Negotiation in Procurement

by Allison Ford-Langstaff | 19th Apr

Negotiation in Procurement often seems to be a solo sport, rather than a team game – and in itself, that can lead to a number of issues.

Firstly, we need to think about what is meant by a ‘team’ in a negotiation. Thinking about the process in the round, there is clearly one element which is our approach and activity in a room (or teleconference or e-mail exchange) which is often more of an individual effort than it is anything else. However, there are many elements which comprise the entire negotiation activity which are not just about the moment of discussion. There should be a lot of detail preparation, development of understanding, control of messaging, much of which is done with the input and assistance of others. There is also the whole post event activity, such as the conversion to contract and the implementation of the outcome, also aided by a range of stakeholders.

On the anecdotal side, we all have tales of a negotiation which has been influenced by people outside of procurement managing some dramatic feat of self-immolation by giving away our entire negotiation approach, pricing structure, competitive position or other value opportunities without an apparent backwards glance.

To combat the anecdotes, and to optimise the process, it is worth having a whole group of people (or ‘team, if you will) agree participation in the development of a negotiation.

We’ve also got to remember that the whole process of negotiation is a dark art for many onlookers (not least because they don’t get to see the whole preparation / negotiation / close out cycle in operation, and are terrified of the whole concept of their holiday bartering efforts in a friendly souk) and as such, there is not necessarily an understanding of how the various areas of the negotiation will actually link together in practice.

So, what to do? Our general suggestion is, for negotiations of an appropriate size, to think of assembling a formal (or informal) team which helps with the preparation activity, can participate in the negotiation activity and is sufficiently bought into the end results to want to support the post negotiation implementation activity.

Roles in the preparation phase can be discussed and allocated as the team sets up, and described in the Negotiation Charter document (more of which in a later blog). This will be focused on making sure a really good understanding of the business requirements, and therefore negotiation parameters, is in place, together with understanding market, supplier data and competitor positions. There will also be internal influencing and supplier conditioning activity to undertake.

In the preparation phase, we will also look at the roles individuals can play in the negotiation. There are a number of possibilities here, and giving people allocated roles (such as data holder in a particular area, or being the good or bad cop in certain situations) is far better than having them freelance in the middle of a discussion. Additionally, having one person as an observer, looking at how the negotiation goes from inside the actual negotiation, is an invaluable approach and allows feedback and learning to be built into the process.

Once we get to post negotiation activity, having people bought into the outcome of the process at the conclusion is a far better way of transitioning into implementation than just throwing the outcome over a wall at the contract management team or operations team and hoping it goes OK…[Read More]

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