I watch so many negotiations where the only people involved from the supplier’s side are salespeople.
Account manager, area manager, regional manager, and finally North American Sales Manager are typically the people I see in US-based negotiations. The same sort of logic goes in international negotiations.
This not by accident, and it’s certainly not because you asked the supplier “excuse me, can you please ensure only salespeople are involved in our negotiations? Thank you!”
It happens because that’s exactly how suppliers have architected things. And companies invest in this function and approach heavily and very, very deliberately.
Salespeople on the other side of the negotiation table have better systems, data, insight, and analysis tools available to them than you do, and they spend up to 20% of their time in training – while you only spend up to 2%.
And what do you think salespeople are trained to do most of all? That’s right, SELL. And that’s a vital function in every company, including yours. There’s nothing evil about it, they are just doing their jobs.
So what’s the issue then? Well, for starters, salespeople rarely actually deliver the product or service you are trying to buy. They just have to sell it.
That’s a problem because the operations department inside of every company can’t believe the stuff that salespeople are telling prospective customers that their product/service can or will do.
Maybe salespeople promise results in forced innovation by the supplier to try and fulfill them, but that’s usually not the case.
What’s usually the case is you pay every penny for the incredible premium solution that was promised, but instead you get the goods and services that bear no resemblance to what was in the slick brochures and PowerPoint presentations you saw just months earlier.
Read this twice: To solve this problem, you must invite operations people to negotiations.
The supplier’s operations people are the ones who understand exactly what they will actually deliver and what you will actually receive. You can ask them lots of questions about FUNCTIONALITY and PERFORMANCE.
Operations people don’t have any fancy negotiation training and are more likely to tell you things just as they are, with no window dressing at all, which ticks off salespeople to no end.
They also understand COST, whereas salespeople generally just understand PRICE. Operations people can help you take costs out of the product/service – which is the same as taking costs out of the supply chain, something I have been advocating for years.
Salespeople only know how to take costs out of price, which is why they are so reluctant to do so because they don’t want to compress profit or their commissions.
Operations people can tell you what features and capabilities you do and don’t need and also can help you with material and service substitutions.
With operations people, you can engage in the most important and the most overlooked aspect of all in negotiations: the acquisition of Performance Results.
Suppliers want to pitch grand solutions. Operations only think in terms of goods and services. And they understand performance metrics because they are the ones on the hook to deliver to them!
I have said over and over for years now, the #1 problem in procurement today is that we are buying goods & services instead of performance results. If you keep negotiating with salespeople only, you will forever be mired in this mediocrity.
If you start negotiating with operations personnel present from the supplier, you can delve deep into costs, components, personnel, response/resolution times, performance metrics, remedies for failure to perform, total cost of ownership, reliability data, and many other areas.
If you let suppliers bring whomever they want to negotiate, you are way down the rookie scale in procurement. You need to have total and complete control of who they bring.
You need to understand every single place in the supplier’s organization that has exposure to cost and performance as it pertains to what you are buying. Those are all operations groups. It could include engineering, logistics, finance, and other players.
You must bring people who have deep insight, understanding, control, and decision making authority over two things: Cost and Performance.
Notice I did not say “price”. I don’t care about price, I care about what goes into it – THAT’s where the money is.
Then you negotiate for those 2 things, with complete control of the ship. If you don’t do these things, the room will be filled with salespeople, as many as possible, and all you will be negotiating is price….Followed by probable disappointment post-contract with the results.
Now go off and do something wonderful.
“THE Godfather of Negotiation Planning” ~ Intel Corp
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