Tag Archives: negotiation

How to Keep the Supplier Love Alive

We take a look at some of the ways procurement professionals should manage, and negotiate with, their long-term suppliers when things get tricky…

Nobody said it was going to be easy. Building and, most importantly, maintaining good supplier relationships takes hard work, commitment and focus. And the longer they last, the more they require this careful nurturing to keep the love alive and the flame burning.

But what happens when one half of the partnership doesn’t hold up their end of the deal; taking advantage of a long-term contract or a presumed arrangement which has started to have a negative impact on your organisation?

What do you do when a change of circumstance means you want to re-negotiate your terms?

How do you get yourself out of an undesirable, self-destructive partnership when to change things up could be costly and difficult to implement?

We joined a recent Negotiation Roundtable organized by CABL (Conti Advanced Business Learning), a firm that specialises in Negotiation & Influencing, on the topic of long-term negotiations. We wanted to hear advice from a number of procurement and sales leaders on how to manage those long term supplier relationships.

Giuseppe Conti, the founder of CABL, introduced the subject by highlighting that in long-term relationships there is a risk that one of the two parties take advantage of the situation. He then led the group to discuss a number of different ways for procurement professionals to manage, and negotiate with, suppliers when things get tricky.

Look below the iceberg

 For procurement professionals, this is a tale as old as time – how do you manage a supplier who increases prices without warning, when you were under the impression that you had a long-term agreement. Do you cut and run?

“That depends entirely” argues Laurence Pérot, Global Supply Chain Procurement Head at Logitech, “on the nature and origin of your relationship with that supplier.

“You need to consider how you selected them in the first place. Was there a good cultural fit, what drew your organisation to them? Cost reduction is just the tip of the iceberg.”.

According to Xinjian Carlier Fu, Sourcing Leader at Honeywell, “If you can satisfy all the elements beneath the surface (i.e. risk reduction, security, protecting margins and personal requirements) you will have a much more effective negotiation.”

Believe that you have the power

 It’s easy to be intimidated by suppliers who seem to be calling all the shots in your relationship. Xinjian Carlier Fu believes it’s important to have confidence in your own procurement power. “Don’t be afraid of [your supplier] relationship. They might seem dominating and intimidating but I like to use the analogy of David and Goliath.

“Procurement professionals should think of themselves as David. Don’t underestimate your influence or give up hope for your organisation.  You do have negotiation power. Don’t give up hope.”

“Unfortunately not every supplier is willing to work with you in a partnership. Sometimes not all parties are considered equal,” explains Guillaume Leopold, Former CPO at Coty.

Look for a win-win

Ifti Ahmed, Managing Partner at Titanium Partners, described that tricky situation of inheriting an existing supplier when starting a new procurement job. “This particular supplier wasn’t my first choice but it became my job to manage the negotiations and the budget. I did look for alternatives, of which none were suitable and so I did feel like I was in a tough position from a negotiations perspective. ”

“But we prepared well for these negotiations, ensured we had a greater idea of what they valued; what was annoying for them and what they wanted from the partnership, so we were able to discuss points for improvement on both sides and the new contract ended up as a win-win”

Giuseppe Conti also highlighted the importance of using partnership tools to effectively manage the supplier. This includes a Service Level Agreement with KPIs for both parties, performance reviews, alignment of senior management teams, bonus system, audits, 360-degree feedback. 

Make your position clear

It’s very difficult to build trust in your supplier relationships when staff turnover is high. Indeed, as Alessandra Silvano, Global Category Director CAPEX & MRO at Carlsberg, pointed out “many suppliers try to take advantage of frequent rotations in the workforce. But they need to know that you are aligned. Pricing should be treated in the same standardised way, not matter who you are working with.”

Work at it like a marriage

Regina Roos, VP & Sales Segment Leader Mineral and Mining at Schneider Electric, recommends you approach your supplier relationships like a marriage. “It’s not a one off event. There are levels of commitment and you have to keep working at it. If you’re not prepared and you don’t know what you’re getting into with a supplier it’s your fault. You need to make a commitment, and stick to it.”

Paul André, Director Reduced Risk Commercial Supply at JTI, agrees, arguing that “you need to be very clear on what you’re entering into – and that you don’t have a different expectation of the relationship you are building.”

Get to the crux of the problem

What should procurement professionals do when faced with a seemingly irrational supplier who simply won’t re-negotiate terms or agreements? Xinjian Carlier Fu suggests that you “try to identify the motivations underlying these actions or attitudes. Think about the possible constraints they might be facing. Then test your theories by asking questions – ‘Are you facing pressure to cut costs?’” When you understand what’s driving the supplier’s behaviour, you’ll find it easier to come to an agreement.

Work with suppliers you like

The value of supplier likeability is not to be underestimated according to Francesco Lucchetta, Director EMEAI Supply at Pentair. “Taking company culture into account is so important when it comes to selecting suppliers, particularly if you’re forming a long-term agreement. People are very different and to work with people you like is a really good thing. When the culture is unfriendly it’s hard to build trust in the relationship.”

For more advice on managing your supplier negotiations, check out the first blog in this two-part series – 6 Ways To Prevent A Negotiation Blow Up.

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.

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!

Negotiation, Trump-Style – The Winner Takes It All

Negotiation with suppliers can be done using hardball tactics, so long as there is no genuine need for an ongoing relationship.

In the New Yorker last year, Tony Schwartz, the ghostwriter for Donald J Trump’s The Art of the Deal said:

‘He lied strategically’.

‘I put lipstick on a pig’.

Rather than inviting more in-fighting than a Taiwanese parliament, let’s focus on the negotiation trap inherent in Trump’s behaviour.

Whether you’re for or against him, Trump’s negotiation tactics are more obvious than a bogey hanging out of your left nostril on a video conference call. Let’s look at his top five tactics:

  1. Huge ambit opening positions – if he wants $2.50, he asks for $1 Billion.
  2.  Flattery – ‘You’re a good guy, a great guy, the best’!
  3.  Bluster – ‘This is going to happen my way, it always does … believe me’.
  4.  Anger (feigned or real) – ‘This deal is so bad, so wrong, you’re making me really mad’.
  5.  Insult and intimidation  – ‘You’re a loser, you’re crooked, you are going down big time’.

These tactics may or may not have worked, but it’s fair to say that at best, they are transactional.

The Winner Takes It All

A deal can be done using these tactics as long as there is no genuine need for an ongoing relationship. The winner takes it all, the loser’s standing small. (Sorry, too much ABBA in adolescence).

Interestingly, a lot of people have asked me if I think Trump’s tactics could be useful for them.

My short response is ‘If you plan on renewing that client, want referrals or would like to be treated as a trusted adviser for a while, then probably not’.

However, when I ask them if they’ve been subjected to these, and other, tactics from clients including senior managers and Procurement, most say ‘All the bloody time’.

Many sales managers and sales people are aware of these tactics being used against them, yet are so keen to get the deal that they succumb, subjecting their company to poor margins, ridiculous stress to meet deliverables and a culture of subservience.

How to address the key tactics in Trump’s playlist

  • Huge ambit opening positions: Plan your own positions, especially your walk away. Politely refuse to discuss offers outside that range. Get back to discussing what the client is trying to achieve
  • Flattery: If you’re desperate for approval, ring your best friend, your mum or ask your dog if he loves you mid-lick. You don’t need approval and validation from clients.
  • Bluster: Ignore or say ‘thanks for sharing that, so let’s look more closely at the issues on the table’.
  • Anger: Keep asking questions like “Why is this so bad? Why do you want to still pursue this then? What would you like to do from here? (my personal favourite).
  • Insult and intimidation: See Anger, or coolly refuse to continue until the behaviour stops.

Unless you don’t care whether your client gets a great result or not, transactional negotiation styles won’t work very well.

Equally, whether they are the President of the United States or the Chief Procurement Officer, you should build a skilful, tactical wall and get them to pay for it.

Elliot Epstein is a leading Pitch Consultant, Keynote Speaker, Corporate Sales, Negotiation and Presentation trainer who gets sales results rapidly. He has coached and trained high profile corporates globally in presenting, selling, negotiating and pitching. Visit Salient Communication for more information.  

This article was first published on LinkedIn.

Negotiation is no game… but here’s how to win at it (anyway)

Welcome to the first blog in a monthly series from John Viner-Smith.

I have spent my career negotiating. I’m guessing that you have too. I’ve worked in procurement as a buyer, a manager and consultant for over ten years but it was only when I left procurement and worked as a consultant and trainer working with procurement and sales people and focused solely on negotiation that I really came to appreciate negotiation as the core commercial skill.

sirtravelalot/Shutterstock.com

People have some funny ideas about what negotiation is. Let’s start by talking about what it’s not;

1.    Negotiation is not the price discussion that happens at the end of a sourcing process.

  • The entire sourcing process is the negotiation. Every conceivable variable (what are we buying? To what spec? Under what terms? Delivered where? When? How? Etc.) is negotiable.
  • If you park all of those early and plan to negotiate the price at the end, you’re either going to sleepwalk into a very competitive haggle or (assuming you’re negotiating with someone who knows what they’re doing), maybe you’ll just get the deal they wanted to give you all along.

2.    Negotiation is not comfortable

  • Negotiation is a tool for resolving conflict. It is therefore rooted in conflict, which is inherently uncomfortable.
  • If you fail to acknowledge and embrace that discomfort, you may find it becomes a factor in the outcomes you achieve. Ever held back from pushing for a little more in a deal because you didn’t want to be that person? That was your discomfort. And your failure to manage it costs you. Macchiavelli said “Whosoever desires constant success must change his conduct with the times”. Become comfortable with assessing and doing what is necessary.
  • As buyers, we have developed techniques and technologies that serve to insulate us from the discomfort of direct, face-to-face confrontation. The assumption that this is a good thing is deeply flawed.

3.    Negotiation is not compromise

  • The task of every negotiator is to get the most they possibly can get from each negotiation for themselves and their employers.
  • Compromise is what happens in the absence of effective negotiation.
  • Your goal is not to give the counterparty anything. Gifts are a sign of generosity.
  • If you are perceived as being generous, your counterparties won’t reciprocate with gratitude. They will become greedy. They will want more from you the next time.
  • Instead of conditioning people to expect free gifts, condition them to expect positive outcomes only if they earn them.

4.    Negotiation is not about securing a win-win outcome

  • Negotiation is about you getting everything you can get, not to be fair to the other party.
  • Win-win is a myth. If you assume you negotiate with rational, competent people, you must further assume that they won’t do a deal that has zero or negative value to them.
  • Therefore, they won’t do deals where they “lose”.  If your counterparty criticizes you for acting in a “win-lose” fashion, they are trying to influence how you feel about the deal. They may be genuinely aggrieved, or they may want you to think they are (it’s a backhanded compliment, designed to make you feel good about your “prowess”). If you have genuinely taken everything they could give you well, they still did the deal. So they’re winning something.
  • Conversely when your counterparty exhorts you to do a deal because “It’s a win-win”, one thing is clear; they’re winning something and want to close the deal. You may be doing ok, but could you do better?

5. Money never gets left on the table

  • I have heard countless negotiators tell me about the times they left money on the table.
  • No money ever stays on the table. If you didn’t take it, the other person did.
  • If the value is there to be had, your job is to get it. In a simple, one dimensional negotiation (typically price), that means you take everything and leave them just enough to close the deal and leave the table. In a complex, multi-variable negotiation that means you identify every conceivable source of value to them and to you and ensure you trade them to create a deal that’s bigger than the sum of it’s parts.

6.    Negotiation is not a game and it is not optional.

  • I meet (and negotiate with) people who’ll say “I’m not going to play games with you, the price is X”
  • If you have all the power in the world, and the counterparty has zero option but to do the deal with you on those terms, they will do it. But they will devote time and energy to clawing back some satisfaction in the deal. If and when the balance of power swings their way, you will be punished.
  • What if you’re counterparty was willing to settle for a price of X – Y? You just overpaid by Y, at least. Chances are that the counterparty will get you to move on your price, so you’ll pay more than X.
  • Negotiation is a necessary and important ritual to help you gauge and attain the best possible outcome every time.
  • Fail to negotiate and you just fail. If you closed a deal without negotiation you either created a risk for yourself down the line, or you got exactly the deal they wanted to give you.

I consult for and train procurement teams and sales forces. Effective negotiation training is not cheap, but it is also essential and an investment in people that delivers great returns in short order.