The 7 Habits of Highly ORDINARY Negotiators – HABIT #2

by Omid Ghamami

The 7 Habits of Highly ORDINARY Negotiators – HABIT #2

Rookie Negotiators Focus on Transferring Value

Rookie Negotiators Focused on Transferring Value

This 7 part series is based a quarter century of me going to hundreds of companies in 21 countries and 5 continents across all industries and sectors.  I’ve witnessed great practices and mediocre practices.  From this experience, and from the biggest gaps between where we are and where I envision we can be, I’ve derived the following blog series, focusing on the The 7 Habits of Highly ORDINARY Negotiators.

Habit #2  is “Focusing on Transferring Value instead of Creating Value in Negotiations”.

Do you want to know the best business deal I ever brokered?  You can’t imagine how much money I made in this spectacular negotiation.

Did you guess?  Here’s the answer:  I made exactly NO money at all – zip, nada, and it was the best deal of my business career.  How could that be?  Read on.

An association in Brazil contacted me and wanted me to keynote their purchasing conference.  Problem was, all they could pay for was my costs – they couldn’t pay me any fee whatsoever.  Discussion over, right?  Not so fast.

The best negotiators don’t negotiate what’s on the table, they negotiate what’s not on the table too.  So we kept discussing.  Then I found out they were going to have a professional videographer film the event, along with professional editing.

I asked them if I could have intellectual property rights to the video.  They said “sure, why not”.  I said “when do you want me there?”  It cost them absolutely nothing to give me that video – they just sent me a link – and they got a world class speaker for pennies on the dollar in return.

So why did I do it?  What did it buy me?  That same video is THE MOST WATCHED purchasing training video on the internet for 4 years running now.  If you don’t believe me, just type “purchasing” in YouTube and it will always rank first, based on views and popularity.

So why was this my best deal ever?  Because this video has generated tons of easy new business for me.  Decision makers watch it from various parts of the world, and these people that I’ve never met contact me with the decision already made that they want to hire me.  No RFP responses, no reference checks, no messing around.  That  video has easily made me over a million dollars.

So why am I telling you this story?

Our entire profession has been trained for decades to use aggressive strategies and tactics in order to ensure achieving aggressive cost savings objectives, always at the expense of supplier profitability (where else is the money going to come from?).  Unfortunately, most of the negotiation training out there continues to proliferate this 1960’s approach.

All of this stems from the Fixed Pie Bias – the belief that there’s a fixed amount of value in negotiations, mostly found in price, and your ability to use aggressive techniques in negotiations will get you most of that pie.   One party wins, one party loses, but we will call it win-win at the end because that’s what both sides are taught to do.

This is what rookie negotiators do.  If you’re doing this, you need to stop now.   If you are using various negotiation “techniques” and “tactics and counter-tactics” to get your suppliers to make less profit  so you can report more cost savings, then all you are doing is TRANSFERRING VALUE.   You’re taking value away from the supplier and giving it to yourself.  And you are an ordinary negotiator, even if you do it better than others.

The supplier has what you want, and you’re going to get it, on your terms, and that’s how you define success. That’s the entire focus of highly ORDINARY negotiators, strategizing on how to transfer value from the other party to themselves.   That’s really not different than kids fighting over a toy in the playground.  Neither kid cares about anything other than getting that toy from the other kid.

Do you think a supply chain can be predicated on each demand-side  link trying to transfer value to themselves, to the detriment of the supply side link?  Don’t all these costs being pushed around roll down hill in the supply chain anyways?

What the world’s best negotiators do is they are absolute experts at CREATING VALUE.  They don’t just negotiate what’s on the table, they instead they focus on investigative strategies to determine not just what the positions and issues are, but also what the INTERESTS are of the other side – things that aren’t on the table, and never will be, unless you do intense pre-negotiation investigations.

If you don’t take time to research the other party’s interests, then you can only make assumptions about what the other party values in negotiations, and the ONLY assumption you can correctly make is that they want your money.  Well, guess what you’ll end up negotiating over then?

You are setting your negotiation up for a battle over Value Transference of the money.  Why?  Because you presupposed that the only thing the supplier was interested in was your money… it’s a self-fulfilling prophecy.

Here are just a few real and very recent examples I’ve either seen or actively participated in as a negotiation expert:

  • Healthcare company getting critical new technology at COST at high volumes no less, because it was determined that the supplier was a startup and their focus wasn’t money, it was getting a proof point in the healthcare industry established.
  • High volume residential and commercial builder getting all lumber at well below 50% of commercial market rates because they allowed the supplier to co-use one of their customer facilities for product demonstrations in an area that the supplier had no marketing presence.
  • A clothing company created the idea to negotiate to visibly place the supplier’s logo (the fabric supplier was very famous) on their athletic clothing product lines in return for a 5% discount – not much right?   Guess what, sales jumped 55% after adding the supplier’s logo to their athletic lines! The supplier helped make this happen by adding product benefits under the logo such as “UV A resistant, UV B resistant”, etc.

I don’t have enough space to keep going.   I have many more that I use in my training and consulting engagements.  You get the picture though.

The bottom line is, even the most rookie negotiator can determine what a supplier’s Issues and Positions are.  It’s right there on their quote!  It takes a world class negotiator to dig deep and ask questions and do research to find out what the supplier’s underlying INTERESTS are – and those are never found in the supplier quotation.

Once you find out their interests, then you can engage in pre-negotiation strategies to Create Value – value that doesn’t cost you much, but buys you a LOT.  Then you can negotiate to exchange that value for the money you are trying so desperately to keep in your company’s bank account, but with this time, with the supplier happy to comply.   Problem solved.  Ditch those 1960’s tactics and move onto 21st Century procurement models.

Now go off and do something wonderful.

Be your best!

 

Omid G.

 

P.S.    Here’s what a Harvard University Supply Chain Instructor said about my world class Certified Purchasing and Supply Chain Manager (CPSCM) Certification Program:
“The CPSCM™ Certification is an absolute GAME CHANGER, and is by far the most valuable Purchasing & Supply Chain Management certification program available today.”

– Professor Zal Phiroz,  Harvard University Supply Chain Management Instructor

Check it out for yourself!   www.CenterforPSCMExcellence.org

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