Tactics of Negotiation in the Realm of Procurement: Part 1

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I am a procurement professional with over a decade of experience in the domain. Ever since I started my journey in this field I have often pondered, how to develop the skill set of a good negotiator and how to improvise its techniques thereupon. By virtue of our social disposition, we all are negotiators since birth. Right from childhood, we are instinctively engaged in, bargaining with our parents over allowing us to play in exchange of taking the meals; haggling with shopkeepers at the bazaars; negotiate with the HR of a new company over salary; etc. However, as we advance through the circle of life, the art of negotiation transforms & integrate from mere dickering over price to a strategic mind game that even induces interpretation through critical theorems of gaming theory & other mathematical algorithms. The Diaspora of the art of negotiation has traversed a long way from the days of basic bartering system during the Babylonian age to the present day Sino-US trade deal negotiations, etc. The scenarios where negotiation is applied are manifold, but we would confine our discussion to its dynamics in the context of procurement in today’s professional scenario.

The functioning of a procurement cycle becomes incomplete if the tactics of negotiation are not applied to its full capacity through well thought of techniques. In my endeavor to learn more about this art, I have browsed through several books and articles, many of which would resonate the same concepts in different forms. I would try to present here the learning and understanding I could gather along my journey so far.
In this very first series, I am presenting an initial checklist that a buyer should maintain in order to prepare for an upcoming negotiation process:

1) Define your objective:
Before getting into the negotiation process I feel one should figure out the objective that he intends to achieve from his deal. That objective need not necessarily be getting a cheaper price. It could be the overall value to be derived at the end of the process— like what would be the various terms and conditions that he intends to achieve, what quality parameters he is expecting, what level of after-sales service he is looking for, etc. The summation of all the related variables that make it the optimal takeaway could be the value to be derived from the negotiation and that would be the objective to focus on. For example, if you want to buy a product X (a service or goods) and there are multiple vendors offering it, getting the best quality at the least price would be an objective. But you may not get the best quality at the least possible price. A proper negotiation strategy will help you achieve optimality in both quality and pricing.

2) Do your homework:
It is important to take prior preparation about how to approach a deal. Understand your strengths and weakness in relation to that deal. Based on your objective, develop your strategy about how to initiate the negotiation. The homework is all the more necessary because when a salesperson is approaching you with his product line that he has sold over and over again, his preparedness and practice on convincing his opponent is already set. He is well taught to market his product properly towards conversion of his sale. Create a storyline for your part of the bargain as well since your counterpart would have already come prepared with his story to present in front of you.

3) Understand your counterparts:
To be a good dealmaker one has to be a careful listener too. When you focus your attention to what the person across the table is trying to offer, you can make out what his objectives are. An active listening will help you not only to understand and judge the person across the table but also to figure out how far the product or service offered is aligned to your desired requirement. Observing the other person and his or her body language is also a required criterion to build your opinion. Try to frame your understanding on, whether the person across has complete knowledge of the product, whether he or she has the authority to take decisions, whether the person is patient enough to hear your requirement, his or her confidence level, etc. During this process, it is also very important to keep taking notes of various key points that crop up during the discussion.

4) Deploy your strategy:
Upon understanding the proposition made by the salesperson and applying that to your objective and prepared storyline, open up your negotiation process. There is no single strategy which is conducive for every circumstance. Yet, fundamentally I prefer to open my move with an integrative negotiation technique (a win-win process) rather than a distributive (win-loss) technique. Distributive negotiation is where you bargain over a fixed sum of value. It is a “win-lose” strategy in the sense that the win by one party comes at the cost of a loss to the other. For example, when we bargain over discounts in a shop. The extra amount gained by you is an extra amount of loss by the seller. Contrarily, in an integrative or collaborative negotiation, the parties collaborate to derive the maximum benefit by integrating their interests to get a win-win outcome. This surely helps when the objective is to build a long term relationship with a supplier and include him to your database. However, the flow of discussion so far would guide you to analyse which opening move would you consider deploying.

5) Evaluate the outcome:
Once the said negotiation is done, you must evaluate the outcome derived from it. The result may not yet be conclusive but your analysis of the meeting will help you to strategize your next move. This part is very essential for developing yourself as good negotiator in the future. You must maintain a notebook to jot down the key points during the meeting that will form your basis of evaluation later. This process helps you understand what were your highs & lows during the interaction and how to minimize your pitfalls going forward. Periodic review of your use cases will help you to strengthen your efficiency in the domain and instill them in your negotiation repertoire.

The above-mentioned checklist is prepared from my years of experience as a negotiator and a learner of the domain. It would work as a starting point towards achieving a successful negotiation process. The entire gamut of the art of negotiation is a lot more widespread and dynamic, far beyond the above-mentioned points. We would discuss them gradually in later editions.

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