If your contract and pricing negotiations are akin to canal root treatment, then read on. There a different way of negotiating. 'Collaborative Negotiation'. A contradiction in terms? Not at all. Procurement is in the spotlight and collaboration is seen as the need of not just the hour but the long term - yes, the long term, to unlock and enjoy shared value and competitive advantage. Sales and procurement professionals are learning, un-learning, and re-learning. Change is sweeping through old mindsets. New habits are forming and some old-school thinking falling away. Moving on. For a collaborative negotiation to succeed, you need to create the right negotiation atmosphere and environment. One that encourages cooperation. This approach is for sales and procurement people alike.
There are three basic guidelines and five key steps to work on.
Here are the guidelines:
Old school transactional thinkers must become authentic strategic partners
A common set of relationship guiding principles must be discussed and agreed in advance of negotiating
The partnering mindset becomes habitual and in all daily interactions, supported by a formal collaboration governance structure, to ensure consistency and improvement planning
So, this is about the long term, however defined these days. The relationship becomes the focus, the pricing and the agreed terms become an output. A natural consequence, suiting both parties.
So, what are the five steps?
1. Firm foundations
I talked about the three core elements of collaboration at a European procurement event on supplier enabled innovation. They apply equally here too: trust, transparency, and compatibility. A circuit is formed with three points at a minimum and all of the three elements are essential ingredients for a successful negotiation by collaboration. Reflect upon them, discuss them, actively listen, be open and be realistic. If there isn't a collaborative fit then work out why, together. This may or may not make a difference. If there is a fit, move on to step two. This approach requires a degree of bravery and yes, you guessed it, a leap of faith at times.
2. Shared vision
When there is full inclusivity i.e. all members of a team equally involved, then a shared vision carries extraordinary long term collaborative value. Creating a single vision is not only smart, it's a great way to establish trusted relationships. This is also where compatibility shines. It is the vision that binds long term partnering. Smart leaders also evolve their team vision over time and it becomes a wonderful, collaborative experience. Apply this approach and build a shared negotiation vision. Two sets of expectations, beliefs, needs and values combine, not collide.
3. Guiding principles
Your vision must be set within guiding principles. Discussed and agreed principles act a binding agent, combining all ingredients. Debate them, write them down, focus on the three core elements and expand upon them. Without them, you will probably revert to how you were brought up to negotiate, and distrust will probably kick in first. So, focus particularly on how to build trust. This will elevate the relationship from average and functional to highly collaborative and flourishing. Then focus on compatibility. If you openly conclude from these discussions that you are not compatible then either work on it or walk away. ‘You’ is an interesting thought as it’s as much to do with organisational compatibility as it is to do with two individuals. Think about that.
4. Adjacent negotiation
Sit together not opposite. Don't jump in at the deep end of the deal : the specification, the pricing and so on. Focus your energy on agreeing the rules. It's about transparency. Share your thinking, your objectives, your measures and your challenges. One could describe this as risk and reward, though its really about risk and value. Collaborative value goes way beyond price and revenue, and remember that both parties agree that the deal should be fair and equitable. Win-lose type language and thinking is in the wastebasket. Yes, negotiate, though with collaboration in mind.
5. Live and breathe
So, the deal is done. The contract is signed. Supplier relationship and client relationship management becomes a very different experience to a traditional model and approach. No longer linear. No longer process or step driven. You have a shared vision, cultural alignment, a deal which works for both parties, and a governance structure to guide you and remind you as to all the good work done, The governance framework will also support others who take the relationship reins over time. Trust, transparency and compatibility remain the core elements and collaboration becomes non-negotiable.
At Procurement Potential, we focus on supplier and procurement collaboration. Have a look at what we do and where we can help you, at www.procurementpotential.com