Supply Chain Management Review: Five Useful Guidelines for Successful Negotiating

Originally Published in Supply Chain Management Review | June 18, 2014 | By Audrey Ford, Paul Mandell, and Tom Linton

Thanks to an increasingly complex global marketplace, today’s Chief Procurement and Supply Chain Officers employ as broad an array of skills as ever before. From the mastery of evolving technology to the sophisticated analysis of data, the universe of job requirements for these senior executives seems to grow each year. However, one constant among the necessary skills for procurement and supply chain executives is effective negotiation. Although developing effective negotiating skills takes time and practice, there are a number of general guidelines that can help executives negotiate in ways that ensure success for both their companies and themselves. Set forth below are five of these, which have been drawn from the more than 30 years of procurement-industry experience of Tom Linton, Chief Procurement & Supply Chain Officer at Flextronics, and several other Chief Procurement & Supply Chain Officers who have attended events hosted by Consero.

Understand Your Mission

To engage in a productive negotiating experience, you must have a clear sense of your objectives and desired outcome. To determine these, you must begin by developing a thorough understanding of your departmental and broader corporate mission. Entering into a negotiation without this understanding heightens the risk that your efforts will achieve a narrow set of goals that do not really advance the long-term interests of your company.  By knowing where your company is headed, you can tailor your objectives and negotiating strategy to clear a straighter path to your destination.

Understand Their Mission

Knowing where you hope to take your business is an important element of negotiation preparation. However, understanding the mission and short-term goals of the individual on the other side of the table is equally important. Only by understanding what the other party to your negotiation really wants or does not want from the deal can you determine an optimal approach to the discussion. Without this understanding, you risk engaging in an inefficient negotiation at best and an offensive one at worst. Arming yourself with the necessary knowledge and strategic research about the other party can make the difference between closing the deal and falling short of your goal.

Be Authentic To Build Credibility and Trust

One guiding principle that is too often neglected in modern negotiation is authenticity. Many people enter into negotiation looking to gain a competitive advantage by concealing information or through outright deceit. While you may achieve a particular desired result through such practices in the short term, you run the risk of tarnishing both your company’s and your own reputation, as well as increasing the odds of a fraudulent inducement claim should the deal go bad. A much better practice is to be honest and authentic. By making it clear that you are a straight shooter who deals in good faith, you are more likely to disarm the other side’s natural defense mechanisms and improve the odds of a productive, long-term business partnership. Moreover, you are creating career insurance for yourself, as companies are far more likely to hire and retain employees who have a reputation for honesty and sincerity over doubletalk and trickery.

Aim for a Win-Win

As counter-intuitive as it may seem, one of your best strategies in working toward a deal is giving thought to boosting the benefits that your counterparty will receive. By seeking a positive outcome for your partner in the deal, you will increase your own leverage on the points that matter most. Moreover, you will lay a stronger foundation for a positive working relationship once the deal is done. By contrast, if you emerge from the negotiation with a deal that is heavily one-sided, even if in your favor, the odds of a productive and hassle-free relationship are decidedly lower, and you will likely be negotiating again with a new partner earlier than you expected.

Create a plan for Evaluation

Finally, as part of your negotiation, you should make an effort to agree upon a mechanism to evaluate the performance of both parties after the deal is done. Agreeing to measure the success of the relationship is a way to ensure adherence to specific performance standards, payment terms, and other rules. This sort of rigorous follow-through guarantees that everyone’s expectations are aligned and makes conversations about the relationship following the deal’s closure more objective and generally easier.

Every negotiation and counterparty is different, and there are no guarantees that your future negotiating partners will be reasonable or rational. However, by keeping the above guidelines in mind as you prepare for your next negotiation, you will improve the odds that the experience goes smoothly both during and after the negotiation—for you and your business.