Organizations can save millions through an effective negotiation process
Professionals today are skeptical of the term “negotiations,” because
of failure by parties to keep to their agreed terms and conditions. Organizations can save millions through effective negotiations, even as the trend of being complacent with daily negotiations to create value or capture advantages that are tangible either for the individual or on behalf of your organization.
Establishing a good framework to approach negotiations is becoming the norm of some world-class organizations, as various trading blocks are established. This is what organizational leaders must live with now. Some of the major tips when preparing for negotiation are: plan; understand the market value of the product or services you are negotiating; develop a framework you can use to give you an edge in the negotiation room; perform some data mining about the person or firm you planning to negotiate with; define your minimum or maximum concession; and establish your exit strategy.
Planning is very important in negotiating good rates and driving cost savings for your organization. It is critical for business and supply chain professionals to understand their leverage before any contract agreements or negotiation. Over my 15-year professional career, I have witnessed a classic situation where sales executives are more interested in locking down long-term contract deals without knowing the ambiguity which most of the time represents risks and liability, that should have been take care off at the negotiation phase.
Lack of planning before negotiations can result in lost revenue and lost competitive advantage. A good example is the case of two countries negotiating a trade agreement: the lead negotiators of both countries need to perform a thorough market impact analysis when the trade agreement comes into effect, so the negotiators are expected to engage stakeholders, because such engagement will capture all the basic elements that will drive the negotiating strategy of both parties.
A good example could be noticed from the recent pronouncement about re-negoting NAFTA , which the US government promised better negation, although the reverse might be the case here as the other members of the trade agreement (Canada & Mexico) might review and trade off areas of less importance to re-negotiate a better deal.
The strategic negotiating framework should begin with a thorough risk analysis regarding any decision that can be accepted as a trade off that will not affect or erode the value creation of the organization you are actually representing. Failure to understand the market will limit your knowledge to negotiate well. This will ultimately translate to the amount of risk or concession that one can accommodated that won’t erode the objective of the intending contract or supply chain agreement.
The risk analysis deliverable will provide a better understanding of what are critical and non critical elements that one can easily establish a trade off mark up point. The point of analysis is to help one drive a win-win negotiating strategy that will enable a front-end value proposition that your negotiation counterpart won’t ignore. It is also very important to utilize the carrot approach at the beginning of negotiation for concession from less valued to more valued elements.
A good negotiator needs to review information about the business’s past behaviour, as it will provide a clear indicator of what they value—and what they won’t trade off—during negotiations. Organizational or personal information negotiation patterns can be captured through an indirect format, which can be through vendors, clients, suppliers and contractors. Negotiating price in a enterprise supply chain platform while supporting any organization could be tricky if not properly planned, as exchange of proposition by either party has to be a classic win, although there can’t be successful negotiation without good planning as stated above, which will help one understand the cycle framework before the task execution (Physical negotiation). Most supply chain professionals don’t have vast experience with the subject of negotiation, which on most occasions results in failure to meet terms and conditions. This is costly to organizations.
A good negotiator should know when to walk out, which doesn’t happen in most cases, due to lack of front-end planning. There should be a clear point exit strategy from any negotiations to better work on your trade offs and strategy. Your ability to understand the implications of every concession made at every point in time makes you a good negotiator.
Negotiation is both the art and science of trading off to get a better deal, regular communication training is recommended for those involved in negotiations, apart from having a good knowledge base of the business or subject requirement.