Habit#7 – Does Not Recognize That Negotiations Start Internally Before Going Externally

I see it over and over again.  Procurement professionals putting together their negotiation strategies in advance of a negotiation, with their exclusive focus is on the supplier they will be negotiating with.

It’s hard to find fault with that right?  Where else would they be putting their negotiation focus on if not on the supplier they’ll be negotiating with?  Stay with me.

Procurement doesn’t buy anything for itself.  Not much anyways.  Most everything they negotiate and contract for is for someone else – a business unit with an end user or for an end user group.

The person generating the demand has a set of interests, yet it doesn’t stop there.  A long series of other internal stakeholders have interest as well, and with that interest comes varying perspectives, needs, and requirements.

Enter procurement.  We also have our own interests, things we are trying to accomplish on behalf of the company.  Insert suppliers and their interests into the mix and you really have a complex picture.

And so procurement develops their external negotiation strategy.

The problem is this:   Negotiations don’t start externally.  They never do.  They always start internal.

Most negotiations that fail or fail to meet expectations have their root in failed internal negotiations.

Internal players can have all sorts of interests that can either enable or derail external negotiations.  A seasoned negotiator will inventory key internal players and their interests and will establish an internal alignment (notice that I said ‘alignment’ and not ‘coercion’) strategy before their external strategy.

What kind of internal interests can be factors in external negotiations?

  • Past or personal relationships with this or other suppliers
  • Preference for a particular product or service offered by one supplier
  • Potential conflicts of interest
  • Wanting something very quickly and already being behind schedule, with no time for competition or negotiations
  • Having already cooked an agreement with a particular supplier
  • Desire to support local business community rather than putting something out to bid
  • Viewing procurement objectives as being shortsighted and focused on the money only
  • Perceived supplier selection criteria that are different from what procurement has as selection criteria
  • Negotiation objectives that are different than what the end user wants to achieve
  • Focus on value while procurement is focused on cost, or the opposite
  • Not wanting to change from the incumbent supplier
  • And so on…..

By the way, none of this means that the internal players are stubborn and wrong while procurement is virtuous and focused on all the right things.  It just means there is internal misalignment, and procurement should not be presumptuous when interpreting that.

However, solid internal alignment is the foundation upon which robust external negotiation strategies are built.

And remember, when you are negotiating externally, you are very powerful, because your pockets are full of money.  You don’t have that when you are negotiating internally however.  Now you are now exercising your raw influence skills, without the money carrot to dangle.

Read this twice: If you are struggling with internal negotiations, it’s a good indication that your external negotiation results were accomplished as a result of all the money you were spending – and not your negotiation skills.

Savvy negotiators understand that their #1 skill is listening, not talking.  And they should listen to internal stakeholders to parse out not only what their positions are on the various issues to be negotiated, but also what that *interests* are.

And remember, procurement’s job at the end of the day is to enable *business unit success* at the lowest total cost.   We can’t operate in a vacuum if we’re to do that effectively.

The root cause here is always missed.  We try to impose procurement policy, procedures, requirements, etc to solve this misalignment.  It doesn’t work because nobody cares about our policies, and this also completely ignores why there is misalignment.

If there is misalignment of objectives and interests internally, then we certainly aren’t prepared for external negotiations.  And even if procurement thinks external negotiations were successful, internal stakeholders won’t see it that way.

Back to root cause.  End user and stakeholder interests need to be translated into performance results.  That’s the way to keep everyone accountable to the end goal.

If the end user insists on a particular supplier, it’s your job to explain that selecting a certain supplier is not a performance result.  Only supplier outcomes constitute a performance result – so what is it they want to achieve and how will they measure that?

This needs to be asked for every single issue, need, requirement, etc that is presented to procurement.  By doing so, you are accomplishing a few things.

1) You are listening and engaging people who care about the process and outcome and making sure their interests are represented, which buys you goodwill.

2) You are making your negotiation criteria aligned with end user and stakeholder interests, and in the process shifting the focus away from who you will negotiate with to what you will achieve.

3) You are stipulating that in order for end user and stakeholder interests to be supported, they need to express themselves in terms which can be measured, negotiated, and contracted for.

4) You are moving away from the biggest problem in procurement today, which is that we are buying goods and services instead of performance results.

5) You have aligned both of your interests around things which make the organization successful, and can use that criteria to select the best supplier – the one that can best achieve your end user’s stated performance results.

There’s much more to this. Much more than can be covered in a blog.  The bottom line is we need to drive end user alignment through US getting aligned with what they are trying to accomplish, while shifting their interests away from supplier X and into a set of performance criteria.

In doing so, you are both better engaging with end user objectives and also able to negotiate better contracts for your company.  This can only happen if you recognize that all successful external negotiations are preceded by successful internal negotiations.

No go off and do something wonderful.

Be your best!

Omid G

“THE Godfather of Negotiation Planning”

 

P.S.  The following companies have invested in CPSCM™ Certification in the last year: IBM, Colgate-Palmolive, Fiat, Dresser-Rand, Toshiba, Fujitsu, Rolls Royce, Carlsberg, Target, Bank of America, Wipro and many others.

The Purchasing and Supply Chain Management (PSCM) profession is being transformed, right here, right now.  Get on board or be left behind.

I have a 1 hour free training video for you in my website below.  Check out the most advanced PSCM Certification Program in the world for yourself!  

www.CenterforPSCMExcellence.org

 

The 90% Solution –  Procurement Has To Excel At This Now

by September 25, 2018 negotiation training

It strikes me after so many years of working with companies and government agencies on elevating the procurement function that we have a major problem that is impeding procurement excellence. One of the biggest issues I see TODAY is the existence of kingdoms.  Allow me to explain. The private sector, and much more so in […]

Read the full article →

The 7 Habits of Highly ORDINARY Negotiators – HABIT #6

by August 27, 2018 Contract Training

The 7 Habits of Highly ORDINARY Negotiators – HABIT #6 Failing to Have a Concession Strategy Mapped Out in Advance of Negotiations For all those negotiators who’ve been trained on at-the-table negotiation tactics and counter-tactics, throw them away – unless you can find someone to negotiate with who has just gotten out of a 40 […]

Read the full article →

Executives – HERE is Why Your Procurement Department is Just a Cost Center

by May 22, 2018 negotiation training

Payroll. Accounting.   IT.  Human resources.  Internal audit. Legal.   All of these groups and more, correctly or incorrectly, frequently get lumped as cost centers by executives. And once you get to the C-Suite inside of a Fortune 500 company, they tend to view their organizational groups in two ways:  “Either you are generating revenue for me, or […]

Read the full article →

Influencing Internal Business Units to Align with Procurement Strategy

by April 9, 2018 negotiation training

Influencing Internal Business Units to Align with Procurement Strategy This problem has been plaguing procurement for much longer than the 25 years that I’ve been around the profession.  Why is it that we spend all of our focus on how to negotiate with suppliers and not so much on internal negotiations? Side note – CPOs, […]

Read the full article →

CPSCM™ Has Done it Again – One of Europe’s Largest Energy Companies Gets Their Strategic Procurement Dept CPSCM™ Certified

by March 22, 2018 negotiation training

Congratulations to Vattenfall AB, one of the largest energy companies in Europe, for getting 83 members from across Europe in their strategic procurement department to one location to have Omid G provide them with world class CPSCM™ Certification training.  Already an incredibly progressive Strategic Procurement organization, new opportunities were found to make the strategic shifts […]

Read the full article →

CPSCM™ Has Done it Again – Ford, IBM, Valvoline, Vodaphone, Roche, McCormick, & Many More

by December 27, 2017 Contract Training

CPSCM™ Has Done it Again – Ford, IBM, Valvoline, Vodaphone, Roche, McCormick, & Many More Congrats to the 30 companies who have decided to get out of the old and into the new with THE Godfather of Negotiation Planning, Omid G. All attendees of this 5 day CPSCM™ Certification session were Director or GM Level […]

Read the full article →

R.I.P. Supplier Relationship Management (SRM)

by August 18, 2017 Contract Training

R.I.P. Supplier Relationship Management (SRM)   After today, I want all of you to stop talking about Supplier Relationship Management.  All of you.  Before I tell you why, we need to step back for a minute and quickly go down memory lane. Sales people have this thing called Customer Relationship Management – CRM for short.  […]

Read the full article →