Good negotiators have a lot of tools in their skill set, but at the top there's always at least one thing in common: the ability to be persuasive. While some of the best results are accomplished simply through listening, there are also plenty of different strategies employed when purchasers have to retain the services of a new supplier, or revisit the terms established by one you've been working with for years.
In either case, many purchasing professionals tend to fall into a groove. They find a negotiation strategy that works once, or even a few times, and it becomes their entire repertoire. However, according to Ernest Gabbard, director of corporate strategic sourcing for specialty metals producer Allegheny Technologies Inc., every negotiation is unique.
"Some of the most successful negotiations are the result of knowledge and information and that comes from doing research, asking questions and listening," explains Gabbard. "But just because a strategy is successful in one particular negotiation doesn't mean it will do you any good in another. Nothing works under all circumstances, so you have to be agile and flexible."
While being a professional negotiator is a big part of the job for anyone involved in procurement or supply management, it is also one of the most challenging. Of course, adapting new strategies and having a better understanding of the psychology behind them can make any negotiator more effective, but Gabbard offers a few fundamental capabilities that all good negotiators have in common.
1. They can define success.
When putting together a negotiation plan, first determine what defines success. Understand where every party's interests lie -- both the seller's and your own as a purchaser. Good negotiators are able to find the common denominator that works for both the purchaser and the seller and their management. In fact, oftentimes the purchaser's most important role is that of a mediator, resolving the difference between what your company wants and what your seller is willing to provide.
2. They can identify priorities.
By understanding the requirements of both the buyer and seller, successful negotiators are able to force the end user to distinguish between a "need" and a "want." Of course, this requires gathering intelligence to understand what the other party's needs and wants really are. Often, the best way to find out what a supplier wants is to just ask (even though very few buyers actually put this method to use). The answer might not always be clearly defined, but at least it gives you a starting point. Identifying needs is important internally as well, because if you go into a negotiation intending to get everything you want, your chances for success will be limited.
3. They understand power.
One of the most common questions is how to deal with a negotiation in which the supplier has all the power. As a negotiator you want to influence the behavior of the counterparty and get them to do what you want them to do -- or convince them that what you want is what they want. On the other hand, power is relative and very rarely does one party have it all -- even single-source suppliers. There are always limitations and it's the purchaser's job to identify what they might be. Also, keep in mind that power shifts over time. The purchaser has it when you're determining what to buy and how to design a new product, but it shifts toward the supplier once the decision is made. This can be especially true with single-source suppliers, where R&D's design might create a bias for a product provided by a particular supplier.
4. They can gain leverage.
Once your R&D department is working with a supplier and they recognize their value, what do you do? First, keep it inside the organization. The supplier doesn't have to know there's a bias, so control that information. In a single, or sole-source negotiation, even if you don't have any options be able to convince them you have an alternative. This doesn't imply any sort of deception, but consider going back to R&D to discuss the possibility of a redesign. That way you can tell a supplier that if the negotiation is not successful, you're able and committed to make a change. Management might not favor a redesign, but it could be cheaper than continuing to overpay a supplier.
5. They can deal with deadlock.
Good negotiators know that a deadlock doesn't mean a negotiation is dead. Most negotiators are reluctant and some even refuse to leave until something is resolved. However, deadlocks are not necessarily bad, so be prepared to walk away. The key to resolving a deadlock is to provide different information and a different perspective. Don't keep repeating the same thing and pushing them with the same information. Look for a new reason for them to change their position and reach an agreement.