Negotiating with the Dark Side – Procurement’s Problem

90-Negotiating-with-the-Dark-Side-–-Procurements-Problem.jpg

When you are in procurement, you’re not just an enemy—you are the enemy to almost everyone involved (or least that’s how it feels). That’s why I like to call it negotiating with the dark side.

Because more times than not, you’re viewed as counterproductive and a middleman to with whom most just want to check the box. Yes, we talked to procurement, now let’s get the project started!

Why? It’s because the business believes you are delaying them from their projects and goals. Conversely, suppliers view you as a barrier to reporting and recording revenue. Oh, and don’t forget slowing down legal with your pesky business terms.

Procurement can be a roadblock in the middle of a desolated highway, and if there are other roads to get around you, you can guarantee they will be taken. So, the question then remains, how can you help all parties involved without killing the momentum? And how can you balance making sure everyone gets a fair deal?

 

Be Fast and Nimble

Now, I wouldn’t suggest rushing your work. In negotiating multi-million dollar deals, it pays to have great attention to detail. Therefore, you need to find a balance in moving quickly, and yet not missing any potential clause that could harm your business.

This is where having a strategic plan and priorities comes into play. That is if you have the time. There are a ton of different templates you can use to help expedite your process.

When you don’t have time for the template approach, quickly write out the top three priorities. Have the list in front of you if you must negotiate on the fly during a phone call, meeting, etc.

 

Don’t View Negotiations as Zero Sum

There are plenty of master negotiators who excel by only pushing for their side. They get amazing deals from their vendors and suppliers. That said, they also get upset, unruly, and unhappy suppliers. This not only leads to a contentious relationship but the supplier looking for ways to gain their margin back on the account.

When procurement pushes too hard on either side internally or externally, they risk burning bridges. That’s why they must take a hard look at what a good balance could be. You can’t expect your suppliers to work for free, but you shouldn’t let your business partners get a terrible deal.

 

Figure out What Fair Is

Part of procurement’s job should be to ensure both sides are happy with the outcomes. That means the business partners feel like they are getting the quality, service, and pricing that is reasonable. On the supplier side, they should feel like a valued partner, not just a short-term supplier that you want to operate on razor-thin margins.

That’s why using industry benchmarking for standard margins is so important. If you know what average is, you will know what “fair” looks like. When the supplier is pushing the boundaries above 10% of the norm, you can push them on pricing without seeming unreasonable.

Conversely, if your business partners are pushing them to be 5-10% under the norm, you’ll need to push back on them too. There’s a fine line when you can get fired from any supplier. It happens all the time, especially when you are asking them to operate at little to no margin.

 

Procurement’s Stuck in the Middle with You

There are a lot of procurement folks who are good. They save lots of money and have great relationships with internal business partners, but they aren’t GREAT. How do you become great when you are stuck in the middle?

It’s quite simple, in my opinion. The best procurement partners view themselves as an intermediary, consultant, or 3rd party. They understand there are consequences for each party when they push too hard.

When the supplier or business partner realizes they aren’t getting a fair deal, there will be a lot of churn between the two groups. Sure, if you saved a business partner $5M on a deal with a supplier, only to have them change order (nickel and dime you) for every additional cost, did you really save $5M?

Not to mention, your internal business partner is going to be upset. You’ve just blown their budget, and their confidence in you will be gone. Not only that, they’ll be less likely to trust you in the future.

That’s why it’s procurement’s place to find a reasonable middle ground. Without it, the scales will surely tip in a single direction and cause problems. So even if you find yourself with clowns to the left and jokers to the right—don’t wonder what to do. Figure out the fair deal, do it quickly, and everyone will win in the end.

By Dana Small, Ms. Category Management