Yesterday at Jaggaer Rev 2019, the best presentation was the guest keynote speaker. While the vision from Bonavito was interesting, and an overview of the enterprise technology journey to date from Zahiri was illuminating for those who haven’t been in tech for almost three decades, neither were very enlightening with respect to how current and potential customers could do a better job of Procurement right now.
On the other hand, Molly Fletcher’s talk (of the Molly Fletcher Company) really hit home and didn’t overlook the fact that at the end of the day, every strategic engagement will be between people who will put the final touches on a contract that, once signed, will govern a relationship for years to come. Moreover, when you negotiate a good contract, both parties understand up front what the other is looking for — and this usually means that you can literally set and forget the contract until renewal time (but still have confidence and assurance on the off chance something goes wrong).
So what are the mistakes? And how do you overcome them? We’ll get to them. But first, it’s only fair to tell you that we’ll be trying to explain the five mistakes — and corrections — in source-to-pay terms, as opposed to the much more exciting — and real — sports (negotiation) terms that Molly, a sports agent rock star, used. (In other words, her presentation is exciting and engaging … and you really should see it if you get the chance, or, even better, organize it when you get the chance.)
1. Not Knowing Who You Are Negotiating With
Some negotiators think that who you are negotiating with doesn’t matter — it’s all about the negotiation and getting the best deal. And while it can be all about the negotiation and getting the best deal if that’s what both sides want, this is only going to work if both sides are interested in (almost) the (exact) same thing. If both sides only care about the number at the end of the day, it might work. But if one side only cares about the number but the other side cares about the future direction of the organization they are partnering with and how the product, service, or overall relationship is going to improve and grow, then the negotiations aren’t going to go anywhere.
On the other hand, if you know what matters most to the other organization, and what they want at the end of the day, and address that continuously during the negotiation, you have a much better chance at a negotiation that is not only smooth, but truly profitable. If what the other side wants the most is not the most important factor to you, a few concessions on the other party’s wants can lead to more concessions against your wants. If the other side just cares about the price, and you waver a little bit, they might throw in more services or better delivery terms or R&D support.
2. Negotiation is a Transaction
The outcome is a transaction in the form of a contract, but the negotiation itself is not a transaction. The negotiation is a relationship where both parties want to continue the interaction with the goal of coming to an agreement that will see both parties working together for months, to years, to come. If you overlook the relationship, you may never get to the transaction.
3. Getting Offensive
All offensiveness does is cause the other party to become defensive. And defensiveness never results in an open dialogue where the other party is looking for a way to overcome the disconnect between the desired outcomes of both parties and cross whatever perceived impasse has been reached. The solution here is to instead get curious, ask questions about possibilities, or orthogonal opportunities, that will instead get the other party to open up about what they really want or what they might be able to do if they can’t meet your need in a direct fashion.
4. Everything Has to Happen Now
Presuming you are starting a negotiation before you need the product or service, or a contract renewal before the contract ends, you have time — and usually more than you think (even if you have to expedite a shipment). Just because your timeline says you should finish in a week, that doesn’t mean you have to. Sometimes the other party just needs time and a little time can make all the difference — and the more strategic the negotiation, sometimes the more time you need. And even if it means you are without an agreement for a month or two, or buying from the spot market, it’s not always the right thing to rush a strategic negotiation. If the negotiation could result in a 5 year long-term deal that is more valuable than any extra costs you’d pay in the short term as a result of a short delay, especially if the supplier or partner could be strategic and bring innovation and value to your organization you could not get otherwise, can often be more than worth it.
5. Not Asking with Confidence
Always ask with confidence. Do your research. Know your facts. Know what you are asking for is reasonable. And then ask with confidence. Not only will you not get what you don’t ask for, but you won’t get what you do ask for if the other party has any sense at all that you expect you might not get it. Be confident … always. (But don’t be foolish. It doesn’t matter how confident you are, you won’t get a price below the supplier’s cost of goods, for example. But it never hurts to challenge the margin.)