From Brussel Sprout negotiation to the art of sound procurement
Negotiating isn’t just an action, nor is it a business concept. It’s something we do daily, most of us without even realising we’re doing it.Whether it’s trying to get your child to eat their Brussel sprouts over Christmas dinner, or deciding on the designated driver for the work Christmas party.
But does everything we’ve learnt from life application go out the window when we step into the work place? How open minded are we to recognising what doesn’t work, and to changing our style?
Within procurement, supplier negotiations are often seen as an act of purely driving down cost. When budgets are cut, procurement puts commodities out to tender. Whether this is a fair assessment or not is immaterial, but I believe we should be challenging this. How do we improve our negotiating style to ultimately to change this perception?
1. Understand the wider business’ needs
We need to ensure, before we even start a negotiation, that we understand the value of our end goal for the whole business. Of course, saving the business money means more money is available for other things, like recruitment, employee benefits and shareholders. But we need to make sure this isn’t the entire focus. Our supplier choice should be in line with the business strategy; if this is local suppliers, global suppliers, ethically focussed suppliers, product delivery or whole service providers, high quality suppliers, internationally recognised suppliers, SME suppliers.
If you don’t know or understand the business strategy – Find out!
2. Manage your stakeholders’ expectations
Frequently, there are many departments and stakeholders involved with a supplier or product. By speaking to them, it helps understand any previously unknown scope, specifications or complications. Yes, it’s naïve to think we will please every person within the business with every single decision, but overall nobody is going to be happy with an outcome they haven’t been aware of or been given the option for. Involve them and listen!
3. Understand your negotiables
Entering into a negotiation requires planning, it shouldn’t just be with the idea of ‘I want the best product, the best delivery, the best service, and to pay next to nothing for it’, because realistically, if a supplier could offer that, they would be going under within the year.
We need to prioritise the aspects of the end goal. This will be made much easier after doing the above two points. Which areas are pivotal to the business strategy, which drive the best value for the business, and which points are we happy to compromise or concede on.
4. Understand your supplier’s motivations
Of course, even understanding the priorities of the end goal doesn’t mean a supplier is going to bend over backwards to give you them. Why are we assuming that laying out our wants on the table and expecting them to be delivered will work, when the supplier could (and would) be doing the exact same thing. They don’t want to be giving away their prized product for less profit margin. Therefore, it is essential to understand what the supplier does want. Do they take pride in the relationship with your business? Do they want a longer-term commitment for guaranteed sales? Do they want shorter payment terms to increase their cash flow, enabling them to reduce their margins? The best negotiations work when both parties are happy with the outcome, where both buyer and supplier are getting something from the deal!
5. Seek feedback
Finally, I would implore any purchasing department to review and reflect on each negotiation. We are only going to improve our style and increase our value for our business, by learning from our mistakes, and fine tuning our successes.
This is a great opportunity to share what we have learnt with one another, to grow into a more mature, and recognisably valued procurement function.