Tuesday, February 8, 2011

Negotiating Contracts – Selling Your Positions

Negotiation is the ability to convince the other Party to change their position, agree to your position, or find an acceptable position. There are several ways to do this:
·      You can demand they give you what you want if they want your business (take it or leave it).
·      You can say no to what they propose, risking the potential of not reaching agreement.
·      You can provide them with good reasons to agree to your position or request.
·      You can explain to them the business problem their position is creating they need to help solve.
·      You can explain the impact their position will have on the current or future business.
·      You can see if they are willing to work together with you to help solve the problem or impasse.

The approach that you use is dependent upon the leverage you have.  For a “take it or leave it” position to be successful, the Supplier must really want or need your business. You must be in a competitive situation (or the Supplier must think it’s a competitive situation). The Supplier must also believe that if they fail to meet your needs, other Suppliers will provide it. The combination of these three things provides you leverage to tell the Supplier take it or leave it.

Saying no to their proposals may work, but frequently the more you just say no to them the greater the tendency there will be for the Supplier to dig in and not move on positions.  Saying no also needs the same requirements – competition, needing or wanting your business, and the fear that they will lose the business if they don't agree. When you don’t have all of these you need to be able to sell your positions or their need to change. 

Selling Your Positions

A number of years ago I read Dr. Chester Karrass books* on Negotiation and many of the things he referred to as tactics are simply tools to help sell the Supplier that they need to agree with your position, or change their position so you can come to agreement.  Some of those were:
  • Setting expectations of what you need and why you need it as early as possible in the relationship. This helps the Supplier sales person set expectations with their management.
  • In all discussions you need to both act and communicate in a manner that shows them the strength of your convictions in getting what you want.
  • Express what you need in clear and convincing terms,
  • Provide them good reasons to agree.
  • Provide a logical thought process showing your demands make sense.  
  • Provide arguments to show it’s reasonable.
  • Use pictures, examples, studies and anything else to highlight either the problem or why what you propose is fair or reasonable for both parties
  • Provide them with information from experts to show the legitimacy of your position or requirement.
  •  Show them where others have agreed (especially competitors)
  • Show them the problem they are creating that needs to be solved.
  • Show them the impact their position will have on their competitiveness
  • Show them the total cost or life cycle cost impact of their position. 
  • Let them know how this may impact your willingness to rely on them, agree to using them as a sole source, or source from them in the future.
  • Use your team and your management to help sell by explaining what they need and why they need it to add additional conviction.  Getting the message from someone other than the negotiator can provide a stronger argument. By escalating the discussion one level higher you can also ask that meeting include someone on the Supplier’s side that is above those on the negotiating team.

* The Dr Karrass Books I refer to are:  "The Negotiating Game" and "Give and Take". Both are available in paperback and I would recommend reading them to better understand tactics