Tactics of Negotiation in the Realm of Procurement : The Objective Setting (Part 2)

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My transition into the realm of strategic negotiation had been a brick by brick journey. Through various chiseling and contesting of my skills by dealing with both local and global vendors, I have strived to learn a bit about its tactics. Over the ages, negotiation itself has transformed from a bilateral debate on certain issues to an automated multi-partite transaction to derive optimal preferential results. The advent of digitized e-auction has disrupted its concept in such a fashion that a buyer-seller bilateral relationship has created a multi-agent layer through which a seller not only negotiates with his buyer but competes with his counter-agents at the same time to quote an even lower rate at every passing bid, in an effort to win over the deal. However, since the focus of the subjected topic is on the objectives of negotiation we will restrict today’s discussion towards that and park the deep learning of the algorithms of automated negotiation strategies for a separate discussion.

In my previous article, I tried to provide a basic outline of how to prepare for a negotiation process. Here we set our sight on the objectives of building a formidable negotiation technique. Over the years, experts have formulated various strategies for successful execution of the negotiation process but the crux of the matter remained constant. I have read Roger Fisher, William Ury, Chris Voss, listened to various Ted Ex videos, etc. and what I deduce from their preaching is that it is more of a common sense and instinct which can guide us to become successful in this art. Of course, practice does maketh a man perfect and it is overtly true for this art form as well. In my self-explored theory, I have tried to question myself with the what, why and how of each aspect and sought answers for them. Let me share my style of the approach here with you.

WHAT is my Objective?

While negotiating, if you are not sure as to what your objective is, you cannot expect to achieve your optimal or desired outcome. In fact, when the goal itself is unknown you would not have any idea about what could be your optimal settlement point. This means if you walk into a negotiation table without knowing what you want from that meeting, you are most likely to end up without a favorable outcome. Paul Klinger and Rachel Burnett in their book ‘Drafting and Negotiating Computer Contracts’ have written, “The goal of every negotiation must be to achieve a result which, even if it falls short of the original objective, can be considered a satisfactory advancement towards it.” Therefore, before heading to the meeting you should do your expectation setting for the upcoming deal making.

In procurement perspective, the objectives that you intend to accomplish could comprise the following:

  • Define a clear and complete scope of supply or service, which include evaluating the specs to fulfil your requirement.
  • Determine what standard of quality you intend to procure and what parameters it should possess to be able to substantiate.
  • Ascertain your expected price range and the terms of payment, like when and how will the payment be made – advance or post-delivery, number of instalments, etc.
  • Timeline for delivery or completion as time is the most sensitive element in any business proposition. If a supplier does not have the capacity to supply within the timeframe it can cause huge operational and financial inconvenience to the business.
  • Other vital considerations like delivery charges, penalty terms, termination clause, warranty, after-sales service, indemnity clause, legal jurisdiction, etc. and many more could be relevant on case to case basis.

Therefore, understanding ‘what’ to negotiate will help in starting the negotiation process with confidence and preparedness. The skill of negotiation keeps improving with every passing deal. I can recall my initial days when I used to listen more while my manager would do most of the interaction. I kept picking up his opening and closing moves as well as the rebuttals he used to counter his opponents.

WHY is it important to prepare an Objective?

On reading the above section one may think that the importance of preparing the objectives lies in identifying those 5 points itself. Nevertheless, the purpose of a ‘why’ runs much deeper than that. Rather I would rephrase the question as – what are the measurable limits or range you should aim to achieve for each of your objectives and why is it necessary to define that range or limit? Industry itself is target driven. You and me, we all are driven by targets of achieving certain percentage savings or to keep the spend restricted within certain limit or mandated to enhance our bottom line, etc.

Often a vendor might have a different expectation from a deal which you may not have anticipated. Like trading a better payment term than a higher price; negotiating a larger delivery timeline to ensure superior quality against your stringent deadlines; disputing on the terms of penalty & its percentage; etc. When you prioritize the scale of each objective, you know which one solicits more weightage for you than what is being proposed by the supplier. I had once faced a real-time situation where an IVR service provider was required to develop a complicated network for us within a stringent timeline but the vendor demanded a longer duration for completion since they claimed not to compromise on their quality. We were stuck in a go/no-go situation due to a tight timeline for completing the implementation before the go-live date, which was already declared. That is when we went back to the drawing board to reassess the scope, timeline, quality, etc. so that the service provider can get the required time to develop the infrastructure and we also do not miss on the go-live. Certain modification to the scope was made for a phase-wise implementation. Consequently, we also had to rework the payment terms in sync with delivery milestones. So we both bent our limits to adjust the constraints and adhered to the go-live deadline.

The above example also indicates that we analyzed the goals of our opponents too. When you try to prepare your objective with certain criteria in mind, you should also think what your opponent might counter it with. This will help you to search for common ground, as we did in our case. When you have your homework done for your set of objectives, you would be able to counter your opponent better if he tries to reject your propositions. For example, when you know your limitations and the range within which you can afford to deviate, you can make counter offers to the other party. That would also create an assurance in them that you are flexible and they are more likely to open up their positions too, had they been more rigid initially.

HOW will I decide my Objective?

Before we can set our objectives, we have to understand properly the scenarios that lead us to decide upon them. The knowledge of relative aspects and stakeholders involved is important to build our perspective about the requisites of negotiation. From there we develop a business logic which forms the foundation for understanding and establishing the objectives and their limiting factors. Some of the key aspects are as follows:

1) Product Knowledge
While at the nascent stage of requisitioning of the purchase, I suggest you should start gathering sufficient knowledge of the goods or service that you want to procure. If you do not gather that idea then it will be difficult for you to counter the salespeople who come well prepared & trained with the knowledge of their offering. Suppose, you are trying to bulk procure laptops for your organization. If you do not have any clue about your business’s prerequisites of RAM, ROM, processors, purpose of usage, etc. then you will not be able to justify your objectives and set their necessary parameters.

2) Business Knowledge
The knowledge about the business process is equally important. In your line of business what type of computers are required. If it is for the Marketing dept they might require laptops whereas the FnA dept may need desktops with large screens for better visibility of the balance sheets; again the IT dept would require high-performance laptops to run critical applications in them. In another example, your BU might be looking for two years of extended support and ready to pay extra for that or wanting two separate price points with slightly different specs. This requisition has to be clear with you so that you can prepare your objectives accordingly.

3) Supplier Knowledge
You also need to have a substantial idea about the suppliers. It is very important to know their credentials. Whether they have the capability to provide proper quality products or service, know whether they have relevant certifications like ISO, CMMI, etc. I also prefer checking their list of clientele and at times even call those clients for feedback. This will help you understand whether the vendor is capable to deliver your objective requirements.

Conclusion

Last but not least, it is all about practice. If the steps mentioned are practised religiously then it is quite evident that one can master the art of negotiation pretty well. I would strongly recommend that you maintain a notebook to document your entire negotiation strategy for every purchase. Periodically that has to be reviewed to recapitulate the use cases to strengthen the tactics of negotiation. The process might look a bit silly and tedious but it helps to a large extent in building your trait as a good negotiator. Although they are written keeping the procurement domain in mind but these tactical steps can be applied for all other types of negotiation as well, as the case may be.

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