Planning a negotiation is crucial to its success. The ‘off the cuff’ approach, which involves picking up the bid file just before commencing a negotiation is not recommended.
On more than one occasion, even in cases of major long-term high-value high-risk construction projects, clients have been reluctant to accept the need for and the value of planning. The ability to predict a supplier’s positioning is essential to planning alternative approaches. There is a similar need to rehearse the counter-proposals that will be made by the buy-side team (assuming they will work as an integrated team and not be a set of individuals with personal agendas). The following facets are typically needed to be taken into account in planning:
- Objectives must be set for all aspects of the negotiation. They must be as realistic as possible, informed by impeccable supply market knowledge and supplier knowledge.
- An agenda is required, based upon the tactical plan for raising each point and their impact on psychology and business considerations. The other party’s reaction should be considered carefully and possible responses prepared. Each item must be timed, taking due account of the other party’s involvement. Many negotiations fail because people run out of time. Poor time management can lead to misunderstandings and a failure to resolve the detail. Planning requires appropriate time and resource. Remember, some suppliers are well-versed at procrastinating to put the buyer on the back foot.
- The effective negotiator will have prepared the ‘opening speech’. This is a particularly difficult task for inexperienced negotiators to grasp – writing the speech and rehearsing it may be seem unimportant. But a faltering, hesitant dialogue gives an advantage and confidence to the other party. The opening speech is a crucial, conditioning statement that should include clarity of the benefits of the contract on offer, the fact the seller must deal with each point as requested and give a summary of the proposed contract and its subsequent operational deployment.
- The negotiator must prepare and create an environment within which the negotiation will take place. It is possible to create a hostile or relaxed atmosphere, but the ideal situation is where there is no doubt that it will be purposeful and business-like. The planning should include the tactics to be deployed when there is immediate hostility by the supplier. This is more likely in a dispute-based negotiation. In one of our recent negotiations the European sales director stated he didn’t need to understand the contract - that was for the lawyers! This statement was in the context of a known dispute directly related to the supplier’s non-compliance with material clauses in the contract.
- The other party’s authority must be established. If it emerges they have no authority to negotiate (make decisions) the meeting should be terminated, unless key information can be obtained which can help the buyer. In establishing levels of authority the other party may have to be asked to leave and to arrange for the person with appropriate authority to be made available. An able negotiator has excellent questioning skills. Some people are uncomfortable asking direct questions such as “Do you have the authority to negotiate this contract?”. It is sometimes a personal embarrassment to ask questions and persist until the question is answered. Such actions may be perceived by some negotiators to demand great courage.
- Introductions should be made to ensure names, titles and organisational roles are known. This will aid identifying decision makers and enhance the understanding of the actual jobs carried out. Identifying and understanding decision maker and influencer roles within the other party requires continued probing to ensure no assumptions are made.
- The meeting room layout and all associated facilities need to be professionally organised. Many customers propose negotiations take place at their premises for no other reason than they feel comfortable and confident. Perhaps more value and the opportunity to differentiate your offer could be gained from negotiations at the seller’s premises? Further, a neutral, third-party location may be deemed appropriate. Wherever the negotiations take place the value of the location must be carefully considered.
- There must be an early emphasis on plugging gaps of information and clarifying uncertainties or use of jargon. This can be tedious task but it needs doing with persistence and patience.
There is the arrogant assumption that everyone is a negotiator, but this is not what we have seen. There are some who should not go near a negotiation room - but who has the skills to find this out? Beware the supplier who pays the negotiator a compliment and says “that was the toughest negotiation I have ever been in”. What benefits have just walked out of the door?
☛ Stephen Ashcroft is leading the launch of Procurisk. You can comment or connect with him on LinkedIn and follow him on Twitter