Negotiation skills are essential for anyone working in Procurement. As a former Procurement officer, I have participated in multiple negotiation seminars and workshops (win / win, to the limits…). It’s become standard for companies to train their employees on negotiation tactics to get better deals from suppliers, but these skills are also useful outside of the buyer-supplier relationship. I’ve often said that the most challenging negotiations were not the ones with suppliers but rather the internal ones. Negotiating is an important part of any relationship, including those with stakeholders and adjacent functions (logistics, R&D, quality…).
My Number One Tip for Successful Negotiations? Be Prepared!
Preparation is the ultimate key to success because negotiations are complex by nature. Not only are there lots of terms to discuss and keep track of, but negotiation is also a “soft” domain, which means that psychology and behavior play an important role. When you’re negotiating, you have to pay close attention to the other party’s words and body language AND you have to be aware of your own behavior and reactions. Behavioral economists have written countless books and performed numerous experiments that, in short, conclude that our brain is pretty good at tricking us in situations like negotiations.
This is why preparation is the number one factor that determines negotiation success. If you’re well-prepared and know your stuff, you’ll be less likely to lose sight of your objectives and you’ll have a better idea of what to expect from the other party.
Preparation covers different areas:
- The object and terms of the negotiation: what am I ready to accept / not accept? What about the other party?
- The context of the negotiation: who, when, where, how, before, after…?
This may look like a lot of information, but keep in mind that you’re not just buying a carpet in a bazar! I lived in the Middle-East for several years where I also purchased several rugs. I did not negotiate. I bargained! The terms were pretty simple: how much cash do you want? The value definition was pretty unclear and subjective. The stakes were pretty low. Not so in a negotiation situation.
In a professional negotiation, you want to maximize the chances of a positive outcome (short term and long term). Therefore, you have to do your homework and prepare. The good news is that there are ways to prepare better and more efficiently. The key is to have the data and information you need readily available! This is where having a Procurement solution in place helps tremendously.
Here are a few examples:
- Information on the supplier: company, subsidiaries, …
- Information on the person you will negotiate with: experience, psychology…
- Information on past negotiations
- State of the business with the supplier: spend, quality, trends, agreements / contracts…
- Stakes (parts, contracts…) and options
- Internal customers
The list above is just to illustrate that the information needed is a mix of hard and soft facts. Therefore, just using an analytics approach is not enough. Context is important. SRM is not just a list of suppliers with more or less hard facts. It is also (or should be) a resource of information about the past activity between your company and the supplier, including things like previous visits, the last negotiation, etc. Knowledge Management is critical!
To assess whether or not your current tools and processes have what it takes to help you prepare effectively and be on top of your game for your next negotiation, download our Negotiation Preparation Checklist!