simply sitting in near-silence and looking stern, grumpy babysitter (Sherri) is able to make Jack Donaghy so nervous that he doubles her pay for working half the time. Donaghy (Alec Baldwin) comes into the negotiation with his usual swagger, but Sherri’s silence causes him to blabber and rapidly cave. Appalled at his own performance, he confronts Sherri a second time. Watch for:

  • Sherri’s tactical silence when Jack pauses to let her speak.
  • Jack rolling his eyes when he realises how badly he came out of the negotiation.
  • Best line: “I made every mistake you can in a negotiation. I spoke first, I smiled … I negotiated with myself!”

Want to suggest some other films or TV shows with great negotiation scenes? Leave a comment below!

Don’t Be Afraid To Kick A Colleague When Negotiating

In a major negotiation, procurement needs to deal not only with the supplier representative on the other side of the table, but with the internal stakeholder sitting next to you. If that person deviates from the script – as they so often do – then don’t be afraid to kick them in the shins. It’s your job!  

Procurious was invited to attend a Negotiation Roundtable organised by CABL (Conti Advanced Business Learning) and facilitated by its Founder, Giuseppe Conti.

Conti introduced the subject by pointing out that in many negotiations, it isn’t enough to negotiate with the suppliers. Usually, there’s a minefield of internal negotiation to get through first.

Don’t enter the maze without a map

Håkan Rubin refers to his company (IKEA) as a “matrix organisation”, and therefore sees stakeholder mapping and management as crucial before any sourcing activity. In his role as Supply Chain Operations Leader (Group Sustainability Innovations), Rubin says that identifying who the key players are internally isn’t always that obvious. “We try to get everyone on board, to make sure that resources are available and that everyone feels they are involved.”

Paul André, Emerging Products & Commercial Supply Director at JTI, built upon Rubin’s point: “I find that even though you’ve carried out your stakeholder mapping and have a joint meeting with key people involved, a lot of discussion happens outside of that meeting. What happens between the meetings is often more important, where people agree on things in one-to-one discussions.”

Overcoming resistance

Kemira’s Senior VP of Global Sourcing, Thierry Blomet, examined some of the typical resistance that procurement faces from internal stakeholders. “They have restrictive time constraints, heavy specifications, and often want to select suppliers based on past history and how comfortable they are with using them. It’s often challenging for procurement to convince stakeholders that there’s a better option against so much resistance, especially in a conservative industry not willing to take on the adventure of new technology or new suppliers.”

Xinjian Carlier (Strategic Sourcing Commodity Manager -Honeywell) shared an example of how she overcame resistance to a request for extra resources to deal with a major issue with significant financial impacts. “The reaction was ‘we don’t have time – I can’t give you the resource.’ I explained that the reason I came to them was that the company including both procurement and engineering would suffer an impact of hundreds of million in sales. Basically, I converted the issue into facts and put both of us in the same boat. This helped the senior leader in engineering understand, and reprioritise his resources.”

Resolving conflicting objectives

Laurence Pérot, Head of Global Supply Chain & Procurement at Logitech, comments that particularly in larger organisations, it’s procurement’s responsibility (and challenge) to juggle differing objectives and agendas from varied teams. “When you’re dealing with different functions, it sometimes isn’t clear what the company actually wants out of the negotiation. It means we [procurement] are unsure what we’re going to ask for. I had an experience where we had to make the decision on our own about the objectives on behalf of the rest of the community, because we couldn’t get alignment between the functions.”

Procter and Gamble’s Global Capability Purchasing Leader, Tamara Taubert, adds that procurement owns the discipline to be able to turn around complex, multiparty negotiation effectively. “To do that, our stakeholders need to get educated on what a negotiation is, the do’s and don’ts, and their role in the negotiation itself. The procurement representative might be the only person sitting at the table across from the supplier, but there are others involved in the negotiation, whether they like it or not. Procurement can lead by connecting all parties together and help them come to a value agreement.”

Staying in control

Blomet has found that engineers are generally happy to be guided by procurement as they’re often less experienced in negotiations and sourcing events. But when senior business stakeholders step in, it’s often more challenging for procurement to keep control of the process. “Business stakeholders are more likely to say that they know how the negotiation should be handled. Procurement may be tempted to back off at this point, but my advice is don’t back off. It’s even more important to help set the scene, do the roleplay, and keep them under control both during the preparation phase and during the meeting itself. And yes, this means it might be necessary to kick someone under the table if they deviate from the script.”

Alessandra Silvano, Global Category Director Capex and MRO at Carlsberg Group, says this has happened to her. “I had to ask someone who was not keeping to the script to leave the room. This person was becoming emotional and I could see we would be left in a bad position. I called a time-out, we took a break, left the room, and the supplier stayed behind. Eventually, we went back into the meeting and said we’d like to continue in a smaller group – leaving out the person who was not playing according to the script.”

Francesco Lucchetta, Director of Strategic Supply at Pentair, noted that although emotion can cause people to leave the script, it’s part of the negotiator’s toolset. “There’s a difference between playing with emotions and keeping negotiations under control. In a supplier negotiation, you’re the customer, so you can be much more emotional than they are. In an internal negotiation, you’re more likely to change a stakeholder’s mind by pointing out the emotional/risk side of the issue, rather than presenting facts around savings.”

Interested in attending a CABL Negotiation workshop? Visit http://www.cabl.ch/ to find out more. The founder, Giuseppe Conti, has over 20 years of Procurement experience with leading multinationals and over 10 years of negotiation teaching experience at leading Business Schools (including Oxford, HEC Paris, IMD and ESADE).

Negotiations Milking you Dry? Why Not Unleash the Power of the Herd!

On Day 8, the true love bestowed that famously lusted after gift of eight milking maids…

The traditional 12 days of Christmas might not start until the 26th of December. But this festive season, we’ll be bringing you the 12 days of procurement Christmas in the run up to the big day. Catch up with the story so far on the Procurious Blog.

“On the eighth day of Christmas, my true love gave to me…eight maids-a-milking.”

As the gifts become more and more extravagant, we have to question the logistics of it all – we wouldn’t be procurement professionals if we didn’t!

It’s unclear how the true love bequeathed the eight milking maids. Were eight cows also included in the purchase or was it simply a milking service that was required? Were the maids employed by an hourly rate or at a fixed cost, and how were they delivered to the lucky recipient?

Whatever happened, it would have taken some great negotiation skills to strike up a fair deal that ensured neither party was milked dry.

Perhaps the true love harnessed the knowledge of a crowd of friends to get ideas on how to orchestrate the whole thing – using the power of the herd as it were!

Negotiating Your Best Deal 

The festive season calls for a lot of meticulous planning but when it comes to negotiating deals, you need to be prepared all year round. What’s your pre-match strategy when it comes to negotiating with suppliers, clients and stakeholders?

In order to achieve the right outcome, you ought to have considered your objectives well in advance. This will help you determine what sort of negotiation you’ll need to have and assess any additional support you might need such as legal advice.

It’s also important to ensure you know the other party. What are their aspirations, weaknesses and objectives?

This Procurious e-learning video has it all covered: 

Here are some key things to bear in mind:

  • Will your agreement stand the test of time? Both parties want to feel that they’ve achieved a good deal and a satisfactory outcome.
  • Is the outcome efficient? Make sure no value has been left at the table.
  • Are you off to a good start? Negotiating a deal sets the foundation for your supplier partnerships and a precedent for the relationship you want to build.
  • Have you mastered your verbal, written and non-verbal communications? When it comes to negotiating, you need to be assertive but not aggressive!

Milking The Power of the Herd 

Sometimes, no amount of self-determination and commitment can get you across the finish line alone. We all need a little help from our friends for ideas, innovation and support.

We’ve certainly noticed that collaborative innovation has been on the rise in 2016 with more organisations embracing the power of the Hackathon.

In November, Spotless Group and Startupbootcamp hosted an epic two-day event at the MCG in Melbourne, Australia, focusing on the Internet of Things (IoT) and DataTech. Events such as these help to generate new ideas and turn innovation into reality.

Lisa Malone spoke about the value of the Hackathon at this year’s Big Ideas Summit.

Lisa explained why it’s key to foster creative cultures in the workplace, giving employees the chance to dare to think about the unthinkable. It can be hard to think big and innovate when you’re stuck in the routine of day-to-day office life.

Hackathons can be a great way to harvest creativity and allow teams to deliver the big ideas CEOs are demanding.

If hosting a hackathon seems a bit out of your reach, remember there are other ways to drive change and innovation within your organisation.

Internal collaboration also has a huge part to play. Procurious recently addressed why it’s so critical to engage Millennials with new tech implementations. They’re tech savvy and accustomed to participating in digital communities.

Their contributions, for example, could be invaluable when it comes to the adoption of e-procurement.

It’s very nearly Christmas, and many of you will be dancing out the door to your Christmas party. But what happens if there’s a crisis that arises, demanding your attention? Don’t worry, help is at hand!

5 Price Analysis Methodologies to Apply to Negotiated Costs

How can you find out if you’ve got a good deal from your negotiation? Here are some price analysis tools that could help you out.

One of the key performance measures that invariably arises at the end of a negotiation is if the final price achieved is a good one or not.

If we, as buyers, have purchased the product or service for a number of years, we can rely on our experience. But we have all faced a situation when we have to deal with an unfamiliar product. What do we do then?

I have outlined the pros and cons of some different approaches to price analysis. There’s no magic formula we can apply to confirm if the negotiated cost is accurate to the market price.

Each price analysis method has its own strengths and weaknesses. Knowing them will help us to understand which one to apply in which situation.

Price Comparison

The most basic method. You take the final price, and compare it against the prices quoted for the same product by other suppliers in the market place. This is the most common method, and it’s usually applied to common products, or those with transparent pricing.

Pros:

  • Doesn’t require too many resources.
  • Relatively easy to find out if the cost is over the market average.

Cons:

  • It can only be applied to common products – it should not be used, for example, for the cost of a lab analysis service, or customised goods.
  • You have to work with updated costs – in some areas, like electronics, a 6 month old cost may be obsolete.
  • You have to compare exactly the same product, under the same circumstances – not, for example, two different mobile phones, or services from two different countries.
Cost Structure

If it’s not possible to find equivalent market prices for the products or services, procurement can use the approach of a detailed cost structure analysis.

In order to do it, we ‘only’ have to replicate the manufacturing process, and assign an estimated cost to each stage. We can then benchmark this result against the cost provided by the supplier.

With a service, rather than a product, the process requires disaggregation of the service into its constituent parts (salaries; materials; equipment), and a cost assigned to each.

Pros:

  • Provides a detailed view of costs.
  • Can be used as a basis for supplier partnerships, and to visit supplier facilities to look at the manufacturing process.
  • Allows for negotiation on each constituent part of the good or service, increasing potential for savings.

Cons:

  • In-depth knowledge of the manufacturing processes and costs is needed.
  • Resource heavy.
  • Without supplier input, manufacturing process costs will be estimated, increasing the error margin exponentially.
Price Index

If the product has a published price index, then it is logical that the index will be a good guide to check if the negotiated cost is a good one. It would then be a matter of comparing the negotiated and index price to see if the negotiated cost was good or not.

The process is a bit more complex than that, but for the purposes of this article, there is no need for further explanation.

Pros:

  • Price indices usually are available on the Internet under paid subscription. As an added value, these sites usually offer forecast analysis that could be helpful for ongoing procurement strategy.
  • Can show trends and provide a comparison to the cost the last time the product was purchased. For example, if a product index has decreased a 5 per cent, but the supplier has only offered a 2 per cent cost decrease, then it’s clear that there is room for further negotiation.

Cons:

  • The indices are just a guide, there is a more complex cost structure which has to be considered. For example, other factors, such as a trader’s fee, would not be expressed as part of the product cost.
  • Indices only have a partial influence on the final price. A drop of 30 per cent on a factor, such as petrol price in the plastics market, wouldn’t necessarily mean a 30 per cent drop in the product price.
  • Markets can fall victim to speculation, or an issue that distorts the index. Being unaware of these issues prior to a negotiation could lead to a higher than expected cost.
Unit Price Analysis (UPA)

The Unit Price Analysis (UPA) is a mathematical model which predicts the right cost that a product or service should have based on its specific properties or details. It’s like a price calculator.

Pros:

  • We have access to a goal cost before starting negotiations.
  • Companies have developed their own UPAs based on non-linear regression statistical analysis. You can hire their services in the same way as you sign up for Price Index sites.
  • They are quite helpful when calculating complex project costs, and provide an accurate cost result for EPC projects.

Cons:

  • Building this model from scratch is expensive. Nearly all companies outsource this service.
  • You must be sure that data comes from a trustworthy source before using it for a negotiation.
  • UPAs are unitary prices based on a specific volume. The data doesn’t support different volumes.
Conclusion

In addition to the price analysis tools outlined above, there are a number of other, less common, ones. They are less used as they can only usually be applied to very specific cases.

There is no, one correct method. The specific circumstances of each sourcing activity will determine which method can be best applied to the post-negotiation benchmarking activity.

The Fine Art of Negotiation

Your negotiation skills come into play practically every day in the procurement game. But that doesn’t mean there isn’t room for improvement.

Strong negotiators master verbal, written and non-verbal communications. They’re assertive, approachable and know what they want.

And while procurement professionals are relying on their negotiation skills more than most, there’s always room for improvement to ensure you’re getting what you want during the negotiation process, regardless of whether you’re the buyer or seller.

Getting the Right Result

Strong negotiators rely on specific skills including patience, self-confidence and creativity. This is according to Australian business and leadership coach Cheryl Daley, who focuses specifically on the art of influencing others.

“People don’t often believe they have strong negotiation skills, but it’s a skill we all need in life, particularly in business. There’s always better ways to approach negotiations, but we often fall into the same rut and forget about the importance of looking for new ways to get the result we want when negotiating,” Daley says.

Negotiations often become a power-play between two parties, but the aim should be for everyone to walk away feeling good about the outcome, she says.

Long-Term vs. Short-Term

Anyone about to enter into a negotiation of any kind should start by determining the type of negotiation it will be.

“The type of negotiation will have a huge impact on the way you approach it. A buy and sell negotiation with someone you will deal with once, will be a completely different situation than if you’re entering into something you believe will be a long-term partnership,” Daley explains.

“The longer-term negotiation processes in the business world can take months or even years. These usually involve higher stakes, and can involve a discussion back and forth for some time until everyone has an outcome they are happy with.”

Set Your Goals

Be sure to set the goals in your own mind, before the initial discussions with the other party, so you don’t feel disadvantaged from the outset, Daley says.

“Be prepared to do some personal preparation before the first discussion with the other part. Always be polite and create a dialogue that doesn’t position one party as the ultimate winner and the other one as the loser. Be firm, but not aggressive. Stay calm, because the moment you lose it, you’ve lost the battle.”

Knowing what the other person’s weaknesses are will really help. It’s easy to be steamrolled by the other party if there’s no connection or relationship in place, so take the time to get to know them, and how you can help them achieve what they’re aiming for.

“It will always be more difficult to negotiate if you don’t first ask a few questions of the other party first to determine whether you’re able to solve their problems during the negotiation process. Otherwise, you could find yourself at a disadvantage,” Daley adds.

Not All About Price

Meanwhile, licensed Buyers’ Agent Nicole Marsh reminds us that negotiation isn’t always just about price. Often, negotiating other terms for real estate buyers such as a longer settlement, being able to move in on an earlier date, or the vendor leaving behind the white goods is enough to get the deal over the line.

“Long term partnerships may require each party to make concessions to make it work and may involve more problem solving skills to get the deal across the line,” Marsh says.

On the other hand, when a negotiation does come down to price, it’s important to set a ‘walk away’ price so you don’t agree to a higher price than you can afford, she says.

“It’s never too late to look at how you approach your negotiations, and consider adding new skills to your repertoire,” Marsh says.

Top Tips for Negotiating

Marsh also shared her top tips for negotiating:

  • Be firm, but not aggressive.
  • Strive for solutions that work for both parties.
  • Stay calm. Stick to the issue, and don’t become hostile or frustrated.
  • Don’t take it personally.
  • Pick a mutually convenient time and place for the negotiation to take place.
  • Put details in writing.
  • Consider whether you need legal advice.