The following article was prepared by Mike Taylor, C.P.M., for distribution to ISM affiliate newsletters
My good friends Ross Reck and Elaine Whittington, C.P.M. have long advocated considering personalities and the ‘people factors’ in a negotiation. In the past I focused more on the preparation and planning. Lately I have started to understand their point, and started to consider the people side of the negotiation. People and personalities are a significant factor in contract negotiations and more importantly in contract performance. It's the people that perform not the piece of paper we call a contract. [I should note here that when I refer to contracts, I am talking about the generic legal instrument which includes service contracts, purchase orders, pcard orders and/or whatever else you might call them].
Here is a real example off how remembering people and personalities can improve a contract negotiation.
In this negotiation situation we had a seemingly intractable problem. The buyer desperately needed this sole-source item and a large quantity of supporting paperwork, documentation and information.
Plan A: The manufacturer was more than willing to supply the item, but refused to provide all of the supporting documentation the buyer requested.
Plan B: The buyer could go to a distributor, and pay the extra money to get the distributor to resell the product and prepare the documentation.
Plan C: Convince the manufacturer’s salesman to help with preparing and supplying the documentation. We guessed that there was probably a way for him to get it done, if we could just find the right incentive.
Incentive 1: The buyer could offer to pay for the documentation separately – that might work, but only if the manufacturer has some way of accounting for the transaction. In some companies, the accounting system doesn’t make it easy – and in this case it didn’t work – particularly since it was still going to be more manual effort for the salesman. Should the buyer ask how much money it would take to get the documentation? I don't think so, even the Fed can't print money fast enough to cover that opening. How you ask questions can make a big difference in a negotiation. read more....
Option 2: The buyer could claim to be a tragic lost soul in serious need of help to prevent being fired by her evil manager. Cute, but this type of strategy only works once and is a real bummer once sellers figure out the truth. [interesting, I actually know a senior buyer who uses this strategy all too often]
Option 3: The buyer could invite the salesman to marry her first-born daughter. Naw, that only works for Kings and Queens.
Option 4: The Buyer threatened to take the business to the distributor. Hmmmm, seems like the manufacturer still sells the product to the distributor, so this strategy didn’t work as well as we hoped.
Option 5: The buyer could presume that the salesman was under the usual pressure to make sales – and maybe even a sales quota. Since this was a rather large purchase, we did have one thing the salesman probably wanted on a personal level; the order.
This worked; The buyer called the seller and said “ If you can find some way to help me with my documentation problem, I have the approval to award you the order today and can give you the PO number right now.
So to resolve the impasse, we invoked several key negotiation strategies :
1- We changed the terms of the deal – as a government contract or, it’s well known that a weighty and ponderous process prevents us from being nimble in issuing contracts. So by offering to place the order immediately, we greatly improved the transaction in the eyes of the salesman. In this case we could give away something (time) that didn’t mean as much to the buyer as it did to the seller - time.
2- We changed the nature of the problem. We asked for help in a professional way to resolve a problem that was preventing the transaction. Sure it was our problem that we needed documentation – not his. But as long as we focused on who’s problem it was, there was really no incentive for the other person to help.
A better way to think about problems, is to consider that the needed documentation was the “contract’s” problem. That is, the perfect contract, which the buyer and the salesman each wanted to create, had one little thing element missing. The buyer-salesman team can both win – if they create the best contract possible for the benefit of both companies. The true enemy in a negotiation is a malformed or incomplete contract. Read more....
3- We made it personal. By considering the motivation of our team member (the salesman). We didn’t patronize him, threaten him or whine. We just politely helped him understand that there could be a personal incentive to getting the contract’s problem resolved. Can you really negotiate with a friend? Read more...
4- We gave the salesman a way to “save face”. Remember that everyone wants to preserve their own personal dignity. We gave the salesman an excuse to change his mind and find a way to help him do so, without having to ‘back down”.
5- We gave the salesman the rationale he needed to justify his own actions to his own manager. Remember that every salesman is accountable for his actions, efforts and ‘sales” within his own company. He can’t agree to something he can’t "sell" to his own organization.
The moral of this story: These relatively simple tactics can greatly improve your chances of negotiation success. [ I don’t know if the buyer really considered option 3 – but if your only other choice was to come to Mike Taylor's office for advice; what would you have done?]
By improving the functionality and commitment of the buyer-salesman team we both win better, more complete and more valuable contracts. Find more article about negotiation in the Purchasing ToolBox
Hope this helps!
Read more articles about negotiation and creative contract solutions in the MLTWeb Purchasing Toolbox at http://www.mltweb.com/prof/tools.htm and in the BuyTrain news article archive at http://www.mltweb.com/tools/buytrain/index.htm
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