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Procurement Negotiation for Beginners

8/19/2019 3:15:10 PM

You’ve aced your procurement strategy, conducted your strategic sourcing and are about to award the contract. But there’s one final hurdle to overcome – negotiation.

People will talk about how good they are at the art of negotiation and how they always seal the deal. But the true experts, the ones who really can walk the walk, are few and far between. When it comes to strategic buying, not many professionals have the knowledge, let alone the experience of negotiation.

However, help is at hand from some world-renowned experts. Some names are instantly recognizable, others less so. Use the following five key tips to get started on your journey toward negotiation expertise.

Tip 1 - Preparation

Fail to prepare, prepare to fail! If you don’t know what your starting point is and ultimate aims are, how are you going to manage a successful negotiation?

The key to successful negotiation is making time to plan. In their seminal work, “Getting to Yes”, the uncrowned kings of negotiation, Roger Fisher and William Ury, talk about the importance of understanding both your aims and objectives, as well as those of the other party.

From this, you can create your Zone of Potential Agreement (ZOPA), as well as understanding your Best Alternative to Negotiated Agreement (BATNA), which provides you with a defined point from which you are willing to walk away without a deal.

Tip 2 - Pick the Right Tactics

Will you choose a Principled Negotiation, with a focus on a good mutual outcome, or go straight to Conflict Negotiation, repairing fractured relationships while trying to achieve the best possible outcomes?

Whichever negotiation tactics you choose, it’s inevitable that they will change during the negotiation, as you have no idea how the other party will behave or react. Therefore, you must always have a Plan B ready to go.

It’s critical to ensure that all strong emotions are set aside and plan mitigation strategies to reduce the risk of emotions boiling over. Think about planning breaks or sharing the load between a larger team. Anger, disappointment, and anxiety have all been shown to undermine strategies and tactics. Likewise, beginning a negotiation on a negative or confrontational note will ultimately lead to a poor outcome.

Tip 3 - Ask the Right Questions

According to Deepak Malhotra, negotiations are as much a case of getting to ‘why’ as getting to yes.

Understanding the ‘why’ – for example, why the other party is looking for a further 10% reduction – can provide context for decisions or requests. It may also provide an opportunity to offer something of value to the other party without adding to your own costs. 

Tip 4 - Don’t Make Assumptions

Making assumptions can lead to issues in everyday life, and the impact of assumptions in negotiations are just as problematic. Game Theory states that parties will assume the behavior of the other and set their positions on this basis. For example, you might assume that the other party is primarily motivated by getting the best possible price, while they are in fact most interested in developing a long-term relationship with your organization. This would mean that all your planning and the negotiation strategies you’ve put in place are based on an incorrect assumption.

It’s a good idea, then, to do everything you can to eliminate assumptions in negotiations and replace them with certainties. In traditional negotiations, parties rarely enter into discussions or communicationprior to sitting down together. But there’s nothing stopping you from entering into communication with the other party in order to gain information and reduce assumptions. A great way to start is to email your counterpart and ask them what they would like to see on the agenda.

Tip 5 - Leverage the Experts

If you still lack confidence or experience, why not engage some experts to assist you? Group Purchasing Organizations (GPOs) not only have the expertise and experience in negotiation, but they are able to wield a power much greater than most individual organizations.

GPOs like UNA are made up of category specialists. They leverage the collective buying power of their members to negotiate deep discounts from suppliers. This group approach saves GPO members an average of 22% on their indirect spend. Plus, the GPO contracts are pre-negotiated, which saves you time and allows you to focus on the daily operations of your business.

There’s no risk to you, but some pretty obvious benefits. Your GPO may even end up being the only negotiation expert you need. Together, you and your GPO can leap the final negotiation hurdle with ease, clearing the way for you to finally award the contract with confidence.

Visit UNA to learn more about the benefits of Group Purchasing Organizations.



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