The 7 Habits of Highly ORDINARY Negotiators – HABIT #6

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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 year coma or prison sentence. 

Having tactics and counter tactics to use at-the-table is useless in today’s negotiation world of multi-million dollar contracts.   And for some reason, much of the negotiation training today still centers around this notion.

I will say it again, repeat after me: Negotiations are won and lost before they ever start.

Before I dive into content for this blog, I want to tell you a true personal story:  My wife and I live on acreage, and a large oak tree on our property fell into our backyard.  It was clearly a problem and a nuisance that needed to be resolved.

My wife immediately put an ad in Craigslist to have the tree cut up and removed from our property.  Sounds reasonable, right?

I looked at the very expensive bids and thought to myself “why is it that we are assuming that what we must concede in this negotiation is money?  Is there a scenario where we may concede the tree itself instead?  Does the tree have inherent value for anyone else?  Just because it is a problem to us does not mean it is also a problem to everyone else, right?”

Then I started to think some more.  I had another project which I had no intention of doing myself – I wanted to have a shed built on my property – a nice one, made of wood.   Then I came up with the idea – could I instead put an ad out that says “build me a shed, oak wood offered as compensation”?  I asked my wife to take down her ad.  I put up an ad that presupposed that the oak wood had value as a  negotiation concession and that maybe somebody would want it enough to build me a shed in return.

Crazy idea?

A number of people responded with interest!  One of them was a 3rd generation homebuilder.  His elderly parents lived locally and they really needed the firewood for the winter.  He was so extremely thankful that I would be willing to let HIM cut up and take the wood off of my property in return for building a shed for us.

He built an extremely sturdy shed, the only ways he knew how – so that it would last a long time. He solved two problems for me, and I didn’t pay him a single dollar to do so. Moreover, he was incredibly thankful for the opportunity.

The moral of the story is, you can dramatically change the landscape of negotiations when you plan your concessions in advance – and more importantly, your concessions need to be not exclusively based on how much you value them, but also on how much the other party values them.

The other part of the moral is that making a concession doesn’t have to hurt.  Why do you assume that in order for the other party to gain, you must lose something?   That doesn’t have to be the case at all.  Don’t succumb to the fixed pie bias!

And if you aren’t negotiating with someone who values what you want to give, there might just be someone who values what you want to give so much more.  Every supplier has different value drivers at different moments in time.

You need to assess what you want to get out of negotiations first. If your goal is to win on every single topic of negotiation, then you are not cut out for supply chain management.  Individual supply chain links trying to get massive advantage over other links at their expense never experience long term success.

You need to then also assess what points are not as important to you.  And then assess what’s important to the other side.  Do they value some of your “less valuable” concession areas as very valuable perhaps?  Remember, I was dying to get that oak tree out of my backyard, but there were many others who were dying to have it in theirs as well…

Then step back and ask yourself, what research have you done about this supplier?  Do you know what is going on in their business, right now?  In their division?  In that fiscal quarter?  For that product/service line?  In your geography?  In your market segment?  What keeps them awake at night?  You must find this out, and it will NEVER be found in their quotations or bid responses.

What I work on with clients and in training seminars is to show how to gather this information and then create a Concession Matrix – basically an algorithm matrix that shows potential concession items from BOTH parties.   Each potential concession item is noted in terms of what it costs the conceding party and also how it’s valued by the receiving party.  If the receiving party places greater value than what it costs the conceding party, that is a perfect area to make a concession!

Read this twice:  Always give away those things in negotiations that the other party values more than you, but make sure you negotiate for something in return that is commensurate with how THEY value your concession. 

All of this needs to be mapped in advance.  You need to have your game plan, based on research, that shows what items they value more than it costs you, and how you want to trade those away and what you want to receive in return, based on how much you value things they have, and what you know it is roughly costing them.

If you aren’t doing this, then you are winging it, and if you are winging it….. well, you’ve got a long way to go.

We’ve come too far for us to be anything other than world class.  Do your part to make the procurement function in your organization be and be perceived as a Value Added Center of Profit.

Be your best!

 

Omid G

“THE Godfather of Negotiation Planning” ~ Intel Corp

P.S.  The following companies have invested in CPSCM™ Certification in the last year: IBM, Colgate-Palmolive, Fiat, Dresser-Rand, Toshiba, Daimler Benz,  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 that I really want you to see.   Check out the most advanced PSCM Certification Program in the world for yourself!  

www.CenterforPSCMExcellence.org

 

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